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Inspired

How to Create Products Customers Love


Great product managers are intelligent, focused and
“bilingual” in technology and business.

Nine out of ten product releases are failures: they fail to


meet their objectives. Mostly this is because the product
manager’s role has been poorly defined or the person is
incapable of filling that role. Hence, many CEOs wonder what
characteristics to look for when hiring product managers.

In fact, a wide array of attributes and skills is needed.


Essentially, product managers solve customers’ problems,
and this requires them to understand their customers and
empathize with their problems as well as be intelligent and
insightful enough to come up with solutions.

Product managers must also be engaging and versatile


communicators. They must interact with lots of different
stakeholder groups from engineers to executives, and hence
need to be “bilingual” in the sense that they understand both
the technology and business sides of the product.

Finally, product managers bear full responsibility for


delivering products as promised. They face long hours at
work and a constant overload of tasks, so they need to have
a strong work ethic and good time-management skills. Above
all else, they must know how to prioritize. Their mantra is:
“The main thing is to keep the main thing the main thing.”
So where can you find such people?

A great and obvious source is within your own company,


where it is easier to find and assess candidates just by asking
around. Look everywhere: Great future product managers
can be waiting in virtually any department, from engineering
to customer service to marketing. Typically, they will have
already expressed some interest in playing a stronger role in
the product. Once you find them, train and mentor them to
fill the role successfully.

Great product managers are intelligent, focused and


“bilingual” in technology and business.

Product managers need product teams around them with


clearly defined roles.

A product manager has two main responsibilities: evaluating


product opportunities and defining the products to be built
to address those opportunities. To allow her to focus on
these tasks, the product manager needs a product team
around her, much like a CEO needs a management team to
run a company.

This team comprises several well-defined roles:

User experience designers create the product’s interface


toward the customer. This crucial role means they must work
closely with the product manager.

Engineers, also a vital component of the team, build the


product that the product manager has defined. This makes
them the product manager’s peers, not subordinates. To help
engineers understand what the product needs to do, the
product manager must involve them early in the process and
have them actually meet and observe real customers.

A dedicated project manager is also recommended to


oversee the work of engineers in the execution phase. This
allows the product manager to focus on discovering and
defining new products while the project manager schedules
and tracks the projects required to build and launch them.

A separate product marketing person is needed to tell the


world about the product. Naturally, both she and the product
manager should give each other input to help formulate
marketing messages and product requirements respectively.

Finally, every product team can benefit from seeking out the
smartest people in the company, regardless of function or
position, and making them unofficial “deputy product
managers.” If asked for ideas and feedback, they can deliver
a surprising amount of value just based on their smarts.

Make user experience design a priority: Build a complete UX


team and help them contribute.

Good user experience (UX) is a vital component of good


products. The iPod, for example, owed much of its success to
the pleasant and effortless UX.

To create a good UX, the product manager must work


intensively with a UX design team, which ideally comprises
four essential roles:
An interaction designer works to understand the target users’
requirements and thinking, and then creates a wireframe
design of the product based on this understanding. After
this, visual designers contribute the look and feel of the user
interface on top of the wireframe. Essentially, these two
roles create the user experience, making them a key part of
the product team. They should be involved early on, taking
part in everything from deciding on the product strategy to
participating in customer visits.

Note that the importance of visual designers is often sadly


underestimated. Their work has the power to evoke
emotions in the customers, and if Apple has shown us
anything, it is that products that evoke strong emotions, like
love and craving, tend to be smash hits.

In addition to these two roles, you need a rapid


prototyper who can quickly create prototypes of the product
and a usability tester who then has users test the product,
thus generating input for another iteration of the design
process.

To allow her UX design team to fully contribute, a product


manager must let them complete their work before tasking
engineers with building the product. This is because good
designers want to experiment with multiple designs, but the
engineering process is not agile enough to facilitate this.

A product manager must constantly seek out and assess


product opportunities.
Opportunities for new products are everywhere around us,
and new ideas, innovative technologies and shifting
competitive landscapes create fresh opportunities every day.
They exist even in seemingly saturated markets. Remember
AltaVista and Infoseek? Their dominance of the search
engine market seemed unassailable until Google came along.

In this endlessly shifting landscape, a product manager must


constantly and quickly evaluate product opportunities and
decide which ones to pursue. To help achieve this, she should
answer a list of questions used to help define and
communicate such opportunities, called a Product
Opportunity Assessment (POA):

 What problem will this solve?

 Who are we solving a problem for and how big is that


market?

 What alternatives do competitors provide and why are


we the ones who can succeed in this?

 What factors are critical to success (e.g. partnerships


with distributors)?

 What metrics will we use to measure our success?

 Why is this the right time to enter the market and what
is our go-to-market strategy (i.e. how will we sell the
product)?

 Based on the above questions, is this an opportunity we


should pursue?
This light and easy-to-understand tool can greatly help
analyze and communicate product opportunities without
resorting to rigid and overly long documentation methods. Its
results can then be discussed with senior management and a
clear go/no-go decision can be reached, thus helping the
product manager focus her efforts.

Note that all questions in the POA are geared toward


understanding the opportunity, not presupposing a solution.
Only after finding a product opportunity to pursue does a
product manager begin the product discovery phase: defining
the right product to fit that opportunity.

Product discovery: Validate that your product is valuable,


usable and feasible by defining and testing a minimal
product.

To be successful, a product must be:

 feasible: your engineers must be capable of building it.

 usable: customers must be able to use it.

 valuable: the product itself must deliver value to


customers, so they want to buy it.

All three criteria need to be tested and


validated before building the product. To facilitate this, the
product manager and her UX interaction designer should first
come up with a minimal product prototype: one that has the
bare minimum functionality necessary to be valuable, and yet
delivers a realistic enough user experience for real users to
test.
Involve an engineer in defining the minimal product so they
can gauge its feasibility and help the product manager decide
which features to cut and which to leave in. This ensures the
engineers are confident that they can implement the
features that remain, and hence no more cutting is required
later on. In short, the product should now be feasible. Once a
minimal product is arrived at, a prototype can be built and
tested with real users to validate whether it is usable and
valuable.

Once you’ve validated a product and delivered the


specifications to engineering, you must make a fundamental
mindset shift from product discovery to execution. There
should be no further changes to the product specifications
after this.

If management requests changes after this point, don’t lose


focus on execution but rather start a new discovery process
for version 2.0 of your product to run in parallel with building
version 1.0.

Use high-fidelity prototypes to convey product specs


effectively and to test your product on real users.

A key responsibility of a product manager is to deliver


accurate product specifications to the engineering team. The
most effective way to do this is to build a high-fidelity
prototype: a prototype with minimal functionality, but a
realistic user experience. In the case of simple websites, for
example, the prototype may just comprise clickable buttons
that lead to different pages.
The end-goal is a prototype that anyone can easily interact
with to understand the product, without necessarily having
to look at any product specs.

In addition to being a handy tool for communicating product


specs, a hi-fi prototype allows product managers to
immediately test the product with real users. The sooner this
happens, the easier it is to adjust the product according to
the feedback.

So how does this testing happen?

When setting up a prototype test, first of all you’ll need test


subjects. Gather them from whatever sources you can:
friends, family or Craigslist recruits. All are fair game.

Second, be sure to prepare thoroughly beforehand. Define


what tasks you want the users to complete, focusing on the
tasks they are expected to spend the most time on.

During the test itself, the less you say, the better. Don’t taint
the test subjects’ experiences with your own expectations.
Your goal is to observe and understand where your model
might be inconsistent with how a user thinks. Just watch: Can
they complete the tasks easily? Do they find what they’re
looking for?

If you identify obvious problems after the first test subjects,


fix them immediately. This way, the next users can already
test your new solution.

Use a charter user program to understand your customers


and gain references for your launch.
If you’re a product manager, understanding customers is a
critical part of your job. In fact, it’s so important that you
should attend every site visit, customer interview and
usability test as well as use whatever market-research tools
are available to really gain a deep understanding of
customers.

Note, though, that customers are notoriously poor at


expressing what exactly they want from a product.
Therefore, don’t let their input directly steer the course you
take with your product. Instead, stay focused on identifying
customer needs, and think for yourself how to address those
needs.

A great way to gain deep customer insights is a charter user


program (CUP). Basically, this is a program where you find
and recruit 8–10 customers from your target market who
suffer from the problem your product aims to solve. You then
work with these customers as partners to develop and test a
product to address this issue. Your end goal is to develop a
product that works for your whole target market, so don’t fall
into the trap of making a specialized product for just one or
two of your charter users.

Using a CUP is beneficial for the participating customers


because they gain early – usually free – access to the
product. Remember, it solves a painful problem for them, so
the earlier they can use it, the better for them.

You, on the other hand, gain extensive access to users from


your target market, allowing you to rapidly test prototypes of
your product and refine it accordingly. Eventually, when you
launch the product, you can realize the second big advantage
of a CUP: use the participants as satisfied customer
references, which are essential for any successful product
launch.

Product management is about making choices: Use


personas and product principles to help you with this.

Effective product management means constantly prioritizing


and making choices: Which product opportunities should be
pursued? Which features should be included in the product?
Which tasks are most important? These decisions are difficult
because, typically, every stakeholder in the company will feel
strongly and differently about them.

To help resolve these tradeoffs, you should define a set


of product principles: your beliefs of what’s truly important to
the strategy of this entire product line and the company. In
the case of a start-up, the company’s mission statement
often embodies these principles.

Despite their strategic nature, the principles need to be


specific enough to help guide any decisions regarding
features, target customers, etc. For example, if an online
auction provider has decided that its primary product
principle is safety, then it should not hesitate to increase
security measures for customers, even at the cost of
usability.

Another excellent tool for making difficult product choices is


the use of personas: fictional user profiles of (imaginary)
typical customers. These personas are created by the product
manager and interaction designer based on what they know
about their potential customers.

For example, you could say that your potential customers are
“Marys” (professional, tech-savvy women in their 30s) and
“Freddys” (male students with limited income). Depending
on whether you prioritize “Marys” or “Freddys,” you will
likely choose very different features to include in your
product. Such simple archetypes help align the whole
product team on who the customer is and what is important
for them. Just make sure that at some stage, you also talk to
real users and verify your personas are accurate!

When you make changes to your product, think carefully


about what you want to achieve and deploy them gently.

When improving existing products rather than launching new


ones, many product managers fall into a modus of just fixing
bugs and adding features as requested. But bolting on
features indiscriminately to please specific customers often
makes the product less appealing to the rest of the market,
hurting its success in the long run.

Just as with new products, product improvement should start


with an understanding of what your goals are. You must
understand the product’s most important business metrics
and gear any improvements toward affecting those metrics.
Say your product is a website where a key metric is what
percentage of visitors become customers – currently 5%. You
may then introduce a new feature to raise that percentage,
like an easier sign-up process. If the percentage rises to 10%,
you’ve just added a very valuable feature!
An especially valuable time to make changes to a product
comes right after the product launch. Lots of lessons can be
learned in the first week when the product is actually live.
During this time, consider yourself in “rapid response” mode,
addressing issues or lagging key metrics quickly.

When improving products, be careful that you don’t


unwittingly abuse your users, i.e. release changes that they
don’t appreciate. To avoid this, ensure you deploy
changes gently. This means you inform customers of changes
well in advance and make the transition as painless as
possible. Redouble your quality assurance efforts, and for
major changes, consider running the old and new versions of
your product in parallel, at least initially, allowing users to
opt in as they please.

Invisible Influence
The Hidden Forces That Shape Behavior
Find out about the forces that shape your decisions.

It often seems as if some of those around us are influenced


far too easily. People appear willing to change their opinions
because of just one tweet that comes up on their feeds, or
will follow some foolish fashion trend that clashes not only
with their body types, but their country’s climate. But of
course, you would never let yourself be influenced in such
obvious ways – or would you?

As these blinks will demonstrate, our thoughts and behaviors


are influenced by external forces and factors far more than
we might like to admit. Luckily, you can learn how to spot this
invisible influence, and even use it to your advantage.

Every decision you make is affected by others, and


identifying this influence can help you overcome it.

Have you ever thought of the reasons behind the clothes you
wear or the car you drive?

Most people would chalk these things up to objective


features like price, mileage or design, but this doesn’t tell the
whole story. In reality, we’re quite easily influenced by social
pressure. While many of us are reluctant to admit that others
have power over us, they most certainly do; they affect our
actions, preferences and even our self-perceptions.

Consider the neighborhood you grew up in: it has a profound


impact on you because of things like the quality of nearby
schools and the peers that surround you. If every kid in your
neighborhood teased bookworms, think about how that
could cause you to develop negative feelings toward reading.

But what is it about humans that allows us to be so easily


influenced by others?
One reason is that we’re vulnerable to all manner of subtle
factors. Take one study by psychologist Richard Moreland of
the University of Pittsburgh: he instructed four women who
were considered equally attractive to attend a large college
class and act like normal students. The four women were to
attend zero, five, 10 and 15 sessions of the class,
respectively.

At the end of the semester, Moreland gave the students


photographs of all four women and asked the students to
rate the women based on their looks. The majority of the
class preferred the woman who’d attended 15 sessions, but
weren’t aware of ever having seen her!

Simply put, the study suggests that we prefer familiar people,


and social influence is a powerful force in this regard.
However, if you are aware of it, it will have less of an effect
on you.

A child may not help but be influenced by the bookworm-


hating kids in your neighborhood – that is, until she realizes
how they’re influencing her. After that, the other kids won’t
be able to discourage her so easily.

When faced with such an issue, she might ask herself


whether people who read a lot are, in fact, losers. She might
then consider all the prolific, illustrious scientists and writers
who immersed themselves in books, and be encouraged by
them instead.

We’re inclined to imitate others and adopt their opinions.


Knowing what you now know about social influence, do you
still think you’re a totally independent person?

Well, if you do, you’d be wrong; we’re highly prone to


adopting the behavior and opinions of those around us.

One reason for doing so is simply that it saves time, because


we don’t have to figure things out for ourselves. But we also
do it because of social pressure.

For example, in 1951, psychologist Solomon Asch did an


experiment in which groups of people were asked to match
the length of a line shown to them on a card with one of
three other lines drawn on another card. Each participant
was then called on individually to match them.

The correct answer should have been obvious – except six of


the seven participants were actors, all instructed to give the
same, incorrect answer. The one real participant was called
on last and, in one-third of the cases, he or she conformed to
the group opinion and gave a clearly incorrect answer.

But imitation doesn’t just affect logic. Another such type of


conformity is called emotional mimicry, wherein, when we
see another person expressing an emotion – say, smiling
joyfully – cells in our brain, called mirror neurons, begin to
fire, making us smile as well.

Imitation can even explain various forms of media hype.


While publishers and producers would love to know how
popular a book, song or movie will be, it’s nearly impossible
to tell because of the power of social influence.
Just take a study in which teens were asked to listen to songs
by unknown artists and download the ones they liked. One
group of participants undertook the process without outside
influence, while the second group could see the number of
previous downloads within their group.

The second group gravitated toward songs that had been


frequently downloaded by previous participants, showing
that participants affected one another’s choices. However,
the songs that were popular in the first, independent group,
did also experience some popularity within the second,
indicating that quality also played a role.

So, what others think can influence us tremendously. But


there are also instances when we don’t imitate others – that
is to say, we don’t always want to be like everyone else. Let’s
take a look at this important factor next.

Many people want to stand out in some way – but not


everyone.

Imagine you’re in love with a new band that only a select few
people know exists. Then, all of a sudden, the group goes
mainstream and everyone else is obsessed with them too.
Would you be annoyed by this?

If so, you might be a bit of a snob – but you’re definitely not


alone.

Traditional economic theory argues that we make choices


based on quality and price. In this system of thought, if
outside influences have any effect, it’s that we follow others’
lead. But there’s actually another force at play: the snob
effect, which refers to the basic principle that the more the
general population likes something, the less interested many
of us become.

People like this don’t just want to appear different; they want
to appear better, smarter, richer or more sophisticated. This
yearning to differentiate oneself may even explain why so
many well-known athletes have at least one older sibling. The
first born often strives for academic achievement and the
second, in an attempt to differentiate himself, gets into
sports.

While some people do yearn to distinguish themselves, not


all of us do. The truth is, the extent to which such distinction
matters to you is a result of your background.

For instance, in the United States, people feel a strong need


to differentiate themselves, whereas the average East Asian
cares more about societal harmony and connectedness. But
there are also differences within the United States, especially
along class lines. So, while a middle-class person will be more
eager to set herself apart, say by owning different material
objects, working-class people are more likely to imitate one
another’s choices.

In fact, people from lower-income backgrounds will often like


something more if many others do too. This might be
because, in working-class communities, familiarity and
cooperation are valued more than uniqueness.
Brands and people work hard to show what they’re not,
sometimes with negative results.

Can you imagine a brand paying you to not wear their


clothes? Well, for celebrities like Mike Sorrentino, a character
on MTV’s reality show Jersey Shore, this is a reality.

In fact, brands and people alike go to great lengths to ensure


that they’re not confused with something or someone else –
especially if that other entity is undesirable. Brand-name
clothing is one way to communicate something about the
identity of the wearer, and brands work hard to distance
themselves, and their customers, from unfitting identities.

For instance, Abercrombie & Fitch paid Sorrentino to not


wear their clothes because he didn’t conform to the brand’s
preppy image.

Or take the luxury brand Burberry, whose unique Burberry


pattern used to mark its wearer as a distinguished
gentleman. Nowadays, however, this upscale image has been
overtaken by a very different one: certain groups of soccer
hooligans have made the pattern integral to their uniform. As
a result, Burberry removed the pattern from the majority of
their product line.

So, proving what you’re not can be just as important as


proving what you are, and sometimes people harm
themselves trying to do the former. For instance, studies
have found that many young African-Americans, especially
those with lighter skin tone, intentionally underperform at
school to avoid being misidentified as white, or as “acting
white,” and end up damaging their career prospects in the
process.

Taking this into account, if you want to distinguish yourself,


it’s safer to stick with costly and disposable goods. After all,
you can’t stick out by using something that everyone needs
and can afford, like bread or toilet paper. Expensive products
and activities, on the other hand, are great for distinguishing
oneself, as long as others see you using or performing them.

In the end, the fact that not everyone can afford these
inessential things makes them inherently exclusive. Such
costs could be monetary, like purchasing a yacht; time costs,
like the time required to learn Esperanto; or an opportunity
cost, like risking unemployability by sporting lots of piercings.

People crave familiarity, difference and a balance of the


two.

Imagine an evil witch has cursed you and, from now on, every
single breakfast you eat for the rest of your life will consist
solely of chocolate pudding. That doesn’t sound so terrible,
does it? After all, who doesn’t love familiarity – or chocolate
for that matter?

Humans tend to prefer familiar people and things, and with


good evolutionary reasons: being attracted to familiar people
increases our chances of forming close-knit groups. Likewise,
familiar foods, even chocolate pudding, are a better bet for
survival than those interesting-looking mushrooms in the
garden.
In fact, this pull toward the familiar goes so far that, in the
wake of big hurricanes, parents often give their children
names that begin with the same letter as that of the storm,
like a family in New Orleans naming their daughter Kathy
after Hurricane Katrina. These parents prefer such names
simply because they’ve been exposed to the sound of the
letter so much.

But, while familiarity is a favored attribute that we seek out,


humans also crave novelty. Just like all other mammals, we
are always searching for new experiences. For instance,
the Coolidge effect describes a mammal, a male hamster for
instance, losing all interest in a female of the same species
after copulating with her several times.

Then, when a new female is introduced, the hamster in this


case becomes frisky, excited by the potential for a new
experience. The same effect takes place in females, although
it’s not as powerful.

But regardless of how much we desire a new person or thing,


we’ll often remain on guard until we know that it’s safe. In
this sense, what we’re really seeking is the middle ground –
and that goes for our identity as well: we want to be
familiar and different.

For example, we all want to be unique in our social circles.


But to be a part of such a group in the first place, you also
need to be familiar. So, you might diverge from your peers by
driving a white car instead of a silver one, but won’t go so far
as to insist on driving a tractor.
Other people can be a source of great motivation or a major
distraction, depending on the task at hand.

Why do so many people join groups when working toward


goals like losing weight or qualifying for competitions?

Well, it’s often because others can help us perform better.


But they can also distract, and whether or not social
influences will help or hinder us depends on how complex a
task is.

When a task is relatively simple, we perform better under the


gaze of spectators, competitors or companions, since such
people keep us motivated. For instance, you’re more likely to
stick with a diet if other people are holding you accountable;
similarly, you’ll run faster when in competition with others.

However, if the task is quite difficult and involves learning,


the presence of others can hamper your performance for a
variety of reasons. First off, other people can be distracting,
either because they make us focus on looking good instead of
completing the task at hand, or because they involve you in
activities unrelated to your goal.

But the presence of others will also make you more physically
alert. Your body will be ready to fight, flee or play, none of
which are much help when solving a complex mathematical
equation.

At the same time, you can use social influence to motivate


others to act differently, but this tool has its limits. For
example, you can make people consume less energy in their
households by appealing to their competitive spirit. In one
study, when it came to energy consumption, the thing people
cared most about was how much energy they saved relative
to their neighbors. This turned out to be a much bigger
motivating factor than, say, protecting the environment.

However, this strategy only works if there’s hope that you


can beat out the competition. So, if a student is so far behind
in his schoolwork that he has no chance of catching up,
comparing him to his classmates will only be of further
detriment to his morale.

Lean Analytics
Use Data to Build a Better Start-up Faster
Get the necessary tools to analyze your start-up.

You have the brains, you have the drive, you even have a
supportive network to get your start-up going. So what more
do you need? The right kind of analytics, of course! No
matter how smart or motivated, an aspiring entrepreneur
should always be aware of that deadly pitfall: building
something that nobody wants. By showing you how to use
good metrics to assess your success, this book will ensure
that your start-up is heading in the right direction.

So, what are the basic concepts you need to analyze your
start-up? And how can you apply these concepts to make
your start-up grow? These are some of the questions
that Lean Analytics sets out to answer.

Start-up founders should be data-informed – not data-


driven.

What is a start-up, exactly? It's an organization that aims to


build a sustainable and replicable business model. Perhaps
you’ve dreamed of founding one yourself?

If so, you'll need to stay informed about data. Data, in


addition to guiding you along your journey, makes it hard to
delude yourself.

So what is data?

It’s the numerical information that's vital to your business. If


you run a media site, for example, you'll need data about ad-
click numbers. If you're an investor, you'll need to know all
the figures about the returns on your investments.

One reason that data is so crucial is that entrepreneurs often


lie to themselves a bit when assessing their success. After all,
they often need to convince other people (like investors!) of
their ideas without having any hard evidence that these ideas
will actually work.
However, if you believe too much in your dreams, your start-
up probably won't survive. You need to stay grounded in
reality – and that's where data comes in.

Data is the antidote to self-delusion. By allowing you to


soberly measure your success, it keeps you on track: you'll
know exactly where you stand as you work toward your goal.

You shouldn't become a robot that just follows the numbers,


however. Your personal judgment is important too! You
don’t want to be data-driven; instead, stay data-informed.

Though data is undeniably important, collecting and


analyzing it can become addictive. Moreover, you'll run into
trouble if you use data to optimize just one part of your
business.

Imagine, for example, that you run a website, and your data
shows that pictures of scantily clad women increase your
click-through rate. If you just blindly follow that by filling your
page with models in bikinis, you might undermine your
business's image or integrity.

So don't become a slave to your data. Remember: data is


ultimately just another tool.

Good metrics are ratios that are both comparable and


understandable.

So what's the goal of staying data-informed? Ultimately, your


data should guide you to the right product, and the right
market, before your money runs out. But you also need to
find an effective way to measure your success. That means
finding good metrics that provide you with relevant and
meaningful data.

Good metrics have three important characteristics: they're


comparable and understandable, and they're most effective
as ratios.

A comparable metric tells you how things are developing.


You should be able to compare a metric to different time
periods, groups of consumers, or competitors. The phrase
“increased revenue from last week,” for example, provides
more meaningful information than just “2 percent revenue.”

A good metric is also understandable. Your data should keep


you moving in the right direction, but if nobody can
comprehend or remember it, it'll just turn into a burden. It
won't lead to any positive changes in your organization. So
keep your metrics simple, like “revenue per week.”

The most useful metrics are also ratios. There are a number
of reasons for this.

First off, ratios are easier to act on. If you're running a media
site, for instance, you'll have information about your ad-click
numbers. Ad click per day, however, is much more useful: it
tells you if you're achieving your ad-click goals. You'll know if
you need to improve on this or not.

Secondly, ratios are inherently comparable. They allow you


to compare short-term metrics over a longer period of time.
“Ad clicks per month,” for example, is one metric. But the
ratio of ad clicks per day over average clicks within a month
will tell you if your site is more popular at a certain time, or if
viewers are starting to taper off.

Start-up founders should concentrate on something that


they’re good at, that they enjoy and that they can make
money with.

The key to thriving as a start-up founder is finding where the


demand for your product and your ability and desire to
answer that demand intersect.

So first, find a business you're truly passionate about.


Building a start-up isn't just about creating something that
works. Ask yourself: What do you really want to do?

Don't start a business you'll end up hating, because if you


don't enjoy what you're doing, you almost certainly won't
succeed. Furthermore, investors typically look for founders
who truly care about solving a specific problem. You won't
attract investment if you're unenthusiastic and disengaged.

Second, make sure you're doing something you're actually


good at. If you identify a real niche in the market, you won't
be the only person trying to fill it. You need to be able to
satisfy your market's demand better than your competitors.

And remember: Never start a business where everyone can


compete with you equally. You need some sort of advantage,
like a network of friends and contacts that will improve your
chances of success.
Finally, be sure you can earn money doing what you do. After
all, this is what starting a business is all about: getting people
to pay you to do what you want.

That means you need to earn enough money from your


customers for the product or service you're offering. You also
need to do this without spending too much time or money
acquiring them.

So be careful – don't waste your time building something


you’re uninterested in or that nobody wants.

A start-up goes through distinct stages: Empathy, Stickiness,


Virality, Revenue and Scale.

There are several ways to understand start-up development.


The Lean Analyticsframework says that start-ups go through
five distinct stages: Empathy, Stickiness, Virality,
Revenue and Scale.

In the first stage, Empathy, you identify a need that people


have. This points you in the right direction: you'll know where
your niche in the market is.

Next, in the Stickiness stage, you figure out how to answer


your customers' need in an effective way that they're willing
to pay for.

Then you enter the Virality stage. That's where you build the
product, features and functionality that'll attract your
customers.
Once you have a base of loyal customers, you start the
Revenue stage, during which your business really grows and
expands.

The Scale stage comes last. In the Scale stage, you'll start
trying to break into new markets or expand, and your start-
up will begin looking more like a larger company.

The Stickiness, Virality and Revenue stages all drive your


start-up's growth. How?

Stickiness ensures that your customers keep using your


product. You can assess your stickiness by
measuring engagement, a key metric for predicting success.

Facebook, for instance, had low engagement in the


beginning. They had few users, but they got them to keep
coming back. Facebook soon became enormously sticky.

There's a metric for Virality as well. Its key metric is the


number of new users each established user brings in. The
more users your current users add, the faster your business
will grow.

Facebook was designed to function better as it gained more


users, so, as more people encouraged their friends to join, it
went viral rather quickly.

Revenue, of course, is the ultimate metric for identifying a


sustainable business model. Facebook now has a good one: it
generates revenue by placing highly personalized ads on its
users' pages.
Start-up founders should always focus on one metric above
all the others.

One of the keys to achieving success in your start-up is


staying focused. That means you need to concentrate on the
single metric that's most critical to whatever stage you're
going through.

You should always know what your most important metric is


at any given time. As a start-up founder, you'll have to keep
track of multiple figures, like revenue per customer or
customer satisfaction. Some of these numbers will matter
immediately, and some you'll store for future use – when you
present your company's history to an investor, for example.

Don't lose yourself in your business's data, however.


Concentrate on the right thing at the right time. If you're
running a media page, for example, don't stress out about
your ad-click rates before you've attracted a sizable base of
customers. Your ad-click rates won't matter before then.

The number you should be focusing on at the moment is


your One Metric That Matters, or OMTM. Your OMTM helps
you set clear goals and measure your success along the way.

In the restaurant industry, for example, the ratio of staff


costs to gross revenue is a great OMTM. It's simple,
immediate, actionable and comparable: it's a single number
you can generate every night; you can adapt your costs to it
quickly; and you can easily track it over time and compare it
with other restaurants.
You could set a clear goal by aiming for a ratio of 0.25, for
instance. That would mean that each of your staff costs
should produce four times the gross revenue. If you're below,
maybe you're under-serving your customers. If you're close
to this figure, you probably have a good balance between
customer service and customer profitability.

Start-up founders have to outline their business model and


find the right customers.

A lot of start-ups are based on truly creative ideas and some


manage to attract large groups of people. Few start-ups
actually make money, however. Even big organizations like
Facebook and Twitter have struggled to make money from
their user bases.

That's why your business model is so important. As a start-up


founder, you need to define yours.

So what's the simplest business model? It would probably be


a lemonade stand where you sell your lemonade for more
than it cost to make it.

A real business model, on the other hand, is the description


of your business's core concepts. It outlines the ways you'll
get people to use your product. And keep in mind that your
product is more than just the thing you're selling – it's also a
mix of other factors, like your service, brand, support or
packaging.

When you buy an iPhone, for instance, you aren't just getting
a phone. You're buying a piece of Apple's character, too.
Business models work in a similar way. They're a mash-up of
several aspects of the business – sales tactics, revenue
sources, product types and delivery models. You'll have to
carefully consider these different elements when you
construct your business model.

Also, a good business model helps you separate your


valuable customers from those that might be harmful.

Unfortunately, not all users are good for you. Some might
only be good in the long term, like people who use a free,
basic service and only sign up for a paid account after a few
years.

Other users might never become paying customers, but could


still provide free marketing or bring in other users
who will pay.

Some users, however, might only harm your business. They


could distract you, consume your resources or spam your
site. So make sure your start-up prioritizes and meets the
needs of your most important users.

The best metric for an e-commerce start-up is revenue per


customer.

If you're like most people, you've probably bought several


things online during the course of your life. E-commerce
companies are very common nowadays. In fact, they're
probably the most common kind of online business there is.

E-commerce companies focus on customer loyalty and


acquisition. They usually make money by selling products
they can deliver electronically, like music downloads on
iTunes, or physically, like shoes from Zappos.

Some e-commerce companies are loyalty-focused, like


Amazon. Amazon builds a strong relationship with its
customers, and ensures they’ll keep coming back, by offering
them a wide range of products and keeping its services
simple.

There are other e-commerce companies, however, that focus


on acquiring new customers and making big, single sales
instead of building loyalty. A website that sells second-hand
cars and charges a fee for its services would be an example of
this. That site wouldn't need its customers to come back – it
would focus on one-time sales.

There are several metrics to use in e-commerce, but the most


important is revenue per customer.

Revenue per customer is the combination of a few other


figures. It includes your conversion rate, the percentage of
visitors to your site who actually buy something. It also
factors in the rate at which your customers return to the site
to buy your products again. This particular figure tells you if
you should focus more on building loyalty with current
customers or on acquiring new ones.

Your shopping cart size is also critical. That figure tells you
how much your customers are actually spending.

Revenue per customer is the combination of these two


figures. It’s important for all kinds of e-commerce companies,
regardless of whether they're focused on loyalty or
acquisition or a mix of the two. Revenue per customer lets
you know how efficiently your business is running.

Media sites make money through advertisements, so click-


through rates are the most important metric for them.

Google's search engine and CNN's website are both examples


of media sites, and much of these sites’ revenue comes from
advertising. So if your business model is a media site, you'll
probably be focused on earning money from advertisements,
too.

Inserting ads into online content is fairly easy, and a lot of


websites rely on the money from advertising to pay the bills.

Ad-based monetization can be a fallback revenue source,


which subsidizes, for instance, a cheaply priced game, or it
can pay for the operating costs of providing free content.

You can earn revenue from ads in a number of ways. Some


sites make money from displaying banners, while others have
sponsorship agreements or affiliate relationships.

For example, imagine a sporting news site that has a


partnership with a local sports team, and a standing contract
to display banners for it. The site might also sell sports books
through an affiliate relationship with an online bookstore.

Media sites focus on their click-through rates because ad


revenue is usually tied to the number of clicks an ad gets.
That's why click-through rates or display rates are so
important – they represent real money.
However, media sites have other concerns, too. They need to
make sure their visitors stay as long as possible and visit a lot
of pages. They also have to know how many of their visitors
are returning and how many are new.

You can tailor your ads to suit these different figures. For
media sites, advertising is everything.

Little Bets
How Breakthrough Ideas Emerge from
Small Discoveries
Learn attainable and affordable ways to test new ideas.

Why put all you’ve got into huge, expensive undertakings


that cost lots of time and money when you can implement
little bets without neglecting your central project? Over time,
these seed-size ideas germinate and may even develop into a
fully fledged business model. Hewlett-Packard used the little
bets approach with its scientific calculators; Pixar took little
wagers on its journey to becoming an animation
powerhouse, and many others succeeded in a similar way.
There are a number of tricks and strategies that can help you
implement and get the most out of the little bets approach.
These strategies will also increase your creativity, help you
become more innovative, and uncover new insights to place
your little bets on.

Take small, concrete actions instead of struggling through


big, elaborate plans.

A common lesson MBA students pick up in business school is


that there’s no point starting a new business till they have a
“great idea.” Wrong! Exceptional entrepreneurs don’t work
like that. Rather than beginning with a great idea, they
discover them when they’re already working on a smaller
concept. Google didn’t set out to dominate the internet.
They just wanted to improve web searches.

To see your small concept grow into a Google-sized success,


you should steer clear of top-heavy planning, as this hinders
your chances of discovering new ideas and opportunities.
Hewlett-Packard co-founder Bill Hewlett understood this,
and bolstered his firm’s fortunes by making a brilliant “little
bet.”

HP needed to expand, but was surrounded by established


markets which were already full of competitors. So in 1972,
under Bill Hewlett’s guidance, HP introduced the first
scientific calculator to the market, even though research
advised against it due to its hefty price of $400. It was niche,
and they didn’t have to “bet the farm” when they went into
production. The calculator was a success, and HP were free
to explore a new market without having to contend with
competition.

A “little bet” has the advantage of being cheap, quick, and of


letting you work your way through uncertainty. Market
trends and technology can be unpredictable, but because
small steps are low-cost and can be launched speedily,
companies won’t collapse if one bet fails.

If HP had tried to change their entire company from root to


branch, and over-planned their next move, the pressure on
everyone not to fail would have been stifling. No one would
have wanted to take the risks required to be truly innovative.

Another great thing about little bets is that even if they go


wrong, they allow us to fail swiftly and learn from the
outcome. An uncompromising top-down approach can mean
a slow-burning, more damaging result.

As you’ll see, a little-bets approach cultivates a growth mind-


set, which leads to fresh ideas. What’s a growth mind-set?
And how can you come up with little bets? The next blink will
show you.

Develop a growth mind-set and see failure as an


opportunity to grow.

Aspiring to ambitious goals is healthy and should be


encouraged. But what really makes entrepreneurs successful
is their ability to abandon ideas that may have once seemed
great, rather than just sticking to a single vision.
This means being growth-focused and flexible, and not letting
failure discourage you. Far from being a disadvantage, errors
and mistakes help you delve into creative ideas and gain
knowledge from the experience.

To be creative, you need to make friends with failure and


mistakes.

Pixar, for instance, recruited director Brad Bird for The


Incredibles, despite his last film being a box-office flop. Pixar
executives didn’t let his previous blunder put them off. On
the contrary, they explicitly hired Bird to shake things up.
Learning from his earlier bad experience, Bird and his team
came up with more elaborate storyboards that mimicked the
camera’s movement, which enabled animators to pick out
the scenes that needed the most work.

Eventually, this new approach allowed Pixar to make the film


at less cost per minute than their previous release.

This is a clear example of how people with growth mind-sets


tend to accomplish more than those with a fixed mind-set.

According to research conducted by Dr Carol Dweck at


Stanford University, we generally bend either toward a fixed
or a growth mind-set. A fixed mind-set means we believe
intelligence and ability are immovable, whereas a growth
mind-set means we believe abilities can be improved through
practice and effort.

While people with a fixed mind-set interpret obstacles as


threats, a growth mind-set lets you move forward and
maintain your self-esteem, undeterred by failure. Dr Dweck
views Michael Jordan as having a growth mind-set; rather
than explaining his success as coming from natural talent,
Jordan attributes his accomplishments to effort.

Strive for excellence with healthy perfectionism.

Striving for excellence requires you to exercise a certain


amount of attention to detail, and hold high standards for
the task at hand. But too much perfectionism can paralyze
your creative process. You should therefore aim for healthy
perfectionism.

Extensive psychological studies have revealed two kinds of


perfectionism: healthy and unhealthy. Healthy perfectionism
is internally driven by personal values, such as quality and
excellence, and results in contentedness, happiness, and high
levels of well-being.

In contrast, unhealthy perfectionism is driven by external


factors, like worrying about mistakes or parental pressure,
and can bring about eating disorders, anxiety and depression.

We all possess both forms of perfectionism, so the key is to


avoid the negative consequences of unhealthy perfectionism,
while letting healthy perfectionism take the lead.

One way you can find a balance between healthy and


unhealthy perfectionism is by prototyping. A prototype is a
primary model of a product, which you can use to test an
idea. The advantage of prototyping is that it’s fast and cheap,
and therefore it’s a small bet that allows you to fail and learn
quickly.

Entrepreneurs call this “failing forward.”

Prototyping is also a smart way to overcome writer’s block.


For example, to conquer her fear of the blank page, author
Anne Lamott writes “shitty first drafts” to get the ball rolling.
This way, she gets something down on the page. She’s rarely
happy with the results, but the next day she goes through the
text, writes a new lead paragraph, a better ending, or adds
improved descriptions. Following this, she rewrites the draft.

Lamott holds that every great writer uses this method,


allowing them to fail and learn quickly with impressive
results.

Aside from nurturing healthy perfectionism, we’ll see in the


next blink how creative industries should play with a variety
of concepts and ideas.

Encourage improvisation and you’ll inspire new ideas and


insights.

How can you create fertile ground for new ideas and insights
that might develop into a small bet? Try creating an
environment where playing and improvisation are prioritized
and encouraged – not just tolerated.

We now know that a jovial, lighthearted environment often


enables the improvisation that unleashes creativity and
experimentation.
For instance, Dr Charles Limb, an associate professor at Johns
Hopkins University, ran a study on how improvisation affects
the brain. In the study, musicians were placed in an MRI
machine with a piano keyboard and were randomly asked to
play structured music or to improvise a new melody.

Interestingly, as the musicians changed from playing


structured music to jazz, the region of the brain connected
with evaluating and censoring became deactivated.

So when this area was switched off, the musicians could


come up with off-the-cuff melodies. Creativity flourished
when the brakes were removed.

Improvisation has another benefit – it’s great at beating the


side effects of unhealthy perfectionism such as fear and
doubt.

One improvisational way to cultivate innovation is known as


“accept every offer.” Say that you’re performing on stage and
improvising a skit, and your fellow performer makes the first
suggestion, like “Let’s go get an ice cream!” A performer
well-versed in improv will accept the offer by agreeing and
adding another suggestion, such as, “Yes, and let’s go to the
park afterward.”

So rather than suppressing both yourself and your thought


process for new plans with a “No, but . . .” response, do as
the improvisers do and say “Yes, and . . .” It can work
wonders for new ideas.
Paradoxically, certain constraints can also give rise to new
ideas.

Though it sounds like a blatant contradiction, limitation can


assist your creativity. You can actually use constraints to limit
the breadth of your project and pinpoint problems that need
to be tackled.

If you present yourself with too many opportunities and


possibilities when an idea is in its early stages, you can cause
self-doubt and stress.

This is why constraints are so beneficial: placing boundaries


around projects reduces the fear of indecision and
encourages innovative ways of approaching a problem.

Take architect Frank Gehry’s approach to the acoustics of the


Walt Disney Concert Hall in Los Angeles. The challenge was to
collate the recommendations and requests of the city, and to
design a hall that looked less ordinary than others, without
impairing the quality of its acoustics.

Taking note of all this, Gehry decided to do away with the


standard shoebox concert hall design and conceive an
incredibly acoustically sophisticated structure. He created a
vineyard-like seating layout, where seats surrounded the
stage and rose up in terraces, which also expanded the area
through which sound could travel. Because of this cozy
seating configuration, people referred to the hall as the
“living room” of downtown Los Angeles.
Gehry had allowed the acoustic limitations to lead him to an
even more creative solution.

But what if the scope of solutions is limitless? Well, then you


can self-impose constraints. If a project is over-complex,
break down larger problems into manageable steps that can
be easily attained.

For example, the game company Electronic Arts (EA) refers to


this method as “smallifying.” Software teams at EA pare
down tasks into small, workable units that can be addressed
in under two weeks. This means that developers can’t go
down unnecessary paths, and need to find creative ways to
finish their tasks on time!

Immersing yourself in unfamiliar terrain will inspire new


creative insights.

Did you know that new insights stem as much from


geographical and psychological places as they do from being
playful and working around restrictions? Well, get ready to
discover new territory and go beyond your comfort zone.

Valuable insights and ideas are frequently buried beneath the


surface. By venturing out into unfamiliar terrain and being
attentive to what people “on the ground” are thinking, you’ll
be far more open to new perspectives and ideas. You may
even find solutions to problems you never knew you had!

Useful insights can actually be gained from a worm’s eye


view (as opposed to a bird’s eye view). One example of a
worm’s eye view is the “embedded” journalist, such as a
reporter linked to a military unit in the midst of a conflict.

A great example that demonstrates the value of immersion


for seeing previously unseen solutions is 2006 Nobel Peace
Prize laureate Muhammad Yunus.

In 1974, a severe famine wreaked havoc on India, and drove


starving people into the main cities. At the time, Yunus was
an economics professor at Chittagong University in
Bangladesh. Unable to ignore his fellow citizens’ poverty, he
decided to conduct some field research and get to the
bottom of the problem.

His team interviewed a woman who made bamboo stools.


The problem was, she had to borrow money from a
middleman to buy bamboo for each stool, leaving her with a
meager profit.

Yunus discovered that when people could access small loans


at reasonable rates, they could lift themselves out of poverty.
These little bets became what we now know as microloans.

Microfinance was a success – in 1983 Yunus institutionalized


lending money to the poor with fair interest rates and
founded the Grameen (or “village”) Bank.

Being around diverse people helps you develop new ideas.

We now know the benefits of delving into unknown


environments, but what about a broad approach, such as
interacting with people from different backgrounds, jobs and
experiences? Successful entrepreneurs do this often. So what
are the benefits of being around a large variety of people?

One is that learning from people with different perspectives


feeds creativity.

For example, in his book The Medici Effect, author Frans


Johansson draws on substantial psychological research
showing how the collaboration between diverse and talented
groups of people is more likely to produce innovative results
than the solo efforts of one individual.

The wealthy Medici family put this into practice hundreds of


years ago in Italy. They brought together a wide range of
creative minds, including Leonardo da Vinci, from across
Europe to cooperate and exchange ideas. The Medici’s
patronage is believed to have been the catalyst for the
Renaissance.

Another thing you can do to benefit from others’ reactions is


to test your ideas and products with extreme users or early
adopters. These are the fans who can predict the needs of
the masses and act as movers and shakers.

Average users don’t think about solving problems, but


extreme users do. They analyze your product carefully and
can provide worthwhile insights and solutions for further
development. After feedback from extreme users, the idea
can be tested with the masses and introduced to a wider
market.
The multinational conglomerate 3M Company, for instance,
discovered in the mid-1990s that collaborating with its most
frequent individual users to develop new products was highly
advantageous for the company’s growth.

One study on Hewlett Packard in 2002 even found that


singling out active customers and working with them to
develop new ideas generated an average of $146 million
after five years.

Small wins can blaze a trail to success.

Now that you have some tools for nurturing creativity, how
do you keep moving forward?

The trick is to use incremental successes or “small wins” to


assess how much progress you’ve made toward your goal.

The psychologist Karl Weick’s definition of a small win is a


“concrete, complete, implemented outcome of moderate
importance.” These small wins provide us with the signs and
guidance we need to proceed in an alternative way.

They’re the little gains you get as you’re working on your


project or product. Maybe you couldn’t build the prototype
exactly the way you wanted, but perhaps you were able to
source the rare parts you needed despite that.

Small wins can function as landmarks to success or indicate a


point of return. As landmarks, they reassure you that you’re
heading in the right direction, while points of return inform
you that you should alter your path.
For a fantastic example of this, see Pixar’s emergence as a
film company. Pixar started out making special effects and
hardware for George Lucas’ Lucasfilm, but was losing money,
selling a mere 120 units of its Pixar Image Computer. But
when Steve Jobs bought the company in 1986, he saw
potential in the team that created animated films to promote
the computer.

Tin Toy was Pixar’s first short animated film and it was a
small win that encouraged Jobs to let lead executives Ed
Catmull and John Lasseter expand the role of the company’s
animation division.

The short film went on to win an Academy Award in 1988 for


best animated short, and later, Jobs decided to steer Pixar
further toward digital animation. Then, in 1991, Disney
partnered with Pixar to release the hugely successful Toy
Story (based on Tin Toy), which shot Pixar to international
fame.

It’s clear that small wins act as fuel for larger projects and can
combat frustration. In addition, they also signpost new
directions, as we saw with Pixar.
Million Dollar Consulting
The Professional’s Guide to Growing a
Practice
Start your own million-dollar consulting practice.

Not everyone is satisfied with the grind of a nine-to-five job


in the corporate world, and many people choose to take their
knowledge, skills, and experience with them to another,
more lucrative industry: consulting.

But as any successful consultant knows, solo consulting isn’t


just about amassing a large fortune. In fact, success in
consulting involves surmounting a dramatic learning curve
and collecting broad and diverse experiences and skills. It
brings the possibility to make changes that can potentially
impact the lives of tens of thousands of people.

These blinks will teach you how to set up your own company
and acquire the kinds of clients that will make your million-
dollar business. They’ll also give you tips – some of which are
quite counterintuitive – for success in this industry.

A consultant adds value to their customers’ cause.

What does it take to become a doctor or a lawyer? That’s


easy: there is a strict set of requirements you need to fulfill,
like passing the bar or doing your residency, after which
you’re awarded a certificate that allows you to practice.
While the requirements for becoming a doctor or lawyer, like
those for many other professions, are quite narrow,
virtually anyone can call themselves a consultant. If that’s the
case, then what does the word actually mean?

A consultant is someone who has a unique set of skills and


talents that help to create the value-adding components that
their clients’ businesses lack. The value that they add comes
from two sources: content expertise and process expertise.

Content expertise is earned through study and work in a


specialized field, where the wealth of your experience and
professional relationships lie. In other words, this is your
professional “comfort zone,” where you are the most
competent.

This expertise is rooted in the specific skills and talents that


made you successful in one particular industry or field of
study in the first place. If you are consulting for a specialized
firm – for example, as an expert witness in a legal dispute –
then you are acting as a content consultant.

This contrasts with process expertise, which transcends


specific industries, is applicable in almost any environment,
and involves a set of highly effective methods.

For example, the company Bain & Co. has spent years
conducting strategic planning projects, and thus has
developed the experience and the methodology necessary to
consider themselves as having expertise in strategic
processes. Consequently, they tend to specialize in just that
area, as they know it best.
For solo consultants especially, process expertise is often
more valuable than content consulting. This is because
process expertise has a wider range of applications across a
broad spectrum of diverse industries, which can help to make
up for a lack of content expertise.

Get discovered by making yourself visible.

Starting a business isn’t easy, and often the biggest hurdle is


attracting the attention of potential clients to your services.
So how do you do it?

There are two major ways in which organizations find


consultants: word of mouth and an outstanding body of
work.

Word-of-mouth marketing is by far the simplest and most


effective of these two methods, as it leads the clients directly
to you.

Unfortunately, since word-of-mouth marketing is based on


direct recommendations by clients or someone else who has
at least heard about your services, the process is therefore
almost completely out of your hands.

In spite of this, it can be wildly successful. In fact, the author


has traced many of his most valuable projects back to
recommendations by clients or other completely unexpected
sources.

It is therefore important that, apart from delivering first-class


work, you treat every single interaction with a prospective
client as a personal “moment of truth,” and always think in
long-term relationships. In the end, consulting is a
“relationship business,” and your success depends upon the
relationships you build.

Of course, you can also help this process along by asking your
satisfied clients for testimonials and recommendations
directly.

Word-of-mouth marketing must be backed up by actual


value, so it’s important to keep a record of your success as
well as your intellectual property in order to build your
reputation and showcase your body of work.

Everything you’ve done – from hard-copy publishing,


speaking, interviews and product sales, to websites and
newsletters – enhances your visibility. Start producing
intellectual property early in order to develop your body of
work, and use this as references to your credibility rather
than as mere sales vehicles.

The best way to get people to see the value you can add to
their business is by showing them the value you’ve added to
others’.

Focus on the big picture and don’t let your job get in the
way of your career.

How do you measure the quality of your work? Many


consultants get tangled up in quantifying their tasks with
arbitrary measurements, like the number of meetings held or
reports written. In reality, the quality of your work comes
down to one thing and one thing only: the value you add to
your client’s business.

In this way, consulting is about results, not tasks. If you just


fulfill tasks and define deliverables without connecting them
to a specific value-adding result, you’re just creating a heavy
and unproductive workload for yourself, such as writing
reports and sitting through meetings devoid of goals.

To avoid this, you should enter an agreement with your client


in which “the ‘how’ is subordinated to the ‘what.’” In other
words, a fulfilling and positive consultant–client relationship
is one in which the end result, rather than the method, is
what’s important.

However, in order to forge this kind of positive relationship,


you will have to clarify to your clients that your work should
be measured in terms of the value you add, rather than, for
example, the time it takes to complete the project.

To do this successfully, you will need to come to an


agreement on what the objectives are and how they will be
measured before you even write a proposal.

This requires collaboration, and, unsurprisingly, the best


consultants collaborate with their clients. This is because the
kinds of value a consultant adds – roughly divided into
resolving an issue or transferring skills – can change
depending on the specific needs of the client.

Whereas an interventionist imbues an organization with


highly effective skills, and an independent expert resolves
many important issues critical to a company’s success, only
a collaborator is able to do both at the same time.

By demonstrating their flexibility, collaborators not only offer


the most value to their clients’ organizations but also tend to
have the strongest and longest-lasting relationships with the
client, and thus the follow-up projects and referrals that
come with them.

Be crystal clear about your strategic goals.

What is it that defines your consulting business and sets it


apart from the crowd? Every consulting firm has some
unique motivational force behind it that sets out their
strategic goals and paves the path for their business.

Unfortunately, companies too often formulate mission


statements such as, “We want to help clients to achieve the
best results possible,” or “We want to be on the cutting edge
of our field.”

The problem is that these statements are far too vague and
generic. Good mission statements get specific in their goals
and their intended results. For example, if you want to
improve customer service, you might have a strategy like
this: “We will design and implement workshops that use
customer feedback to create demonstrable changes in
behavior on the job.”

Or, if you specialize in process optimization, you might “assist


clients in enhancing staff productivity through needs analysis,
enhanced communication and joint decision making.”
No matter how you formulate your strategy, the key is to
show how value is added, and thus differentiate your service
from others.

This strategic goal will always be underpinned by this primary


motivator: to grow, both financially and personally.

There is virtually no other profession with a steeper learning


curve than consulting. Consequently, your ability to add
value to your clients’ operations increases with every new
experience, gained ability and learned skill, all of which, in
turn, justify a rise in your fees.

At the same time, every assignment will ideally leave you


with a new valuable contact or strengthened relationship
with your client, thus improving your network and word-of-
mouth marketing.

This means that you should always get something out of your
contracts. If a business doesn’t meet your growth strategy –
for example, if the project doesn’t meet your fee structure, is
unchallenging or doesn’t otherwise help you grow – don’t do
it.

Sometimes you need to fire clients in order to grow.

Has your doctor ever told you that there’s something you
need to cut out of your life – maybe smoking or candy bars –
in order to improve your health? Surprisingly, the same is
true in the world of consulting: sometimes consultants fail to
grow because they refuse to abandon bad clients.
This is because consultancy firms operate differently to other
businesses, such as soft drink manufacturers, who will always
try to sell to as many people as possible. In order to grow –
both financially as well as in terms of client relationships and
professional experiences – you will need to let go of less
lucrative businesses.

As your wealth of experience continues to grow, your fees


should grow with them. Not only is this good for your wallet,
but it’s also good for your reputation. If you become known
as an “inexpensive alternative” desperate to accept any job,
you will receive the pay and repute that come with such a
perception.

Instead, ensure that the quality of your work is always above


the quantity, i.e., one $50,000 project will always be more
valuable to you than ten $5,000 ones. In fact, the time and
cost required to sell a $100,000 project or a $10,000 project
is generally very similar, thus making bigger projects all the
more valuable to you.

And since the value you can provide increases with your
expertise and your abilities, it only makes sense for you to
raise your fees accordingly.

Consequently your strategic goals should incorporate the aim


to accumulate increasingly higher-value assignments.

One good way to ensure that this actually happens is to look


back at all of your assignments every two years and identify
the bottom 15 percent that you then choose to no longer
accept, thus making room for more lucrative business.
If you don’t grow continually, your success will eventually
erode beneath you. By constantly looking for opportunities
to expand your business, you will steadily climb, growing
your wealth with each step.

Consulting is a “relationship business,” so a likeable brand is


crucial.

A consultant’s most crucial actions are to differentiate their


business and find their niche – but how do you achieve this?
The answer lies in branding yourself and building
relationships.

Although we’ve been told not to, people really do judge a


book by its cover. Knowing this, you should be sure you
create a personal brand that others will both like and
recognize.

Like it or not, part of this brand is your personal presentation.


Have a few nice suits and accessories, and strive to behave
like the professional you are. Try to stay natural, avoiding
things like hairdryers, potent fragrances and tanning salons.

However, it is not your face, but your name, and the logo
that accompanies it, that is your ultimate trademark. Thus
you should always use your logo on everything you produce.
Potential clients need to be able to recognize your work in an
instant in order to make it easy for them to call on you.

You also want your business to be a legally recognized entity.


Generally, if you’re not incorporated, you’re considered an
amateur. You’ll never be perceived as a true professional,
and will consequently lose out on many lucrative business
opportunities.

It’s also important to consider how you differentiate yourself:


specialization makes you competitive and differentiated
services make you distinct, but your relationshipwith the
client will determine whether you are perceived as a valuable
collaborator or a one-timer.

The ideal relationship is one where the client has confidence


in the consultant to make decisions on his own, act
responsibly and in the client’s best interest.

One simple way to gain trust is to provide your best clients


with your private telephone number. The ability to call upon
you during tough times provides a feeling of safety and
partnership.

In addition, you shouldn’t be afraid to take a stand on crucial


issues, even when internal politics threaten the success of
your project. In the end, good clients will understand that
you are acting in their best interests, and will only trust you
more.

Focus on value and partnership when negotiating with a


potential client.

Consultants who don’t “make it” are often unsuccessful


because they fail to convince the client of their value. This is
because there are a number of hurdles that can make
negotiations difficult.
Firstly, you will often find yourself sitting across from
a gatekeeper at the negotiating table – someone who is
authorized to say “no” but not “yes,” like, for example, HR
personnel or a mid-level manager. Under no circumstance
should you ever enter negotiations with a gatekeeper and
you should always insist on the presence of the person who
actually makes the ultimate decisions and writes the checks.

Secondly, you will have to overcome the four main reasons


clients use to reject your services: no money, no urgency, no
need, and no trust.

No money or urgency: The key to overcoming this hurdle is to


focus solely on value in your negotiations. If you can
successfully show how the issues your potential client faces
will worsen over time, and explain exactly what kind of value
you’ll deliver, then your services will appear more urgently
required and your fees more reasonable.

No need: Indeed, “the essence of marketing is to create


need.” Generally speaking, clients know exactly what they
want, but not always what they need. To surmount this
hurdle, you’ll need to identify what their needs are, show
them why they need these things, and then explain the value
you can add by helping them meet their needs.

No trust: If you and the client have no relationship, then


there is no trust upon which successful negotiations can rest.
To develop this relationship, you have to identify the issues
that excite or frustrate your client and provide candid
feedback, positioning yourself “as potential partner, not as a
salesperson or a sycophant,” and convincing them that you
have their best interests in mind.

If you can succeed in surmounting these obstacles, then


they’ll have no choice but to say “yes.”

Don’t charge for time, but instead for value.

It can sometimes be difficult to translate the services you


provide into a dollar amount. Many consultants make the
mistake of charging a per diem fee, but unfortunately for
them, this is not only counterproductive, but can even be
considered unethical.

This is because the time you spend on a project


has no intrinsic value for the customer in and of itself. The
only thing that the client is interested in is improvement, or
value.

If, however, your fees are based on the time spent on a


project, then your goal is actually to maximize time rather
than add value. Such a pay scale puts you and your client in
opposition to one another: the client wants fast and
profound improvement, and you want longer project times.

In reality, however, value-based fees and shorter project


times are far more appropriate for meeting your client’s need
for fast results and your need for personal, professional, and
financial growth.

The same applies for tasks. Clients don’t care about the tasks
– they care about results. Furthermore, since tasks are
repetitive, they therefore lose value the more with each
repetition due to economies of scale. Outcomes, however,
only become more valuable as they accumulate.

So how should you structure your fees? Here are some things
you’ll want to consider:

What qualitative and quantitative benefits will you provide


your client? How will affect your client’s reputation? How
much emotional energy will you need to invest in the
project?

You should also consider the scope of the project, the


number of people who will have access to your services, and
the approximate duration of the project.

Ultimately, the only way to get the fees you deserve is to


convince your client of the value you add and then
simply ask for them. Many people, however, can’t ask for a
huge amount of money convincingly. Make it easier on
yourself by practicing saying, “the fee will be $50,000” in
front of a mirror in order to convey the confidence that
justifies the fee.

Don’t be fooled by immediate success, and always keep


your pipeline evenly filled.

How far ahead do you plan for your future? If you’re like
most consultants, you don’t look much further than your
next paycheck. This tunnel vision is what causes most
consultants to miss the omens of bad times ahead. In order
to stay above water, you’ll need to closely monitor the
volume and source of your incoming assignments.
The pipeline approach is one way to gain perspective on your
incoming assignments. Your pipeline indicates all of your
long-term, short-term, and immediate projects along a
timeline, all of which are “signed and sealed,” thus
representing safe income.

Your pipeline should be filled with short-term sales you’ve


closed, repeat business from current clients, and other
business that comes by referral. You should also make plenty
of time for prospects and direct marketing targets.

And because most companies have a policy that does not


allow multi-fiscal-year agreements, most pipelines will
represent a 12-month period. For you, this means that your
pipeline offers a realistic estimate of yearly cash flow and
profit.

A poorly structured pipeline, however, can lead to a world of


problems.

For starters, a dry pipeline puts you under pressure to


acquire new, short-term business, which almost always
translates into poor business, poor fees, and fewer growth
opportunities.

Additionally, when your projects are unevenly distributed or


clumped together at some point in the pipeline, you will
probably have to hire contractors or enter an agreement with
another consultant in order to complete all the work. This, in
turn, reduces your margin and opportunities for growth.
You should also take care to monitor your pipeline. If you
notice a lack of new prospects and targets as well as a lack of
repeat business from your existing clients, it might be that
either your marketing efforts are ineffective or that you’ve
failed to form strong relationships with your clients.

Diversification and investment are the best protections


against bad times.

As a result of the economic crisis of 2008, many consultancy


firms suffered a loss of business and drastic cutbacks in their
expenses. Others, however, were able to actually grow their
business in spite of this economic hardship. So what did they
do differently?

The answer: they invested in their businesses instead of


cutting costs, and made use of their highly diversified
services and excellent client relationships.

You can think of the economy as acting like a hydraulic


system: “When something goes down, something else goes
up.” Therefore, with the right strategy, you can actually use a
crisis to your advantage.

Regardless of the economic climate, however, you should


diversify your services – both your content and your process
expertise – in order to address the industries that thrive in
booms and those that thrive in busts.

Indeed, some industries – for example, the pet care and


health industries – are quite resilient in economic
depressions, and you want to be able to capture that
business when the time is right.

Another way to protect your business is by expanding your


market geographically. This strategy will ease the pain of
regional economic downturns and keep you from being
overwhelmed by local competitors.

And if you do fall into slow times, you can focus your time
away from clients and become productive in other areas –
most importantly marketing. For example, you could make it
a habit to call your old clients and partners in order to
maintain a good relationship, write articles for a magazine, or
give speeches on the challenges of the crisis.

Finally, most competitors will start divesting in times of crisis


and uncertainty. Clients, however, will immediately notice
the falling quality and value of their services. You should do
the opposite, and fill the void left behind by your competitors
with your enhanced efforts to make your value noticeable to
the clients.

Think long term and wise up if you want to hold on to your


dream client.

In order to be the most successful consultant possible, your


ultimate goal must be to become irreplaceable for your
clients and to form lasting relationships with them in order to
maximize your fees and keep your pipeline filled with
assignments.
To achieve this, you’ll need to think strategically and in the
long term, even discounting your fees for special
opportunities that allow you to gain enough knowledge
about your client’s organization to make yourself an
irreplaceable asset.

With every project you are involved in, your worth will
increase as the added value of your projects accumulates and
the organization imparts more insider information to you.

Having been educated about the ins and outs of the culture
and business of your client’s organization, you can then be
more proactive about finding areas where you could add
value, suggest projects, and thus raise your fees.

In order to gain these valuable insights, start your project


with “roaming time” in order to get an overview of how the
organization works and is perceived by the different
stakeholders and functionaries within the organization.

Roaming time never really ends during your project, as there


is always more to learn, but in the beginning, you should take
special care to meet all key senior staff as well as a wide cross
section of middle- and lower-level managers in order to gain
insight into their perceptions, and how they use the
resources and technology available to them.

Additionally, you can accompany salespeople on the road,


and even try to talk to the major customers to get their
perspective.
Once you’ve successfully completed a couple of assignments
and have gained sufficient knowledge about your client’s
organization, you have reached the ultimate point in your
client–consultant relationship. In the words of the author,
“you have become a wise person whose contributions are a
synthesis of personal talents, organizational knowledge, and
personal relationships established with top management.”

Balance work and life – your real wealth is your free time.

Hell-bent on being as financially successful as possible, many


consultants end up spending their lives in airplane seats and
clients’ offices, leaving only the weekend for their families, if
that. Others, however, believe that their real wealth is their
discretionary time, and that money is merely the means to
achieve that lifestyle.

If that’s the case for you, then growing your business may
actually mean a decrease in your wealth.

In fact, it is a holistic outlook on life, rather than one focused


on business, that will truly make you a better consultant. This
is because you can draw more energy and creativity from a
balanced life, which in turn improves your work and helps
clients to see you as both a complete human being and a
professional.

But how do you achieve the balance between work and play
that allows for a more balanced and rich life?
First of all, you must realize that there is no strict division
between your professional and private life. There is only one
life: your life.

Consequently, you should eliminate arbitrary time


boundaries, and instead do things when “the spirit moves
you.” If you want to complete some work on Sunday and go
to the beach on Monday, that’s fine! As an independent
consultant, you are the master of your time, so use it as you
wish.

Secondly, the secret to a fulfilling life lies in variety. As


Nietzsche once wrote, “a day has a hundred pockets if you
know what to put in them,” so you should make an earnest
effort to never stop learning and to push yourself to try new
things. Avoid isolation, find inspiration in others and help
them in order to maintain perspective about the priorities in
your life.

And lastly, stay healthy and fit, and reward yourself regularly.
A healthy body is home to a healthy soul, increases your
confidence and curiosity, and makes you more resistant to
stress.

Moms Mean Business

A Guide to Creating a Successful Company and a Happy Life


as a Mom Entrepreneur

Become a better and happier mompreneur.

Today, American women are launching twice as many


businesses as men – and many of these women are mothers.
While these blinks are useful for all entrepreneurs, they offer
especially valuable advice for mom entrepreneurs. You’ll
learn how to make sure you meet your own goals and not be
bound to another person’s agenda.

These blinks also give advice on how to budget your time


despite the various challenges which mom entrepreneurs
encounter – and on how to find time for all the activities you
love most.

Eliminate unnecessary pressure by recognizing your true


priorities.

Today’s entrepreneurial mother faces a host of challenges on


her way to success. The wonderful wife, the caring mother,
the exemplary hostess and the fierce business women:
there’s no end to the roles mothers are expected to
juggle and perform to perfection.

Women quickly internalize unbelievable social pressure like


this and become their harshest critics. But there’s no sense in
it. Being a mom entrepreneur is challenging enough – why
put extra pressure on yourself?

As a mom entrepreneur, you need a business plan that takes


your needs and circumstances into account. You have a finite
amount of time on your hands. And if you want to use it well,
you need to separate other people’s expectations from the
things you really care about.

Start by making a list of the top five things that matter to


you. These could be your values, or things that you aspire to,
such as independence, integrity and
authenticity. Motivators, the things that get you out of bed
everyday, are also worth noting. These could be your
children, a sense of autonomy or the opportunity to help
others. Your passions, whether they’re solving complex math
problems or going hiking, also deserve a spot on this list.

Now, take a look at your list. These top five things should be
what you put most of your time and energy into. But do you
really pull that off?

All too often mothers find themselves sacrificing their time to


complete tasks that aren’t truly important to them, like
maintaining a spotless household. This is the result of
unnecessary self-pressure. By recognizing that your priorities
lie elsewhere, you’ll feel this pressure lessen almost
immediately.

Chase what’s important to you right now, not what was


important to you ten years ago.

What do you think of when you hear the word success? Do


visions of money or status come to mind? Do you see
yourself as that hotshot entrepreneur you’ve always
admired? If so, it’s time to put those dreams away. Instead,
create a vision of success that fits with your own life. This
kind of success is sustainable and feels truly worthwhile.

Before motherhood, many women dream of scaling the


corporate ladder, traveling often and coming home to a nice
house and car. But if they haven’t achieved this after
motherhood, they often feel frustrated, resentful or even
angry.

The reality is that becoming a mother changes your life


profoundly. You may no longer have the energy or the time
to work ten hours straight, like you used to. But so what?
That doesn’t mean you can’t achieve success. The trick is to
aim for a goal that is aligned with the top five things that
matter to you right now, not ten years ago.

Perhaps you loved to work out before you became pregnant


and took great pride in how much you could bench press.
And now that your child is six months old, you’re ready to
start working out again. But after a week at the gym, you
realize that you simply don’t have the energy anymore.

Before you start criticizing yourself, take a look at your top


five again. Is it really one of your priorities to look super fit
and toned? Probably not. Realizing this will annihilate those
unnecessary feelings of guilt. By keeping your priorities in
perspective, you’ll have more time to focus on what you
really value.

Designate time slots to each of your priorities and make


room for the unexpected.

As mothers, time is our most precious and most scarce


resource. Despite this, it seems like we only ever seem to
lose track of it. But things don’t have to be that way! Let your
priorities be your guide to effectively manage your time.
It’s time to go back to basics: grab a physical calendar so you
can start treating time as currency. Every day offers you 24
hours to spend. So what are you going to spend it on?

Sleep, chores, cooking, childcare and time for your romantic


life should be automatically blocked off. Block off all time
slots on the calendar that belong to regular family activities,
such as morning routines, soccer practice or helping with
homework.

Next, put in your non-negotiable tasks: your work hours, time


with your partner and time off. Now have a look at what’s
left. This time is yours to split between your business and
yourself. Keep your top five handy and start filling in the free
slots in your calendar accordingly.

When you’re arranging your time slots, there are a few things
to remember. The first is that energy levels
fluctuate throughout the day. So don’t try and schedule
laborious tasks for the middle of the afternoon if you’re
usually sleepy then! You’ll thank yourself for it later.

Secondly, do your best to stay honest with yourself about


when you need a break. You should never feel guilty about
needing to relax! Having enough downtime will always make
you more productive later, and that’s a fact. So schedule
some breaks and some time to reward yourself by doing
what you love.

Finally, don’t forget that life inevitably gets in the way.


Unexpected obstacles, whether it’s a sick child or a minor
accident, can be quite frustrating. Cope with them better by
making room for them. How? By over-scheduling certain
things. If you want to work out four times a week, schedule it
for six. If something comes up, you can always use the next
slot you’ve made for yourself to hit the gym.

Self-care is vital, so make time for it!

Burnout is real. Maybe you’ve even experienced it firsthand.


If you want to avoid it, there’s one thing you’ve got to make
time for between your kids, your work, your relationship and
your business: namely, self-care rituals.

These are activities that you do because you enjoy them. But
what if you just don’t have room for “me time”? Short
answer: you do. It’s all about being smart with your
scheduling.

Kill two birds with one stone by scheduling twofers. A twofer


means combining two self-care rituals to get double the
enjoyment in half the time. You could hop on the treadmill
while watching your favorite show on Netflix. Or run around
the block while listening to your favorite Blinkist audio book!

You can also make a hitlist of the things that make you
happy. Keep this list handy so that you know exactly what to
fill an unexpected free slot with. Even little things, like a half-
hour nap or a cup of ayurvedic tea will lift your mood more
than you expect!

Once you’ve found time for a few self-care rituals during your
week, start making time for more. But what if your slots are
all full?
Take a closer look: you might be losing time without realizing
it. When was the last time you signed onto Facebook or
Pinterest? More importantly, how long did you spend
scrolling? Social media sucks up a lot of time. It’s time to
break the habit! Delete apps from your phone or log off to
reduce the temptation and enjoy your newfound free time.

Another way to free up your time is to let some things go.


Learning to say no is a valuable skill, so why not practice it
this week? If you don’t help out with the school auction, no
one will think less of you! Save your time for activities that
bring you closer to achieving your goals.

Finally, don’t be afraid to ask for help! If you’ve got the funds
for it, think about getting a virtual assistant or intern to help
you out with menial tasks that you don’t have time for. You
don’t have to go it alone! Remember: self-care isn’t a luxury.
It’s a necessity – and one you’ll truly be thankful for.

Turn your goals into reality with a concise, concrete plan.

Mom entrepreneurs often call their business their baby. After


all, you bring them into the world, raise them, celebrate
them and eventually watch them take off on their own.
When raising a child, this process works best when you let
things happen naturally. But your business is a different
story. As a mom entrepreneur, you have to create a plan for
your "baby."

The plan doesn’t need to be exhaustive. In fact, one page is


all you’ll need! So where do you start?
Determine your vision: What need is your business fulfilling?
Whose lives will you better through it? Next, work out
your mission: What motivates you to run this business? What
principles are behind it? Finally, outline your concrete
objectives. These goals should be SMART, that is, specific,
measurable, attainable, realistic and time-related. A SMART
goal should look a little something like this: “In 2016 I want to
earn an income of $85,000”.

The next step for your one-page plan is all about putting your
vision, mission and objectives into action. For this, you’ll
need strategies. If your vision is to give women aged 25 to 35
a product that will improve their lives, then you’ll need to get
in touch with them. You could create a targeted marketing
campaign or establish a presence at local trade shows.

To realize these strategies, you’ll need resources. These


should be accounted for in your plan, too. Ask yourself: What
needs to be done next? You might, for instance, decide to
hire a web designer to boost your company’s online presence
this month.

You may feel a little daunted by your plan as you write it.
After all, you’re making a lot of promises to yourself here! If
all the decisions to make and steps to take seem
overwhelming, just think of all the resources you have.

Your strengths, skills, personality traits, education, work


experience, networks and support systems that you’ve
developed and perfected over your life will stand you in good
stead. Time to make use of them!
Boost your productivity as much as possible.

So, you’ve made a killer business plan and time to take care
of yourself. And yet ... something seems to be standing
between you and the success you’re aiming for. This would
be a good moment to take a closer look at your working
methods.

Mom entrepreneurs need flexibility, which makes working


from home quite the blessing. But it can also be a curse! If
you find yourself doing the laundry during the time slots
booked for work when a deadline is nearing, you’ve fallen
victim to a form of productive procrastination that moms
know all too well.

The first step to ending procrastination is admitting that


you’re doing it! So stop pretending that sparkling windows
are more urgent than your product proposal. If you’ve
booked slots for housework, don’t let it distract you outside
of those times.

When you’re working on your business, always ask yourself


how productive you really are. There’s always room for
improvement! It’s worth checking out the latest apps created
to help you boost your productivity in new and innovative
ways.

There are also a handful of old-school techniques that will


serve you well. All you have to do is chunk it, map
it and calculate it.
Assign chunks of time to particular tasks: allow yourself just
20 minutes to reply to emails, dedicate two hours to a long
work slot and reward yourself with 25 minute breaks.
Segmenting your time in this way is a simple yet effective
way to keep it manageable.

If you’ve got a big project and don’t know where to start with
time management, then it’s time to map it. Break your
project down into smaller tasks and outline the time you’ll
need to complete each of them.

Finally, get calculating with the 80/20 rule. This means you
only deal with the 20 percent of tasks that give you the
greatest returns. Armed with these tools, you’re set to show
the market just how powerful mom entrepreneurs really are!

Moore’s Law

The Life of Gordon Moore, Silicon Valley’s Quiet


Revolutionary

Learn what made Gordon Moore one of the most influential


people of the last century.

Who would be on your list of most influential figures in the


computer industry? Most of you would include Bill Gates or
Steve Jobs; a few of you (those who saw that Benedict
Cumberbatch film) might throw in Alan Turing. But there’s
one person who should be at the front of people’s minds –
though he probably isn’t – and at the top of any computer-
industry list: Gordon Moore.
Hardly anyone has done more to create the modern digitized
world than Gordon Moore. As the co-founder of Fairchild and
Intel he has played a leading role in two of the most
influential companies of the 20th Century. He is also
responsible for Moore’s law, which, though coined back in
the 1960s, predicted the rise of the modern, highly
technological world of today with incredible prescience.
These blinks take you on a journey through the life and
career of this unparalleled influencer.

Gordon Moore was passionate about science from an early


age.

You've probably heard of Moore's Law, but what do you


know about Gordon Moore – the man who came up with it?

Gordon Moore was born in San Francisco, in 1929, to Mira


and Walter Moore. He was a very reserved child, but also an
exceptionally concentrated one. His precocity and
extraordinary intelligence led him early on to what would
become his lifelong vocation.

In 1940, when he was eleven years old, Moore’s life changed


forever. After his best friend was given a chemistry set, the
pair began using it to make explosives and blow things up.
Science suited Moore’s analytical mind, preferring it to math
because he could see its visible effect on the tangible world.
Moore had found his calling.

As he got older, Moore remained passionate about chemistry


and experimentation. He took his first chemistry lessons at
Sequoia High School, where he was far ahead of the rest of
his class, and by the age of 16, he already had a sophisticated
understanding of the subject and was very confident in his
ideas.

Moore also retained his love of blowing things up. He


experimented with nitroglycerine at home and eventually
began making firecrackers for his friends, who used them to
blow up mailboxes.

Nor was the chemistry in Moore's life just happening in the


lab. In September 1947, Moore met Betty Irene Whitaker, a
journalism major at San Jose State. Whitaker was outgoing,
lively and headstrong – the very opposite of Moore.
Naturally, that drew him to her. She, in turn, was intrigued by
his quiet confidence and composure.

Moore's chemistry education brought him to Berkeley and


Caltech.

As Gordon Moore and Betty Whitaker grew closer, Moore


began expanding his horizons. He took his first steps toward
formulating Moore's Law at Berkeley University, right across
the Bay from his childhood city.

Moore was accepted to Berkeley in 1948, with the help of


recommendation letters by professors at San Jose State.

At the time, Berkeley was a particularly exciting place for a


young chemist to be. The East Coast had long been the hub
of academic science, but, partially due to California's
booming economy, that was beginning to change rapidly.
Moore had the privilege of working with a number of
important people in the field. In fact, two of his professors,
William Giauque and Glenn Seaborg, won the Nobel Prize for
their discovery of the element berkelium shortly after
Moore's arrival.

During his first years at Berkeley, Moore was greatly


influenced by George Jura, an assistant professor in
Berkeley’s physical chemistry department. Jura taught his
students that contemporary scientific literature was nearly
always wrong, and urged them to disprove it.

This opened Moore's eyes to the significance of original


research, which also suited his flair for experimentation. Jura
also introduced Moore to the art of glassblowing, a talent
that proved useful during his later research on his
semiconductor equipment.

Moore quickly gained a reputation for his studiousness, and,


in 1950, he was accepted to the California Institute of
Technology, Caltech, which was regarded as one of the best
science schools in the US at the time.

By then, Betty Whitaker had finished her journalism major at


San Jose State, so Moore asked her to come with him. By the
standards of the day, such an invitation was tantamount to a
marriage proposal. The couple married and began their life-
long partnership.

After achieving great success in chemistry research, Moore


got into industry work.
When Gordon Moore began his studies at Caltech, the area
was booming. Multiple technological advancements had
recently been made. In the 1940s, aerospace science, for
instance, depended completely on electronics and IBM's
special calculator, Harvard Mark 1, a kind of proto-computer
that was used for calculations in missile testing and design.

It was a thrilling environment for Moore. His work in


experimental chemistry flourished, particularly under the
tutelage of Professor Richard McLean Badger.

Badger was conducting research on nitrogen compounds. His


work was supported by the military, which was busy using
nitrogenous explosives in the Korean War. Moore's previous
work with explosives and nitroglycerine made him a perfect
fit for the research, and he was soon working in the field.

In 1951, at the age of 22, Moore published his first scientific


paper, on nitrous acid, in the Journal of Chemical Physics. He
completed his research and finished his Ph.D. in 1953 – a
mere three years after arriving at Caltech.

After completing his Ph.D., Moore felt finished with student


life. He initially hoped to become a professor at a prestigious
school, but couldn't find a position that matched his high
demands.

Badger convinced him to look into industry work instead, as


there was a high demand for his skills in the field. So Gordon
considered a few companies, looking for one that would give
him enough freedom to experiment independently.
He eventually decided on Applied Physics Laboratory, a
research center funded by the Navy at John Hopkins
University. The only downside was that it meant leaving
California; he and Betty felt it was time for something new,
however, so they bought a Buick and started driving east.

After the development of a highly powerful transistor,


Moore realized the potential of semiconductors.

In 1947, an important device was invented by scientists at


Bell Laboratories: the transistor. Few people (if any)
understood its potential at the time, but the invention ended
up changing the world completely.

The transistor could be used to amplify and switch signals on


and off, just like vacuum tubes. Vacuum tubes were fragile
and expensive, however, whereas transistors were made up
of solid material. They were also much smaller and required
less power. Transistors would soon make an array of new
technology possible - most prominently the transistor radio,
which was ubiquitous by the 1950s.

By 1955, over half a million transistors were produced every


month in the US alone. Moore had become interested in
semiconductors under Badger's tutelage, but he only realized
their true potential when transistors became popular.

While at Caltech, Moore attended a lecture by William


Shockley, one of the inventors of the transistor at Bell Labs.
Two years later, Shockley was trying to produce a new kind of
transistor that used silicon as a semiconductor. He needed a
talented young chemist to help him in his California
laboratory, the Shockley Semiconductor Laboratory, and
Moore's name came to mind. In 1955, he offered him the
job. So the Moores got back in their Buick and drove west.

Shortly after their arrival, Shockley received the Nobel Prize


for his work on the transistor. By 1957, Moore had made
significant strides toward the company's goal of creating a
transistor that used silicon as a semiconductor. All seemed to
be going well.

Things began to get tense, however. Moore was confident


they'd reach their goal, but, after 18 months of work, the
team was still far from finished. Arnold Beckman, Shockley's
partner, was beginning to get anxious.

Moore launched his own business venture to continue


researching transistors.

Shockley’s apprehension mounted as his team struggled to


make a breakthrough. Eventually, feeling that the time had
come for something new, Moore and a few dissatisfied
colleagues left the company to set up their own. They
became known as the “traitorous eight” – and Moore was
their leader.

Moore and his new colleagues began searching for an


investor and soon found one in Sherman Fairchild, one of
IBM's biggest shareholders. Their new venture, Fairchild
Semiconductor, was born the same week that the Soviets
launched Sputnik, the world's first satellite.
Moore knew that Sputnik would create an even greater
demand for the kind of transistor they were trying to create;
a fast-switching silicon transistor. In 1954, Texas Instruments
had already offered a small batch of silicon transistors for
military use. They were more robust and withstood heat
better than other transistors on the market at the time, but
they had one major drawback; they were slow-switching.

At the end of 1957, IBM secured a contract related to the


development of the B-70 Valkyrie, a bomber armed with
thermonuclear weapons and capable of flying at supersonic
speeds. The engineers of the B-70 badly needed fast-
switching silicon transistors, which would enable the onboard
computer to switch quickly between electronic signals. And,
word had it, there was a small start-up in California that was
researching them.

Moore's team still had a number of problems left to solve


with the transistor, however. They knew that Texas
Instruments and Bell Labs (both of which also had enormous
budgets) were also researching the technology. Moore had
to make sure his team came first – everything depended on
it.

In August of 1958, a mere year after founding the company,


they succeeded. Fairchild Semiconductor became the world's
first company to develop a fast-switching silicon transistor
and bring it to market. They called it the ZN696.

The team had focused so much on producing the transistors


that they hadn't thought about actually sending them to IBM.
So Gordon went to the grocery store and bought the nicest
container he could find – a Brillo box!

Moore's predictions about the future of complex microchips


became known as Moore's Law.

The silicon transistor soon became the industry standard, and


its applications became more and more manifold. More
computers, radios and television sets were produced as
newer models replaced the old ones that’d relied on vacuum
tubes. That wasn't all, however. A new and particularly
important technology was also emerging: the microchip.

At the end of the 1950s, people still believed it would be too


expensive to put several components on one chip, as the
advanced technology it required was exorbitantly priced.
They assumed it'd always be cheaper to wire individual
components together. Moore, however, knew this was
wrong.

So he started Micrologic, a division of Fairchild dedicated


to integrated circuits. He knew that integrated circuits would
lead to a new generation of smaller and more complex
microchips. His microchips would later be selected by NASA
for use in the onboard guidance computer of the Apollo
program.

Moore had unique insight into the rapidly growing world of


transistor-driven electronics. He knew where it was headed.

In February 1965, Moore published a journal article, “The


Future of Integrated Electronics,” which made some startling
predictions. He wrote that, as people developed more
applications for them, silicon transistor microchips would
become more ubiquitous.

Moore noticed that the microchip's complexity (in terms of


its number of components) had doubled every year since its
development. He predicted that it would continue to double,
while its manufacturing cost would halve each year.

Moore believed the microchip's exponential growth would


lead to an explosion of computational power. His prediction,
which became known as Moore's Law, turned out to be right.

According to Moore, there would be 65,000 transistors on a


single microchip by 1975. In 1965 that sounded like science
fiction, even to many of Moore's peers – that year, the
number of transistors on a microchip was only 64.

The development of microchips with greater memory


storage made Moore (and Intel) very successful.

In 1968, Moore set out on a new adventure that would


change computing forever.

Moore and Bob Noyce, his business-savvy partner, were truly


the perfect pair – but they needed to find a fresh market.
They knew they couldn't compete with the giants in
established markets, like Motorola and Bell Labs.

They found their niche when Moore noticed that the


expansion of computers and calculators was creating more
demand for greater memory-processing capabilities. Data
was still stored on punch cards, which were cumbersome and
took up lots of time to use.

So they started searching for another team member –


someone who could create the next generation of memory
storage technology. That's how they found Joel Karp, a
microchip designer at General Microelectronics, in Santa
Clara.

Karp would go on to create Intel's 1101 memory microchip,


which could hold 256 bits of data on 1s and 0s. The new
microchip propelled Intel to the forefront of the emerging
memory market.

The memory market was generating a solid profit for Intel


when Moore got a visit from a Berkeley electrical engineer
named Dov Frohman.

Frohman had an innovative idea for a new kind of memory


chip. Earlier chips could only store data when the power was
on, but his version would retain data even when it was off.
That wasn't what made it revolutionary, however.

There were already some memory chips that could retain


data without power, but their memories were fixed, that is,
the data was physically printed onto them. Frohman's chips,
on the other hand, were reprogrammable. Moore
immediately realized their potential and put them on the
market straight away.
The new microchips, now called EPROMs, were a great
success. Between 1972 and 1985, EPROM chip sales were
Intel's main cash flow.

Moore was wary of selling personal computers after an


unsuccessful foray into the electronic watch market.

In the early 1970s, the American economy was faltering and


unemployment was high. Despite this, Intel's business was
booming.

But Moore was about to learn an important lesson: change


and innovation are an important part of business, but
sometimes you should stick to the things you know you're
good at.

Moore was always looking for potential new markets in


microchip technology and the emerging electronic-watch
market caught his eye.

The Hamilton Pulsar, the world's first fully electronic


wristwatch, was introduced in 1972, and cost a whopping
$2,100. In today’s money, that’s roughly $12,000.

So Moore and Noyce went searching for partners. That’s


when they found Microma, a business that was just about to
start shipping out their new LCD wristwatches. Moore
invested huge amounts in the small company to help them
develop.

It wasn't long, however, before Microma foundered. Their


watches had a number of technical problems and
competition from Texas Instruments rapidly reduced their
price. Microma simply couldn't compete.

Ultimately, Moore would come to understand his mistake.


Consumer products were different from what he was used to
selling – they demanded a lot more than technical knowledge
about microchips. A purely electronic focus would never be
enough when it came to consumer goods.

Fortunately, he maintained a sense of humor about the loss.


He even called his own electronic watch (which he wore a
long time after the failure) his “15 million dollar watch.”

Moore and Noyce later found another emerging market:


home computers. Enthusiasts all over the country, in fact,
had started to build their own personal computers. The first
“personal minicomputer” set was sold, in 1973, by a small
company called MITS.

This gave Noyce an idea: Intel could get into the personal
computer industry by producing the rest of the kit along with
each new chip.

He took his idea to Moore, who, still reeling from the


Microma catastrophe, exploded: “We are not in the
computer business,” he said. “We build computer
development systems.”

The use of Moore’s and Intel’s microprocessors became


widespread, leading them to team up with Microsoft.
By the mid-1970s, Intel had become a hugely profitable
company. Moore was right at the heart of a revolution that
would forever change computers.

Up until 1979, it was extremely profitable to be in the


computer memory industry. Intel's revenue was well over
half a billion dollars per year.

Competition from Japanese makers started to change that,


however. They began manufacturing chips more quickly and
at a lower cost. Intel's business gradually became less and
less profitable. Luckily, Moore knew where the wind was
blowing: microprocessors.

Microprocessors were just making their way into the market.


They allowed customers to create their own software
programs and store them in an EPROM chip. Moore realized
that microprocessors could revolutionize the industry and
become a universal part of computing.

If Intel were to get into the microprocessing market, they


couldn't continue doing things by halves. The market for
home computers was expanding at a phenomenal rate, and
they had to keep up. In 1978, Apple sold 25,000 units of their
Apple II computer. And by 1980, 750,000 PCs were sold
worldwide – and each of them had an Intel microprocessor
inside!

Moore realized he'd have to invest heavily in research and


development to keep staving off the competition from
Japanese producers. They weren't only producing microchips
faster; they were producing higher quality ones, too.
So Moore invested $100 million into researching and
developing Intel's next game-changer, the 386
microprocessor. With a total of 275,000 transistors, it offered
unprecedented computational power.

Intel further changed the industry when they started


collaborating with Microsoft. In 1986, the companies
produced their new PC, the Deskpro 386, which ran on
Microsoft’s software and Intel's microprocessors. It would
rule the PC world for the next 25 years.

Intel came to dominate the microprocessor market, but


Moore was more interested in philanthropy as he got older.

By this point, it was clear that computers were rapidly


changing the world. And the good news for Moore was that
all of them still needed microprocessors!

In fact, in 1990, the average US citizen spent 40 percent of


her time looking at screens: watching TV, playing video
games or using a computer.

And because Intel had quickly secured a dominant position in


the microprocessor market in the 1980s, business was
booming. Between 1981 and 1987, consumers spent billions
of dollars on software and hardware for personal computers,
and all of these computers relied on Intel microprocessors.
This led Intel to leave the memory market and focus solely on
microprocessors.

Intel's dominion was partly due to the industry's high costs.


Microprocessors were increasingly complex, and they
demanded enormous budgets and facilities. Other companies
couldn't compete. By now, Intel was a multi-billion dollar
corporation that churned out microprocessors of greater
complexity every year.

By the mid-1990s, Intel had over 80 percent of the market


share in PC microprocessors. And they've more or less been
able maintain that ever since!

In 2001, for instance, the year Moore decided to retire, at the


age of 72, Intel was hugely profitable. The previous year,
Intel's revenue had reached $10.5 billion and its stock
price tripled. Moore was finding other interests, however.

As Moore became less involved in Intel, he started turning to


philanthropy instead. He made substantial contributions to
Caltech and other educational institutions; the Gordon and
Betty Moore Foundation joined the ranks of philanthropists –
people like Bill Gates and Warren Buffet – who’d donated
billions.

In 2005, Forbes magazine named Gordon Moore the year's


most charitable person.

So where does Moore's Law stand today? It's actually


approaching its physical boundaries, as microprocessor
technology nears the level of individual atoms. It's time for
another game changer. Who do you think will be the next
Gordon Moore?
No Ordinary Disruption
The Four Global Forces Breaking All the
Trends
Get ahead of the four global trends transforming the world
today.

The futurist Ray Kurzweil has suggested that the first human
being who will live to 1,000 has already been born. Even if
this prediction is still a longshot, advances in medical
technology and better living standards are making it easier
for people all over the world to live longer.

Needless to say, this growing demographic poses serious


challenges to the world economy, such as how exactly
countries and markets will be able to support a new
generation of centenarians.

This dilemma is just one of four major global trends – or


disruptions – that are transforming the world today. What
are the others? These blinks will show you.

A series of globally disruptive forces are fundamentally


changing the economic landscape.

The quarter-century before the crash of 2008 was a time of


unparalleled economic development. Interest rates were
low; natural resources cheap; jobs plentiful and workers
adequately employed.

But that phase is now over. Today, we’re entering a new


phase, marked by four globally disruptive trends.

These trends are: a shifting focal point of economic activity


and dynamism; an acceleration in technology’s scope, scale
and economic impact; an aging global population; and a
greater degree of connection through trade, capital
information and people.

While these trends certainly present major challenges,


they’ve also been the driving force behind pulling some one
billion people worldwide out of poverty since 1990.

In short, increased connectivity and advances in technology


have spurred economic growth. The shifting locus of
economic activity as a result has meant more development in
ever more remote regions, further ameliorating the burden
of poverty in these areas.

This new world is thus going to be wealthier and more urban,


with higher skill levels and better health than previous
generations.

These four global trends interact in complicated ways,


however, which makes predicting future conditions
increasingly difficult. Not just that, but such forecasts are
often based on past experiences and outmoded ways of
thinking.
To succeed in this new world, we need to reformulate our
prior notions about how the economy works.

For instance, supply and demand traditionally says that when


demand for financing is high, capital becomes more
expensive; and then, demand will abate. But now the
opposite is true. Emerging markets the world over are rapidly
building capital-intensive infrastructure and spurring
demand, even though the cost of financing continues to rise.

But this is just one example of how old ways of thinking


aren’t keeping up with changing conditions. Let’s take a
closer look at today’s four disruptive forces.

Increasing urbanization across the globe will transform the


world’s economic landscape.

Have you ever heard of Hsinchu? Few people have, yet this
northern Taiwanese city is home to many of the world’s
largest and most advanced electronics companies.

In fact, about half of global growth leading up to 2025 will


originate in some 440 medium-sized cities in emerging
markets – many largely unknown.

In the years between 1990 and 2010, the world’s economic


center experienced a rapid shift, more extreme than in any
other point in history, and this shift was directed east,
toward Asia.

One reason for this shift was the crisis of 2008 and the
subsequent global recession, which had a greater impact on
Western countries. The shift also occurred astoundingly
quickly.

While Britain, with a population of less than 10 million, took


154 years to double its economic output per capita, China
took just 12 years to do the same, with a population of more
than a billion.

Urbanization is one reason for this stratospheric growth. In


just over a decade from now, China will have three times the
number of urban dwellers as

does the United States today.

The bottom line is that cities are powerful economic engines.


At its core, a city is a productivity center that facilitates the
rapid spread of knowledge and trends. A dense population
means more exchange, but also often better infrastructure
and stronger educational systems. Today’s cities are also
attracting droves of talented, well-educated young people.

These elements taken together make cities ready-made


creative laboratories for innovative companies looking to test
new technologies, products and business strategies.

In fact, three-quarters of the gross domestic product gap


between the United States and Europe can be explained by
the fact that Americans are more likely to live in major
metropolitan areas.

Yet urban areas also have their share of troubles, such as


congestion, public services shortages and supply problems
that can mean high costs for local operations. It’s factors
such as these that make the port city of Luanda in Angola the
most expensive city in the world.

Technology continues to evolve at a rapid pace, and


companies need to keep up – or fail.

Technology is evolving faster and faster. In the 1990s, it took


a team of scientists 13 years and $3 billion to sequence the
human genome; today, one machine and $1,000 can do the
job in a few hours.

It’s a fact that digitization and mobile internet access is


fueling today’s technological revolution.

Digitization, or the conversion of information into 1s and 0s,


has indeed made it easier to store, process and share data.
Physical products such as books can now be converted into
digital formats.

But digitization also reduces entry costs and in general lowers


barriers to market participation, which allows more
entrepreneurs and small companies to experiment and
innovate.

The growth and ubiquity of the internet is changing the


game, too.

Just consider the fact that 20 years ago, less than three
percent of people in the world had a cellphone, and less than
1 percent had reliable access to the internet. Today, some
two-thirds of all people own a mobile phone, and one-third
can access the internet!
The revolution in technology has also meant that consumers
are adapting to market changes faster than ever. Once
Alexander Graham Bell invented the telephone, for example,
it took some 50 years before even half of American
households owned a phone. Yet a mere five years after the
first iPhone was introduced, half of all Americans owned a
smartphone.

In fact, technological revolutions are happening so quickly


that companies which can’t keep up will struggle and
potentially fail. One poignant example is the technology
company BlackBerry, which failed to anticipate the
smartphone revolution. So while a company’s first instinct
when faced with rapid change might be to play it safe and let
the dust settle, companies need to realize that they’re in a
race against time – and the technology of today will be old
news tomorrow!

The world is getting older while the workforce is shrinking,


forcing the need for large-scale changes.

Would you want to live to be 100 years old? Given the rapid
pace of technological development, you just might. Yet a
world with a large elderly demographic will present many
new challenges.

In 2013, approximately 60 percent of the global population


lived in countries with fertility rates that were below
the replacement rate – the rate that maintains a stable
population, about 2.1 births per woman in developed
nations, and 2.5 births in developing countries.
This trend means that a smaller global workforce will be
reliant on increased productivity to keep driving growth to
support a growing elderly population.

But a world with fewer workers and caregivers also makes


elder care a question of technology. In Japan, for instance,
robots now help elderly citizens dress themselves and go
grocery shopping.

Over the next few decades, populations everywhere


excepting certain African countries will reach peak
population for the first time in the modern age.

Some nations may be able to support a declining workforce


with an increase in immigration, like Germany is trying to do,
but the elderly population will still grow as life-expectancy
rates rise.

Even though this trend has been obvious for some time,
governments, communities and even corporations have been
slow to come up with ways to adapt.

Pension systems, as just one example, need to change to


meet rising life expectancies, such as increasing the age of
retirement – or many people will simply struggle to survive.

Employers for too long have focused on maintaining a


younger workforce. Instead of seeing older workers as
valuable experts, they’re viewed as a costly legacy. The
elderly have been ignored as consumers, too.

So while senior citizens spend less on entertainment and


eating out, they do spend more on home furnishings,
medication and household electronics. Some companies
however have rethought their strategy in tapping this
market, like Fujitsu, which is developing a walking cane with
a built-in navigation system.

Global interconnectivity is rewiring the world economy,


giving small companies a global reach.

You might have studied abroad, or perhaps have close friends


who live in another country. At the very least, you certainly
have purchased a product that was made abroad. All these
things are solid proof that the world is growing more
connected every day.

In fact, trade between countries and continents is rising. For


instance, while China and Africa booked $9 billion in trade
activity in 2000, by 2012 this number had risen to $211
billion. But it’s not just trade that’s become more global;
people, finance and data, too, are crossing borders.

Yet this increasingly interconnected world also means


increased vulnerability. Shocks in seemingly remote areas,
which decades ago would have caused less than a ripple in
the global market, now have global repercussions. Unrest in
the Ukraine or financial strife in Greece are just two
examples of events that affect everyone, not just local
citizens.

This is a result of trade and interconnectivity not simply


growing but broadening and branching out to form a truly
global web.
Money in particular is flowing across the globe; despite the
2008 financial crisis, global money transfers are still on an
upward trend. Not just that, but people too are more
connected globally. In fact, migration numbers in the 1990s
doubled during the first decade of the twenty-first century,
especially growing between developing regions.

And of course, the labor market is almost entirely globalized.


But the most dramatic change of recent years is likely the
speed at which information travels around the world.

For business, increased connectivity holds huge potential.


That’s because global interconnectivity is opening up the
market to greater competition.

One of the many examples of companies that have benefited


from this new climate is German micro-multinational
company Solar Brush, a Berlin-based start-up that designs
lightweight robots to clean solar panels. Today the company
has an office in Chile, and supports customers across America
and the Middle East.

Without the connections and affordability of modern


technology, such a nimble company could never have
existed!

Success in the new economy means finding a way to attract


a broadening consumer class.

It’s clear the world is changing. Thriving in the new global


economy means living in reality, not the faded glory of the
past. One thing that needs to be accounted for is the
heterogeneity of the new global consumer class, which
makes segmentation and localization more essential than
ever.

In 1990, for instance, 43 percent of the developing world’s


population lived in extreme poverty. Today 700 million fewer
people live in poverty, and the consumer class has grown by
1.2 billion. These people are now online and purchasing
items – yet don’t get distracted by the group’s sheer size.

While new markets are growing, they’re also fragmenting.


That’s because there’s no quintessential global consumer –
companies need to understand local markets. For example,
the instant coffee Nestlé sells in China is sweeter than it is in
the West; and while chewing gum company Wrigley holds a
40 percent market share in China, it didn’t earn it with its
best-selling spearmint but with locally specific flavors.

An understanding of a local market is essential, but so is


securing local channels of distribution. For instance, Coca-
Cola makes sure to analyze and segment its range of retail
outlets, from the biggest stores to bicycle-powered micro-
distributors in Africa.

Companies also need to prepare for unexpected competition.


In fact, with barriers to entry lowered due to technological
advances, small companies everywhere have the chance to
take on and beat world leaders. That’s exactly what
happened to eBay when it fell second to Chinese-based
Alibaba, which a mere decade ago was just a minor player in
the Chinese online market.
Technology is also blurring business lines, fostering new
competition. For instance, Netflix got its start using the
internet to distribute content, acting like a video rental store.
But as the company grew, it began to dabble in content
production, an activity generally kept separate from
distribution.

The result? Netflix today is a formidable content producer,


competing with major studios for consumer attention.

Companies as well as governments have to see clearly to


take advantage of new opportunities.

So you’ve seen how world markets are being shaken up, and
that as a result, global businesses can run into trouble. But
this shouldn’t scare you out of the game.

However, to stay on track and succeed it’s important to be


clear about the risks and opportunities.

Many commodity prices are climbing as demand grows


worldwide. At the same time, the global market for resources
is growing more connected. Yet there are still other factors
contributing to a steady rise in global prices.

Environmental costs are becoming increasingly an issue, as


extreme weather due to climate change causes market
disruptions and a subsequent rise in prices. According to the
Brookings Institute, if the health and environmental costs
linked to coal were taken into account, the price of the
commodity would increase 170 percent!
So is there a way to manage these spiraling costs? By
producing less waste, building better logistics networks and
recycling used products, we can find new opportunities amid
scarcity.

But governments will also have to remain vigilant and flexible


in policy, as these issues too will affect labor markets,
regulations and education. Only by being open and adaptive
to change will governments find the right method to tackling
the new world’s challenges.

In the future, governments should employ incentives to


accelerate change, such as with the pressing need to address
aging populations. Fair regulations should be crafted in direct
response to these needs, to ensure that information flows
easily and businesses are allowed to run smoothly.

Naturally, every country will need to find the right mix of


strategies for its particular situation.

Estonia is a great example of a country that has harnessed


information to increase productivity. The country’s 1.3
million citizens use electronic ID cards to vote, pay taxes and
gain access to over 160 semi-private services, such as
property registration.

Access to cash continues to be a challenge, so businesses


need to get creative about financing.

Before 2008 when world markets were more stable, it was


possible to make longer-term predictions. Unfortunately
that’s no longer an option.
The demand for cash today is on the rise. By 2030, the world
will need to spend some $57 trillion to $67 trillion on
improving infrastructure such as roads, buildings,
telecommunications networks, ports and water systems.
However, it’s still unclear whether this money will even be
available.

How can that be? Before 2008, cash was cheaper to acquire,
yet today things have changed. Capital now is more
expensive, which makes investing a challenge; and market
systems in general are more volatile.

Yet since we can’t say whether we’re entering a period in


which expansive monetary policies and the monetization of
debt – tactics that have long been viewed as taboo – are
going to become common practice, we have to prepare for
both scenarios.

So thriving in this new environment means tapping new


capital sources, including sovereign wealth funds such as the
Abu Dhabi Investment Authority or the Korea Investment
Authority, and dealing with market risks in a more flexible
manner.

Another uncertainty is how jobs will develop. While many


regions recovered from the recession, an increase in jobs
didn’t follow. At the same time, higher-skilled workers are
being replaced by technology.

As a result, our very definition of work is transforming,


becoming more about what people do wherever they are and
less about a fixed location.
But this changing definition brings with it a paradox: while
we’re seeing a shortage of highly-skilled labor, we’re also
witnessing at the same time a situation in which it’s harder
for college graduates to find jobs.

Overcoming this will require companies to adapt creatively.


That doesn’t just mean seeking out talent from overseas but
also investing in education.

The automotive industry in the United States, as one


example, has taken the initiative to train its own workers.
The Automotive Manufacturing Training and Education
Collective partners with car companies and community
colleges to create courses designed with employers’ needs in
mind.

One Simple Idea


Turn Your Dreams into a Licensing
Goldmine While Letting Others Do the
Work
Learn how to start your business with only one simple idea.

Have you ever seen a product and thought, "I could do better
than that"? Or, while browsing the store shelves, been
suddenly struck with a great idea that will fill a gap, and
think: "Why hasn't anyone invented this yet?" No matter
what your inspiration or motivation is, now’s the time to
make something out of your idea.

One Simple Idea will teach you how to turn your passion into
a business and bring your product to market yourself. The
author provides a roadmap to guide you through the sticky
terrain of developing your one simple idea into a fully
realized successful business, providing you with tools and
useful advice along the way.

Seize the opportunity to bring your idea to the market, and


find an experienced mentor.

You might think that, given the recent economic downturn in


the U.S., now would be a bad time to create a product and
attempt to bring it to market.

But you’d be wrong. Even during a financial slump, consumer


spending in the U.S. accounts for 60-70% of the national
economy.

The fact is, there will always be certain products that


consumers will find irresistible. As an entrepreneur, your
main task is to identify such products, then use the right
channels to promote them.
The products that sell even in a dismal economy are those
which improve customers' quality of life without breaking the
bank, because consumer spending is motivated by desire, not
by necessity.

And when it comes to selling your product, the


predominance of the Internet, especially social networks,
means that nowadays you can easily work out of your home,
selling your product online without having to fight for a place
on store shelves.

Furthermore, social media can help you to connect with your


customers, to understand and address their needs and
desires, and — because you're closer to your customers — to
react swiftly to the whims of the marketplace.

But even with the above in your favor, you’ll still need a lot of
guidance. So find yourself a mentor who can give you some
practical, firsthand advice — ideally someone who’s already
successfully launched a similar product.

How do you find one? Begin by looking in your hometown, or


search the web for successful entrepreneurs from your
region.

Once you’ve found a suitable candidate, get your foot in the


door by expressing interest in what they’ve achieved, even
massaging their ego a little. Most people enjoy talking about
themselves and will welcome the satisfaction that helping
you to succeed will bring them.
There are many opportunities and people out there to help
you get your business started. Now you have to grab the
chance and start with one simple idea.

Be passionate about your idea and ready to take full


responsibility for your business.

Starting a business for the first time can be scary, and you
might even find yourself wondering if you’re cut out to be an
entrepreneur.

But no one is born an entrepreneur. Like other apparently


innate “gifts,” being an entrepreneur is actually learned, and
the first step is to make yourself aware that starting your
own business requires, above all, passion for your idea and
unyielding persistence to get that idea off the ground.

Fortunately, passion drives persistence: if you have passion


for your idea, and for your customers and work, it will be so
important to you that you’ll be extremely motivated to
promote it and share it with everyone – which, of course, will
help you to sell your product.

Also, passion helps you to face the risks and survive the steep
learning curve that starting a business always presents.
Believing in your idea will spur you to be innovative and
opportunistic whenever the business needs it, and to
motivate you to learn from the mistakes all businesses make
when they are young.

Equally importantly: passion for your idea will drive you to go


further and try even harder, so that, finally, you will have
transformed your great-but-embryonic idea into a full-
fledged successful business.

Clearly, passion is essential to starting a successful business.


But it’s not sufficient. In addition to having passion, you need
to be prepared to take full responsibility for your business.

This means that, when starting a new business, you must


stand behind every decision and mistake you make and deal
with the consequences. As leader of your very own
enterprise, it’s your job to lead your employees in the right
direction – after all, you’re the boss.

Finally, taking full responsibility means working hard, usually


for long hours, because you have to juggle many tasks and
constantly deal with the kinds of changes and surprises
involved in getting a business off the ground.

Your idea has to be simple, marketable and profitable.

One of the main reasons startups fail is because their idea is


too ambitious and too complicated. So, if you want your
business to succeed, you should start small and keep it
simple – and the simplest way is to make a small modification
to an existing, successful product.

This offers a number of benefits:

First, an established product serves an existing demand, so


you don’t have to educate the market about its potential
value.
Second, you can target a different market niche, by adding a
unique feature. For example, CelebriDucks added images of
celebrities to the rubber duck, transforming a children’s toy
into an adult collectible.

Finally, by making your product similar to an existing one, it’ll


be more likely to find a manufacturer who can produce it at a
reasonable cost.

But in order to create a sellable product, you first need to


study the marketplace.

First, get an overview of the market you want to enter,


analyze its trends and major players, and learn your
customers’ lifestyles and desires. Next, find your unique
selling point by solving a common problem or unmet demand
in a new way. Once that's done, test your idea on the market.
This will give you the chance to modify your product based
on customer feedback.

After you’ve gotten to know the market, you need to find out
as early as possible whether your idea is a potential “money-
maker.” This involves ensuring your product will sell for a
certain price and in a high enough volume, and that the costs
to produce it will still give you the desired profit.

To estimate your retail list price, one simple method is to


multiply your per-unit production cost by 5. For example, if
your manufacturing and packaging cost is $2 per unit, your
retail price should be around $10.
All that’s left to do is find out whether the price you need to
charge to be profitable is a price customers are willing to pay.

Write a short, focused business plan, and start small and


simple.

So you’ve developed your product idea and gotten to know


your market. What now?

First, it’s time to make a business plan. This is an invaluable


step in setting up a profitable business as it will force you to
describe your business clearly and concisely: what you’re
doing, how you’re doing it and why. It will also help you to
forecast your financials — i.e., projections about revenues
and expenses — and thus ensure that your business will be
profitable. And if you’re looking for external financing, you’ll
need a business plan to present to potential investors and to
get feedback on your business concept.

Second, you need to start small and simple with your


business.

You don’t need to spend a lot of time or money in order to


establish a professional business entity. You can even start by
working from home, as many entrepreneurs before you (but
don’t use your “home office” for anything else, and make
sure you get yourself a business address, like a PO Box). And
the only equipment you need to get started is a phone line, a
computer with Internet access and, of course, a website.

For tax and legal purposes, you need to set up your business
entity and decide which structure fits you the best. For
example, becoming a limited liability company or a
corporation has the advantage of protecting your personal
assets, while a smaller and simpler legal entity saves you a lot
of time and effort.

Starting your own business doesn’t have to wipe you out


financially. With a thorough business plan and a simple set-
up your business is ready to launch.

Protect your business idea by outsmarting the competition


and building partnerships.

If you care about your business idea, then it’s natural to be


afraid that someone might steal it.

Fortunately, however, there are several ways to protect your


great idea from the competition.

While patenting is probably the most famous method, it’s not


always the best. For a start, it involves withholding your idea
from people who could help you realize it and bring it to
market. Also, the patenting process is costly and takes some
time to complete – and time is precious when you need to
get a jump on the market.

So what are the alternatives?

First, since trying to beat big corporations at their own game


is hard, you can outsmart the competition by designing
something unique. That way, you can claim and defend your
Intellectual property rights.
Second, use your smallness as an advantage. As a small
company, you’re more flexible than a big company, and can
therefore bring your new, great idea to the market before
they can. Remember: the first to market usually has a huge
advantage, so speed is one of your best allies.

Finally, keep the creative juices flowing even if your first idea
is a market success; you need to stay current to stay ahead of
the pack.

Another way to protect your idea is to build relationships


with everyone you work with. Forming relationships with
some of the major players can convert them from
competitors into allies – especially if you offer them a
business opportunity. For example, Hot Picks eliminated one
of their leading competitors, Dunlop, by contracting them to
produce their guitar picks.

Building strong relationships with your retailers is equally


essential. They are on the front line and can provide great
protection for your business if you provide them with great
products, service and competitive prices.

Being quicker than the competition and keeping good


relationships with your partners will give you protection and
peace of mind before you introduce your product to the
market.

When launching your business, try to use your own money


and get whatever “free” money you can.
Even if you start small and simple, at some point you’ll need
cash. Of course, there are many funding options available to
you. The simplest way, however, is to use your own money
and avoid any external obligations as far as possible.

This is because people tend to work harder to keep their own


money; they don’t spend it as freely as borrowed money and
tend to have more control over it. After all, would you spend
your own money on a business-class flight without a second
thought?

Another reason to use your own money is that you won’t


allow as many external constraints or as much external
pressure to build, which gives you more freedom to run of
your business as you see fit.

Of course, this advice has its limits: no one would


recommend liquidating all of your assets and depleting your
savings to get your business off the ground.

So what’s an alternative source of funding that won’t put too


much pressure on your business?

“Free” money.

“Free” money – for instance, via crowdfunding or grants –


helps you limit the amount of initial debt you generate, so
you can bootstrap until some cash comes flowing in.

Crowdfunding means that a group of individuals provide


small amounts of money to a startup. You can promote your
idea via online crowdfunding platforms, which reach a large
number of potential contributors. Non-equity crowdfunding
is particularly attractive, since it means you literally get the
money as a gift.

Grants have the advantage that they oblige you only to


demonstrate that you need the money and explain how it
will be used for your business. Grants are available to help
with both startup costs and growing your business later on.

So, to keep it simple and finance your business without a


mountain of debts in the beginning, take all the “free” money
you can get your hands on, and start growing from there.

Find the right manufacturer and set up your supply chain


carefully.

If you can’t make your product at the right cost, you’re not
going to make a profit. It’s essential, therefore, to find the
right manufacturer. Most contract manufacturers specialize
in a certain area, so some might have the experience and
expertise you need to produce your product.

To find the right manufacturer, you need to vigorously


investigate those you’re considering, by, for instance, getting
a referral from someone who produces a similar product to
yours, and using due diligence when evaluating other
potential manufacturers.

Investigate the most promising manufacturers thoroughly by


getting into direct contact and, if possible, visiting the
facilities.

Since you’ll need to make changes to your product, especially


in the beginning, it’s best to choose a manufacturer based in
your home country. It’s much simpler to communicate and
negotiate with such a manufacturer than with one overseas,
as that would involve using a sourcing agent.

To help you narrow your choices down, ask potential


manufacturers for a quotation to check out their prices,
capabilities and services. Then choose the option that suits
you best.

So you’ve decided on a manufacturer. What’s next?

You need to set up your supply chain. In order to collaborate


with your suppliers and partners to reduce costs and improve
efficiencies, it’s crucial to build tight relationships with them
so that they can keep you updated about any issues affecting
your product, as well as to understand every link in your
supply chain.

Once you finally do start selling, keep a tight rein on your


inventory. At the start, you should have a certain amount of
products in stock to serve your retailers on time, and you
should also organize your inventory according to metrics,
such as: “How long does it take to receive the products from
my manufacturer from the day I submit the order?”

Keeping on top of your manufacturers and your inventory is


crucial, and it’s much easier if you start small and stay close
to the process.

Pull the market and build relationships with your


customers.
In today’s consumer-centric, highly-connected world,
traditional so-called “push marketing” is not the most
promising strategy for small businesses. Instead, what
startups need is to understand their customers and to make
their products all about them. In other words, they need
“pull marketing.”

Nowadays, marketing is not about selling a product but


providing value to your customers. Small companies have to
let their customers know that they are able to give those
customers with what they need and want.

But earning people’s attention takes time, and new, small


businesses don’t have enough money to spend on expensive
advertising. So instead of costly print ads, it’s better to make
use of cheap or free-of-charge marketing channels, such as
websites, social media pages and even Youtube.

To make the most of these channels, it’s a good tactic to


incentivize word-of-mouth marketing as this will spread the
news of your product quickly. Moreover, it’s important to
reach out to the most influential people and give them
something of value to earn their trust; they will tell the rest
of the people how great you and your product are.

But targeting and building your customer base isn’t enough.


You also need to create a strong brand that appeals to your
customers’ lifestyles and needs.

Your brand must communicate what your product is all about


and what makes it unique. For instance, your brand identity
– company name, logo and tagline – has to fit to your
product and appeal to your target audience. For example,
people typically expect the colors of eco-friendly products to
be light green or blue, rather than black or gold.

Also, you can communicate your product’s value to your


customers by choosing a catchy, suggestive and
percussive tagline (slogan or brand tag).

As you see, you don’t have to spend lots of money on


marketing — you just need a simple idea that customers
want, and the ability to connect with them and provide
personal value for their money.

To succeed in retail, place your product in the right stores,


and create happy customers through great customer
service.

To sell your product successfully, you have to get it into the


stores. But which?

Fortunately you’re spoiled for choice: in the U.S. alone there


are 1.5 million retail stores, collectively making more than
$2.5 trillion each year.

The best way forward is to start small with orders from a few
local and regional stores.

Starting small in this way is important since big stores want


to stock only those products they're certain will sell.
Moreover, they want to be supplied in fairly large volume at
the outset.
Placing your products in such stores also means you can stay
in close communication with each store and keep track of
how your product is selling. It also frees you to make changes
to your product based on customer feedback.

And if you succeed in getting repeat sales, these stores will


continue to stock your product.

So your product is on the shelves, and it’s selling well. Now


you’re going to want to hold on to those customers, and give
them a reason to keep coming back.

How?

The simplest way is to provide great, personal customer


service.

As a small business, you can create one-on-one relationships


with your customers, giving you a massive advantage against
big companies who can’t provide a service that personalized.
Such a relationship ensures your customers' satisfaction, and
gives you the opportunity to learn even more about your
target group to further improve your offers.

Also, this kind of customer service means that a large amount


of your customers will be motivated to ask stores for your
product, which in turn will give retailers a reason to increase
the size of their orders.

Great customer service means being fully available to your


customers, and making good on your promises. If you
provide a great product and service, your customers and thus
the stores will keep coming back and spread the word to get
you even more sales.

Keep track of your business by carefully monitoring your


finances and inventory.

If you succeed with your business idea, at some point your


business will become large, busy and complex. As the captain
of the company, it's your job to steer the ship, and the most
important levers are your financials and your inventory.

Managing a business's finances is a crucial factor in managing


that business effectively. This requires that you can pay the
bills, so keep your finance records up-to-date and review
your monthly reports carefully. You should also negotiate
your vendors’ payment terms and incentivize your customers
to pay on time so that you're always able to pay on time, too.

Finally, while it's normal for a startup to have only a small


profit margin for the first couple of years, or even to make
losses, if you're not breaking even after two years of work
you need to evaluate how you're running the business.

Another way to keep track of your now-established and


successful business is good inventory management, as this
will ensure a steady cash flow.

The main consideration here is to ensure you produce


enough of your product to fulfill incoming orders
immediately. At the same time, you should beware of
overproduction: you don't want to pay for the production
and storage of products you can’t sell.
For example, if you've managed to reach the point where
you’re supplying a big retailer, such as Walmart, you'll have
to scale up your business and build inventory ahead of time
so that you're able to ship immediately.

Another method to ensure that there's always enough cash


available is by reducing the lag time between your payables
(to suppliers) and receivables (from customers).

As you can see, keeping an eye on your cash flow will help
you manage your inventory by enabling you to better
coordinate your production with your customer orders.

The bottom line for your business to survive is that its


finances are managed well and that a sufficient amount of
cash is always available.

Before expanding your business into a new area, make sure


it’s the right fit and be ready to sell it when the time comes.

When successfully growing a startup, you (like most


entrepreneurs) will be itching to further expand your brand.

But you should be aware that this entails an increased effort


in managing your business relationships, monitoring the
quality of your products, and even involves hiring new
people. You should therefore be careful about expanding
your business into new areas, and first make sure that it’s the
right fit for your brand.

The area you want to expand into should complement your


core business. For instance, if you want to launch a new
product, you should make sure that it appeals to the same
market. Otherwise, because your customers will be different,
it will be like starting a completely new business.

Consider Hot Picks, for example. Licensing other characters


and celebrities like Disney and Taylor Swift worked for them
because it was closely related to their core business. The only
difference was that the new product design appealed to an
additional sub-audience of their target group, which had a
different lifestyle.

What if you're considering selling up at some point? To


prepare yourself for this, you should structure your company
in such a way that you can simply hand it off to someone else
when you’re ready.

This means that your brand has to work and sell without you.
So, while setting up your business and building the brand,
imagine that you're writing a playbook that someone else can
follow in your absence. However, you should remember that
increasing your sales is ultimately what will make your
business more attractive to potential buyers.

Only the Paranoid Survive


Transform apocalypse into opportunity

Learn how one of the most successful companies in the


world survived moments of crisis.

During his time as CEO of Intel, Andrew Grove helped the


company to overcome numerous apparently insurmountable
hurdles to its existence. In Only The ParanoidSurvive, Grove
draws on his experiences to present a strategic model that
can help companies not only to cope with moments of critical
change, but also to exploit them and thrive.

Terming such moments strategic inflection points – or SIPs –


Grove presents invaluable advice for making the most of the
sink-or-swim moments in a company’s life.

“Strategic inflection points”: Whenever there’s a change in


the market, companies have to reevaluate their strategies.

There are critical moments during the life of any company


when its entire strategy needs to be brought into question.
These are known as strategic inflection points(SIPs).

But what’s behind these moments of crisis?

There are six forces at play in the “competitive well-being” of


a company which can compel it to consider its strategic
options. These forces are the strength of its competitors,
suppliers, existing customers, potential customers and
complementors, and, finally, the possibility that business can
be done in a different way.

Any disturbance in the balance of these forces will transform


the company’s business environment.

Consider, for example, the computer company IBM, which


was greatly affected by a major shift in how its business
could be done. Once it became possible for consumers to
combine components (like microchips, hard drive and
software) that were produced and sold by different
companies in an individual PC, pre-built computers were no
longer as popular. Customers simply preferred selecting their
own parts and combining them to make a PC of their own
design.

Although IBM tried to continue developing its pre-built PCs,


their overall design failed to compete with the possibilities of
the customizable PC.

The result? They sold fewer PCs than other companies sold
components.

Although it’s clear that any change in these forces may alter
the way that companies can succeed in a given market, it can
sometimes be difficult for a company to spot even a major
change.

For instance, while changes in technology are usually quite


easy to detect, because inventions or improvements directly
linked to the production process or the business itself are
ordinarily fairly concrete and observable, a change in the
strength of a competitor will be harder to notice.

Since some of these six forces are easier to spot than others,
companies should be on the lookout for any changes which
might affect them.

Employees must react to strategic inflection points – not


only in their company, but also in the wider market.

SIPs are not relevant to CEOs alone. Rather, they have an


impact on a company at every level – and, therefore, on
every single employee.

For that reason, all employees should be prepared for such


critical situations, as jobs are often endangered at these
moments. In extreme cases, an SIP can even result in a
business shutting down, which means that every single
employee loses their job. But even if the company manages
to survive, it might have to restructure, resulting in some
workers becoming unemployed. And in still other cases,
people are forced to acquire new skills and to adapt to new,
unfamiliar business environments.

Often, an SIP forces employees to change the way that they


operate as individuals in the market. When, for example, the
first “talkie” movies were released, actors were impelled to
choose whether to stick with silent movies or adapt to the
new way of acting that movies with sound required. While
some failed to redefine themselves as sound movie stars,
others succeeded – though sometimes reluctantly. Charlie
Chaplin, for instance, was a bitter opponent to “the coming
of sound,” yet ultimately even he was forced to submit and
produce his first “talkie,” The Great Dictator.

Furthermore, SIPs have even caused some types of jobs to


become almost extinct. This is especially true in the case of
major technological changes.

For example, at the beginning of industrialization, traditional


craftsmanship was in danger of becoming obsolete, as
factories were able to produce the same products much
faster and cheaper. Because their skills were no longer in
demand, almost all craftsmen were forced to quit their
businesses and work at the factories. The few craftsmen who
could survive independently were those who specialized in
higher-quality production, thereby distinguishing their
businesses.

Individuals as well as companies must react to SIPs, and they


can do this by properly analyzing their individual situation,
specializing or acquiring new skills.

Strategic inflection points can lead a company either to


catastrophe or a new chance for success.

The development of the Japanese memory-chip industry had


a huge impact on Intel (formerly a memory chip company)
because the Japanese were able to sell chips at prices Intel
simply couldn’t match.

As a remedy, Intel invested heavily in the development of its


chips, but to no avail.
The company faced an existential crisis. To the dismay of the
management and existing employees, Intel decided that it
would have to change everything that had been crucial to
their success so far, from their oldest plants to their most
established departments.

Intel had little choice. An SIP can lead to a total catastrophe


for a company if its management doesn’t recognize the new
situation and react appropriately.

One reason that managers ignore new developments is that


they’re emotionally attached to the existing way of doing
business. A consequence of this is that while a company
continues to reproduce the same, once-successful measures
as always, the already transformed business environment
means that those measures might now result in outright
failure – as when Intel tried to fight the powerful Japanese
memory-chip industry by investing in the development of its
own chips.

However, if a company adopts an effective strategy at


precisely the right time, SIPs offer them the opportunity to
establish and lead a completely new market.

Also, having to re-position a business in a new market – but


one which also requires a similar business strategy – can have
positive effects.

In the case of Intel, their strategy in the face of Japanese


companies was a combination of technological development
and new, strategic positioning of their business. Specifically,
they put their focus and their resources into
microprocessors, redefining themselves as a microprocessor
company – a field in which they became the market leader in
a very short time.

SIPs can be very dangerous for companies. However, by


taking the right action at the right time, SIPs can present a
chance for success in the future.

SIPs can confuse a business, so strong leadership is needed


to ensure companies remain focused and relevant.

When an SIP strikes, there’s a chance of serious confusion


within a company. What direction should the company take?
Should they make permanent changes, or only temporary
ones?

This uncertainty demands that someone has a clear sense of


the direction the company should take. What’s needed is a
leader.

In large companies, it’s the CEO who must have a clear vision
of the company’s future. They have to communicate their
vision clearly and constantly, as failure to do so can have
negative consequences.

For example, the head of one Japanese company was asked


about its general strategy, but he refused to discuss it,
fearing the competition would use the information to their
advantage. Whether correct in that fear or not, his silence
sent a negative message to the company’s employees and to
the public.
When a company’s strategy must be redefined, CEOs mustn’t
be scared of changing the core of the business. This is not
easy to accomplish, as they and their staff are usually
emotionally attached to the business in its present state.

Another reason that redefining strategy is difficult is that it


can involve letting a lot of jobs go and employing new staff in
new positions. However, again, you must face this task
without fear, and persevere with it.

For example, until the memory crisis of the 1980s, Intel had
been the memory company. Andrew Grove, its CEO (and the
book’s author) insisted that the senior staff redefine Intel as
“the microprocessor company,” and though there was an
initial resistance, eventually many of the staff appreciated
having a new vision they could champion.

Once a new strategy has been introduced, it then has to be


implemented. To do this, you must first deliver the message
to the relevant people, and secondly, act as role-models for
the rest of the company by committing immediately to the
new strategy and all it entails.

For internal and external employees to follow a new


strategy, companies must transmit a clear and simple
message.

The confusion that SIPs can trigger over a company’s


direction can destroy team morale and cohesion, which
means that the people involved won’t be certain of what
they should do.
This can affect a company both internally and externally. For
instance, employees will have no clear vision to follow, and
they might be scared of losing their jobs, while a company’s
partners and suppliers might fret over how future changes
will affect them.

In order to avoid such uncertainty, companies must ensure


that all their actions are in line with a clearly defined new
vision.

This means that the redefinition of the business must be


reflected in changes to its organizational structure. New staff
need to be hired or old staff retrained. And new
complementors and suppliers may need to be found.

For the change to go as smoothly as possible, the new vision


has to be communicated in a simple, effective message,
internally and externally. It’s essential to convince all
employees of this new vision, as – to remain effective – they
need to identify themselves with the new order of things.
Also, complementors and suppliers need to be informed of
the company’s new vision so that they can adjust to the
demands it entails, and they should also be made aware that
a future partnership is possible.

The simpler the message, the more effective it will be. One
reason for this is that simple messages tend to stick in the
mind, and they may also give people a sense of security.
Another reason is that they’re more likely to be picked up
and reproduced as headlines and soundbites by the media.
In short, the moment a company arrives at a new vision for
its strategy, that strategy should be communicated clearly –
in words and actions – so that employees and the outside
world can learn of the change and react accordingly.

Since employees are emotionally attached to their


company, leaders must solicit objective opinions from
outsiders.

Companies in critical situations often employ consultants to


analyze their business, and to suggest an effective course of
action. The reason for employing consultants in this role is
that they have a more objective perspective on the situation.

In contrast, those working for the company are often


emotionally involved in the work they do, which means that
their opinions are biased. The reason for this level of
involvement is that work is often an essential part of a
person’s self-image, and a change in what they do brings
their entire personality into question.

People can feel very comfortable and “at home” in their


team, and therefore tend to resist any changes to it. For
example, when Intel went through the “memory crisis,” some
of its oldest production plants were running at a loss. The
result was that they had to be shut down and their resources
redeployed to other plants.

Many among the senior staff resisted these developments


because they were attached to the “origin story” that they’d
played a role in; they remembered when those plants were
first opened, in the early days of that story.
As far as possible, leaders should try to make themselves
immune to such attachments, and instead adopt the more
objective view of an outsider to shift their own perspective.
Seeing the business with fresh eyes can be accomplished, for
example, by talking to consultants, or employing new people.

At the same time, however, leaders must always be open to


the criticisms that will probably come their way. Outsiders
are more likely to see the flaws and mistakes that insiders
will just as likely miss. Faced with such criticisms, leaders will
have to ensure their egos do not get in the way if they’re
identified with whatever decision or action is being criticized.

To stay current in the market, companies need open


communication with employees, outside experts and
journalists.

Many companies try to keep certain information secret,


especially when it concerns new strategies and products.
However, this secrecy can mean that a business’s upper
management will fail to pass crucial information down to
middle management about goals and strategies.

Neglecting to maintain open communication between upper


and middle management is ill-advised. This is because staff in
the middle of the company are often first to identify a
business’s problems. For one thing, they’re closer to its daily
operations and are therefore sensitive to the slight changes
that can accumulate to a threatening situation. For that
reason, they should be encouraged to openly communicate
their fears and observations, as often they have good ideas
about how businesses can be run differently.
For example, Grove received an email from a sales manager
in the Asia-Pacific area in which the manager discussed a
potential competitor. Faced with this new information, Grove
decided to initiate a study on the case. Had the sales
manager not felt comfortable informing Grove, Grove
wouldn't have been aware of the competitor’s existence.

Other people with whom companies should always maintain


close contact are business partners, outside experts and
journalists, as they might have a broader view on the market
situation as a whole.

For instance, a company should stay in touch with its


complementor, as they are a driving force behind the
business. And by keeping close to outside experts, a
company’s senior management is able to learn of market
constellations which they’d otherwise not recognize. Finally,
even journalists – if they ask critical questions – can lead a
manager to a welcome shift in perspective.

Change in the business environment can come from


anywhere – even from within. Therefore, it’s important to
stay on the watch and get information from as many sources
as possible.

Companies need to build flexible teams of creative staff


who are comfortable with change.

The culture of a company can be a decisive factor in its ability


to survive periods of great trouble. If people are not
challenged with new problems, they become accustomed to
the current situation and are then less flexible in times of
major change.

This kind of mindset can be deadly for a company when


hitting an SIP, so it’s essential both that employees are
accustomed to acquiring new skills and that the team is
flexible.

This is because, firstly, people who acquire a variety of skills


are able to reflect on a situation from multiple points of view.
And those employees habituated to learning are able to
adjust to new tasks more easily: if an employee is able to
think “outside the box,” with the box being his or her direct
working field, he or she will be well positioned to find better
solutions to the working process.

Secondly, a team that is flexible creates a trusting


environment in which new ideas can develop and prosper.
Indeed, creativity can grow only in an environment where
people are free to search for their own solutions. Thus
employees should be made to feel comfortable in suggesting
trying out new ideas and practices, such as the redeployment
of resources. Another benefit to team flexibility is that staff
morale will increase, because it’s quite simply more
enjoyable to work in a climate that encourages individuals to
be creative, and that remains flexible to individual desires
and suggestions.

In sum, mutual trust and flexibility lead to a positive working


climate. They train people to unite in critical situations and
come up with new ways to resolve challenges.
Business conditions can change in an instant, so companies
must be vigilant and prepared for multiple scenarios.

Business situations are complex and capable of changing in


an instant. In such an environment, only the paranoid
survive.

This means that companies must be prepared and on the


watch for the danger that can come from every corner. Yet in
some situations just keeping watch isn’t enough; they need
to be prepared for multiple or even unknown scenarios.

For that reason, a company should channel sufficient


resources to innovation and development because in doing
so it can increase its chances of being first on the market with
a new product, and thus diminish much of its competitors’
strength.

Also, people who work in development are more up to date


with technical possibilities, which is valuable knowledge in
times of instability, like SIPs.

Secondly, if the outcome of a market situation is not


predictable, companies should be prepared for every
possible outcome.

Of course this means that some of the resources will be


invested in vain. But, more positively, the skills people
acquire in the process might turn out to be useful later on.

Also, this kind of preparation can give a company an idea of


the possible costs and consequences of implementing a
particular technology. A typical example is the tug of war
between Blu-Ray and HD-DVD. Since it was not at all clear
which of the two formats would become more popular, it
would’ve been wise for a company producing DVDs or DVD
players to develop solutions for both formats. Of course, part
of this investment would undoubtedly be in vain, because
one of the technologies was certain to fail eventually.

Investments in development are crucial because they can


provide a company with the opportunity to react quickly to
new situations – or even to be the driving force of the
market.

But whether the technologies and techniques that were


developed are implemented or not, an innovative company is
always more likely to stand on its feet in critical and
unfamiliar situations.

POP!
Create the Perfect Pitch, Title and Tagline
for Anything
Create pitches, titles and taglines your audience can’t
forget.

People nowadays are overwhelmed with all kinds of


advertising pitches that compete for their time and attention.
In this information-saturated age, if an ad isn’t presented in a
unique and instantly appealing way, it’ll remain lost in the
noise.

There is a way, however, to pierce through the chaos and get


your message heard. POP! shows you how to make your
messages so compelling that your audience
simply can’tresist.

You’ll learn the secret ways of wrapping your brand, idea or


product in memorable pitches, titles or taglines that’ll get
people’s attention – and won’t let go.

The key to a sticky message is to make it POP!: Purposeful,


Original and Pithy.

Every single day, from the moment we connect to the


internet or walk out onto the street, we are bombarded with
ads that fight for our money and our attention. But have you
ever wondered why some ads are more successful than
others?

The answer is simple: the ads that grab your attention are
the ones that POP! – or that are Purposeful, Original and
Pithy.

Let’s examine these elements one by one.


First comes Purpose. Whether you’re trying to spread an idea
or sell a product, your message has to instantly communicate
your purpose – and how it positively affects your audience.

In fact, the best wordplay in the world won’t POP! unless it


does two things: it must precisely articulate the essence of
your message and show your audience what’s in it for them.

Then comes Originality. You’ve got to remember that no


matter how brilliant your product or message is, someone
else is probably trying to do something similar. Therefore you
need to distinguish yourself by every means possible, and in
particular, by being original in what you do.

Keep in mind that people’s yearning for something fresh is so


strong that even if the essence of what you’re doing is not
new, it still has a chance of taking off if you can make
it original.

Finally, there’s Pith. The word pith means the essence of


something – a concept that’s crucial, as the human brain can
actually only hold about seven bits of information in short-
term memory! This means that you have to be pithy and
convincing in a second, or your idea will soon be forgotten.

It’s no coincidence that the top slogans of the twentieth


century, as selected by Advertising Age magazine, are all less
than seven words: De Beers’ “Diamonds are forever,” Nike’s
“Just do it,” and Avis’ “We try harder.”

By answering the big W’s, you create a foundation of core


words that form your purpose.
When you think about it, it seems obvious: the first step to
good communication is always to find out exactly what
you’re trying to say.

This means that if you want to make a message POP!, you’ll


need to have precise answers for the big W’s: what you are
offering, who you’re aiming at and what you want to
achieve. You also need to consider what value you’re offering
your customer and who your competitors are.

When you’re answering these questions, keep one guiding


principle in mind: you need to examine the essence of your
offering from every possible angle, to create a detailed bank
of core words. Core words are the key descriptive phrases
that articulate the essence of your product or idea.

And although it could take ten minutes to two hours to


answer these questions to your satisfaction, it’s time well
spent. Remember that core words are the foundation from
which all POP! messages are built. You’ll be using them
regularly to create powerful messages in future exercises.

As your product and business evolve, you should repeatedly


evaluate your answers to the big W’s and your core words to
make sure your branding is as fresh as your latest creations.

Play with your core words and put yourself in your


customer’s position.

As they say, there is nothing new under the sun – which


means being original is close to impossible. And yet people
still demand originality if they are going to give you their
attention.

So what can you do?

You have to do your best with the most powerful tool you
have – the core words that embody your idea – and catch
people’s attention with an original phrase. This means you
need to push your creative potential and create a one-of-a-
kind name.

And if you’re successful, the media will help you out for free.

Why?

Because the media is always on the hunt for the next big
thing to report. This means that if you can come up with a
catchy word or phrase, you not only get the attention of your
customers but also get free advertising through media
coverage.

So, how can we create an original phrase?

One way is to use “Spell Chuck,” and discard the normal way
of spelling things. For some reason, beauty salons seem to be
very good at this:
Consider Shear Genius, Curlup and Dye and Cut and Dried.

Another way of creating an original phrase is to run your core


words through the alphabet, from A to Z, and keep modifying
the first syllable until you find something that corresponds
with your idea or product.
For example, the word entrepreneur can be transformed into
a variety of trademarkable terms – a spiritual business owner
could be a “Zenpreneur,” for example.

You can extend this wordplay approach and try playing with
the last syllable, or add a prefix (e.g., re-, multi-, pre-) or
suffix (e.g., –ly, -ology, -ish) to your core words. For example,
consider the new word re-newlyweds that describes couples
who have renewed their wedding vows later in their
marriage and are “wed” once more.

Tap into your audience’s love of music.

We all love music: it fills us with energy, it takes us to the


highest highs, the lowest lows and back again. But did you
know that you can use musicality to increase the
memorability of your messages?

One great way of using musicality to increase memorability is


by using alliteration: words that start with the same sound
can have a pleasant ring to people’s ears.

For example, what do you feel when you say these


words: Bed, Bath and Beyond;Dunkin´ Donuts; or Rolls Royce?
Isn’t it pleasant to say and hear them? Aren’t they intriguing
and memorable?

This is the magic of alliteration.

Review your core words and try to find new words that form
a series of alliterations. You can also run the first syllables of
each word through the alphabet to potentially create an
interesting neologism while you’re at it.
Another way of increasing memorability is summed up in a
Duke Ellington song title: “It Don’t Mean a Thing If It Ain’t Got
That Swing.”

Indeed, rhythm and rhyme are powerful tools of easing


comprehension, and can make even longer strings of
information memorable. Take the alphabet song, for
example: A, B, C, D, E, F, G – pause – H, I, J, K, L, M, N, O, P.
Many of us still use the song to remind ourselves which letter
fits where!

A good way of applying rhythm to your own idea is to try and


use an iamb. In an iamb, or iambic meter, we accent every
other beat in a sequence, as in “Ta DUM, Ta DUM, Ta DUM.”
Try reading the following commercial jingle out loud to
understand iambic meter: “Double your pleasure, double
your fun, with Doublemint, Doublemint, Doublemint gum.”

If you still doubting that rhymes help you remember, try this
on for size: if you were asked to think of two instinctive
human responses to danger, what would they be?

I’m betting your answer was, “Fight or flight!”

Relate to your customer’s world through celebrities and


popular media.

As we saw in a previous blink, to ensure your message sticks,


you have to make it personal. So if you want your message to
POP!, you need to relate your message to
your customer’s world, thoughts and everyday life.

How?
Start by asking yourself: what do your current or future
customers say or think when they experience the need your
idea fills? What could a possible “Eureka!” or “At last!”
moment feel like, when the customer’s problem is finally
properly addressed? By placing yourself in your customer’s
shoes, you’ll realize exactly what they need – and how to tell
them that you’ve got it.

Another powerful method of making your message personal


is to relate it to a celebrity or popular piece of media.

For example, consider the questions: who is also doing what I


do, or what also represents certain core aspects of my idea
that everyone knows about?

Amy Rosenthal did this brilliantly when she wanted to spread


ideas about being a loving mother and juggling many
responsibilities at the same time. She understood that young
babies react very strongly to our temperament, which makes
it very important to maintain calm. So, she asked herself,
who is internationally known for being calm, peaceful and
tranquil?

The Dalai Lama!

She then ran the name through the alphabet and voila, there
it was, Dalai Mama, two words that instantly communicated
what Amy wanted to say.

Another more systematic approach to making your message


personal is to relate it to a popular piece of media. Review
your core words once more and use your favourite movie,
song and book search engine to find a match with a popular
piece of media.

Be HUMORiginal – but avoid clichés like the plague.

Everyone loves a good laugh, and most of us would love to be


funnier – especially when we’re trying to create memorable
messages. But can humor really be taught?

Probably not – but there are some methods you can use.

First, pay close attention and learn from the humorous


moments around you. Family celebrations are often an
excellent source of humor, as are TV shows and movies.
Remember, inspiration is better than information, but if you
do borrow a joke, remember to credit the original or it will be
perceived as a rip-off.

You can also raise your sensitivity to the timing and context
of your humor, which is just as important as the content.
Watch carefully how comedians deliver their lines, and try to
be surprising and out of the blue with your jokes. But when it
comes to creating your memorable messages, remember to
pay attention to your purpose – don’t be funny for funny’s
sake, and always relate your jokes back to your core words to
keep on message.

The problem with jokes, however, is that they can easily lose
their novelty factor. And there’s nothing more deadly to your
likeability than using clichés. However, rearranging clichés to
make them fresh is fair game – and can even be powerful.
Here’s a systematic approach to rearranging clichés. First,
enter your core words into a cliché search engine, like
ClichéSite. Then write down everything you read that makes
you giggle or creates a quirky connection to your core words.
Then, substitute or rearrange the key elements of the original
cliché with your core words to turn an eye-roller into an eye-
opener.

A good example is business writer Steven Pearlstein’s


powerful title for an article about a group of managers who
were concerned about not having access to their
BlackBerries, due to pending litigation. The title?

“Big Firms Caught with Their Patents Down.”

Visualize your message with pictures and metaphors.

As they say, an image is worth a thousand words – which


means that if you can create an image with only a few words,
you’ve increased the power of those words a thousandfold!

But before you start creating visualizations for your idea, you
need to ask yourself what attributes your product has, and
how those attributes are embodied in the real world.

Let’s clarify with an example: What are the attributes of


superglue? Answer: It’s really strong. And what is something
real, that is really strong? The brand Gorilla Glue answered
this question with an 800-pound gorilla, which became a
powerful symbol in their ads.

You can use your answers to


create meaningful metaphors that empower your message.
The best method for creating personalized and unique
metaphors is to focus on the three A’s: Avocation (e.g., a
hobby), Achievement and Adversity.

To do this exercise, you need to take a fresh piece of paper


and on it, draw three vertical lines. Use one column for
avocations you are passionate about, one for your proudest
achievements and one for all the adversities you have faced
so far.

Now look for similarities and connections between the


columns. Can you create analogies and use past experiences
to create stories that better explain what you’re trying to
say?

A good example of the power of this method is how a


business executive used his flying lessons as an example to
curb micromanaging in his company. He told his managers
how his flying teacher never took the yoke out of his hands –
not even in critical situations – but instead gave general
instructions and let him figure it out. “Let them fly the plane”
thus became an expression in the company for “stop
micromanaging.”

Be counterintuitive and catch your audience by surprise.

“TV IS GOOD FOR YOUR KIDS!...no, it’s not.” Bet that


message got your attention, didn’t it?

The reason why is because


it’s surprising and counterintuitive, which is often enough to
catch your audience’s attention and get your message across.
Like author John LeCarré once said, “’The cat sat on the mat,’
is not the beginning of a story. ‘The cat sat on the dog’s mat,’
is.”

To create your own message that surprises, start by looking


at your core words and the answers to your W’s from an
earlier blink. Now ask yourself: Where do I dare challenge
common sense and suggest that people change their minds,
instead of offering blind allegiance? Where do I even dare to
be politically incorrect? And most importantly: How does my
product address a topic no one wants to talk about?

Another surprising way of raising curiosity is the half-and-


half technique.

This technique was used to great effect on the popular FOX


TV show, The O.C., in 2004. One episode featured a Christian
family and a Jewish family that blended the holidays
Christmas and Hanukkah together to celebrate a brand new
feast: Chrismukkah. The episode created a buzz that lasted
for months, and the show itself generated a record number
of viewers.

If you want to produce a similar reaction to your idea, try


this: Take out a piece of paper and write one half of your
core words on the left side and one half on the right. Now try
and blend each word from the left column with the right, and
write any combination that strikes you on a different piece of
paper. Write as many as possible, keep playing – you never
know what’ll come up!

Keep your audience’s attention with the power of stories.


We’ve now seen many powerful ways of creating memorable
messages. But if you want to make your message come alive,
you’ll have to wrap it in a story.

Why?

Because when you give people a meaningful story to which


they can personally relate, they switch from simply
processing information to emotionally relating to your
message.

One way of doing this is to create a powerful history behind


your idea. Think back to when you came up with your idea,
product or brand. What did you feel, say or do? Where did
your ideas come to you, who inspired you? Interview
everyone who worked with you and create the authentic
story behind your cause.

For example, when SpeakerNetNews co-founder Rebecca


Morgan told the story of how she came up with her new
book, she quickly had everyone’s attention. She was visiting a
mall when she was approached by a salesperson with
samples of orange-spiced chicken. When she repeatedly
refused, the salesperson became more and more persistent,
to the point that Rebecca decided never to buy anything
there again.

But when she left the mall, she smelled the delicious flavor of
chocolate-chip cookies being sold on another counter. No
one had to approach her – she couldn’t resist the sweet smell
and bought a whole batch of her own free will. That’s when
she came up with the title for her new book: “Chocolate-Chip
Cookie Marketing: The Anti-Hard-Sell Approach.”

Another powerful way of sustaining your audience’s


attention is by tapping into the stories that all of us know.

To do this, start thinking of famous phrases out of a story or


movie. (Consider: “I’ll be back” from Terminator, or “Here’s
looking at you, kid” from Casablanca.) Then review your core
words and see if you can create your own derivation of this
kind of classic phrase. If you succeed, the memorability of
your phrase will drive word-of-mouth marketing for you.

Pitch Anything
An Innovative Method for Presenting,
Persuading, and Winning the Deal
You must tailor your pitch to the audience’s croc brains.

Everyone should learn to pitch ideas well. In every


profession, from dentistry to investment banking, there
comes a time when you must convince someone of
something. Unfortunately, there is a gap between what we
are trying to tell our audience and how they perceive it. To
understand this gap and overcome it, we must look at the
evolution of the human brain.

Basically, the human brain has evolved in three separate


stages, resulting in three distinct parts: the primitive reptilian
part, the croc brain, developed first. It’s a simple device
primarily focused on survival and it can generate strong
emotions, like the desire to flee a predator. Next,
the midbrain developed. It allows us to understand more
complex situations, such as social interactions. Finally, the
sophisticated neocortex evolved, facilitating reasoning and
analysis to understand complex things.

When you pitch, you use your neocortex to put into words
the ideas you are trying to convey. Unfortunately, your
audience doesn’t at first process these ideas with their
neocortices. Instead, it is the audience’s primitive croc brains
that receive the ideas and they ignore everything that is not
new and exciting. Worse still, if your message seems abstract
and unfathomable to the croc brain, it might perceive the
message as a threat. This will make your audience want to
flee to escape the situation.

This is why you must tailor your pitch to the croc brain. Since
croc brains are simple, your message should be clear,
concrete and focused on the big picture. You also need to
ensure the croc brain sees your message as something
positive and novel, which deserves to be passed on to the
higher brain structures.
To secure your target’s attention, you must create desire
and tension.

The one critical thing you need throughout your pitch is


the attention of your target. To successfully attain this,
research has shown that you must evoke two sensations in
your pitch: desire and tension. Desire arises when you offer
your target a reward, and tension arises when you show
them they might lose something, like an opportunity, as a
result of this social encounter. On a neurological level, this
effectively floods your target’s brain with two
neurotransmitters: dopamine and norepinephrine.

Dopamine is a chemical associated with anticipating rewards


— desire. One such reward would be the pleasure of
understanding something new, such as solving a puzzle. Thus,
to increase the level of dopamine in your target’s brain, you
must introduce novelty through a pleasant surprise, like an
unexpected yet entertaining product demo.

Norepinephrine, on the other hand, is the chemical


responsible for alertness and it creates tension in the target.
If your pitch convinces them that there is a lot at stake here,
their brains will be flooded with norepinephrine.

To create tension, you must create a bit of low level conflict


with a push-pull strategy. This means first saying something
to push the target away, like, “Maybe we aren’t a good
match for each other.” You then counter this by pulling the
target back toward you with something like, “But if we are,
that would be terrific.”
This push-pull dynamic creates alertness in the target, as they
sense that they might lose this opportunity. Depending on
the situation, you may use very powerful push-pull
statements, especially if you sense your target’s attention
beginning to wane.

To control a meeting, you must first establish frame control.

Different people will see any given situation from a different


perspective or point of view based on their intelligence,
ethics and values. These perspectives are called frames, and
they dictate how we perceive social situations such as
meetings and sales pitches. Frames also determine who
controls those situations.

When two people meet, their individual frames crash into


each other. Only one frame can survive such an encounter —
the stronger one. For example, let’s assume a cop pulls you
over for speeding. He has a strong moral-authority frame and
you only have a weak “I’m so sorry officer”-frame. It is clear
that when your frames clash, his frame will prevail. This
means he will control every aspect of the encounter: from its
duration to its content and tone.

You will often face a similar clash of frames in a business


environment; for example, a customer may be focused on
the price of your product while you are focused on its quality.
You will both try to get the other to focus on what you think
is important.

If it is your frame that survives this clash, you will have frame
control in the situation meaning your ideas and statements
will be accepted as facts by the customer. This is a crucial
advantage in any pitch. Without frame control, you are
unlikely to convince anyone of anything.

You will often encounter the power frame, time frame and
analyst frame, hence you must know how to counter them.

In a pitch or sales meeting you will often encounter certain


archetypes of frames, and it is important you choose strong
with which to counter them.

Typically, your target will use the power frame which exudes
arrogance. You must not do anything that validates the other
person’s power. Instead, use small acts of defiance and
denial to bust the frame; for example, by yanking your
presentation material away from the target if they do not
seem to be taking it seriously.

Another oft-used frame is the time frame, where your


customer asserts control over time: “I only have ten more
minutes.” This is meant to push you off balance, but you can
always counter with: “That’s fine, I only have five.”

A particularly lethal frame is the analyst frame, denoted by a


fixation on details and numbers. If your opponent is in this
frame, they will likely insist on drilling down into minor
technical and financial details, effectively bogging down your
pitch.

In such situations, give a direct but high-level answer to the


question asked and get right back to your pitch. Analysis
comes later. Before more questions come up, counter the
analyst frame with your own intrigue frame. This basically
means you tell a compelling personal story and leave it
unfinished as a cliffhanger: “… so there we were, in a pitch
black, falling airplane with no idea what was going to happen.
Anyway, back to the pitch …" This redirects the focus of the
room onto you and makes the discussion personal once
again.

Use prizing to make the target seek your acceptance.

The most important frame you should be able to use is


the prize frame, as it works in a variety of situations against
many opposing frames.

Typically when you’re selling something or pitching an idea,


your target will tend to see their money as the “prize” of the
meeting, something you have to fight for. You must reframe
the situation so that you are the prize and they would be
lucky to do business with you.

Because people tend to want things they can’t have, prizing


yourself will make your target work for your acceptance
instead of the other way around. BMW does this with a
special-edition M3. The company demands prospective
buyers sign a contract assuring they will take proper care of
the car, otherwise they cannot buy one.

In a pitching situation, never engage in behavior that makes it


seem as if you are chasing the target, for example by
agreeing to last minute schedule changes or trying to
prematurely close the deal by saying things like, “So, what do
you think so far?” Such behavior only reinforces the
impression that the target is the prize. Instead, get your
target to explicitly qualify themselves to you; for example,
you could say, “I am very particular about with whom I work.
Why should I do business with you?” This usually catches
them off guard and they start trying to impress you.

Stack frames to trigger hot cognitions.

Contrary to popular belief, we are more prone to making


choices instinctively than through rational analysis. In fact,
we often make a decision about something before we even
fully understand it and only later come up with reasons for
that decision. These gut calls are called hot cognitions,
whereas the decisions arrived at through rational reasoning
are known as cold cognitions.

After you’ve introduced your big pitch idea, you want to


trigger hot cognitions within your target. These will make him
or her want what you have to offer in mere seconds, instead
of analyzing your pitch for days to reach a rational, cold
decision. You trigger the hot cognitions by stacking frames,
meaning you introduce multiple frames in quick succession.

The first frame is the intrigue frame: you tell your target a
compelling story, a personal narrative where a dilemma is
solved. At the crucial juncture, you stop telling the story,
leaving your target on the edge of their seat, ensuring their
full attention.

Next, you pile on the prize frame, where you flip the tables
on the target: instead of trying to impress them, make them
qualify themselves to you. You could say something like,
“This deal has so many investors after it, I have to choose
who to take on board.”

After this, you stack on the time frame by adding time


pressure to the pitch: “Unfortunately, this is a limited-time
offer, and the train, so to speak, is leaving the station on
Monday.” This will make the target feel like they are losing an
opportunity, at which point they will want it even more.

By triggering all these hot cognitions in the target, you will


leave them drooling for what you have to offer.

Don’t be needy – make the target chase you.

Neediness, otherwise known as validation-seeking behavior,


is a sign of weakness and it can be absolutely fatal to your
pitch. If you act needy, the audience will sense you are weak
and their primitive croc brains will classify your proposal as a
threat – to their money. This can easily push you into a
vicious cycle where the audience becomes more and more
distant due to your neediness, which in turn makes you
anxious and even needier!

To negate neediness, you can use a simple three-step


formula based on the movie The Tao of Steve, where the
protagonist, Dex, follows a pseudo-Taoist philosophy to pick
up women.

First, try to eliminate your desires, at least in the eyes of the


target. If they have something you desperately want, this will
translate as neediness in you. To negate this, make it clear to
the target that you do not need them.
Second, focus on the things you do well, your strengths.
Demonstrate something that showcases your excellence.
Dex, for instance, was great with children and made sure the
target of his affections saw this. Similarly, you must
demonstrate excellence in front of your target.

Third, withdraw. At the crucial moment when your target


expects you to chase them for their money, withdraw instead
by saying something like, “I’m not totally convinced we’re a
good match for each other.” This will make them chase you,
much like the women in the Tao of Steve chased Dex.

To pitch effectively, you must attain situational alpha


status.

Status plays a vital part in any social encounter. In any


meeting, a dominant member known as an alpha emerges,
while others take subordinate beta-positions. It is very
difficult to be persuasive from a beta-position; hence, you
must grab alpha status.

Though some elements of status, like your reputation or


wealth, are quite stable, situational status can vary
immensely; for example, while a successful surgeon has
considerably higher social status than a golf teacher, the
teacher is still the alpha during a golf lesson.

Often your pitch targets will lay so-called beta traps to force
you into the situational beta position; for example, being
made to wait in the lobby is a classic beta trap.
You must try to ignore these traps and avoid doing anything
that enforces your opponent’s alpha status. Instead, use
small acts of defiance and denial to grab the situational alpha
status for yourself as soon as you can.

Say a customer has made you wait in the lobby. Once in the
meeting room, you could begin examining some papers on
the table in front of you. When the customer peeks at them,
you could yank them away and say something like, “Nope,
not until I’m ready.” If done in a good-natured, half-joking
manner, this enforces your alpha position.

Once you have alpha status, you must then steer the
discussion into a direction where you are the expert, much
like the golf professional talks about golf, not heart surgery,
when teaching the surgeon. To solidify your status, force
your opponent to say something that reinforces your alpha
position with a good-natured jest, like, “Remind me, why on
earth should I work with you guys on this?”

Keep your pitch short and simple.

Before you begin any pitch, let your target know you will
keep the presentation short. This will put them at ease.
When Watson and Crick presented their Nobel Prize-winning
idea of the DNA helix, they only needed five minutes. If you
know what you are doing, you can pitch anything in twenty.

Start your pitch by introducing yourself. This does not mean


rattling off your entire résumé but just outlining your
greatest successes, like projects where you really did
something impressive.
Most people will be tempted to jump right to the “big idea”
for which they’re trying to get financing. But before you get
to it, you should address one crucial concern in your target’s
mind. Namely, you must explain why now is the right time to
invest.

Rather than a long and complex analysis, simply outline


the economic, social and technological forces which make
your deal unmissable right now. Economic forces that benefit
your pitch, for example, could be your target customers
becoming wealthier and interest rates going down, the social
forces could be the rising consumer concern for the
environment, and the technological force could be the
development of the electric car. You must present these
forces in a way that shows a window of opportunity has
recently opened but will not remain open forever.

The three forces set the stage and paint a backstory for your
big idea, which should also be kept brief and simple. Use an
established “recipe” for this:

“For [target customers] who are dissatisfied with [current


offerings on the market]. My product is a [new idea] that
provides [solution to key problem] unlike [competing
product]. My product has [key product features].”

That’s it. The time for details comes later.


Play Bigger
How Pirates, Dreamers and Innovators
Create and Dominate Markets
Discover how to create a new market category by playing
bigger.

Are you ready to shake up the market? Do you have a game-


changing idea on the order of an iPad or Uber, something
that will solve the problems consumers didn’t even know
they had?

Then these blinks are your ticket to becoming a category


king. You’ll learn how to play bigger by inventing your market
category and simultaneously dominating it.

Category kings find and develop solutions to problems that


no one else has noticed.

At the beginning of the twentieth century, if you had asked


people how personal transportation could be improved, they
would have told you to make a faster horse.

Henry Ford, however, imagined an ambitious alternative –


the Ford Model T: the first affordable, mass-produced
automobile.
Such a game-changing innovation is called a new category.

New categories offer consumers a vision of a new way to live


and solutions to problems that few others have even
considered.

When you need a taxi, for instance, you often scramble to


hail one from the street or search high and low for a taxi
stand. Then Uber came along and said, “Why can’t the taxi
come to you, no matter where you are or what time of day it
is?”

A person who thinks like this, who comes up with game-


changing solutions, is called a category king.

Companies can be category kings, too. A company, after all, is


the entity that develops the services and products that
become essential in our lives. Old ways soon become
obsolete, and we wonder how we ever survived before the
new category came along.

We often think this way, because it’s only when a category


king offers the perfect solution that we realize we had a
problem in the first place! To become a category king, you
have to not only show people the solution but also show
them the problem.

Uber is a perfect example of a category king. Its innovative


taxi service was all the more appealing because it highlighted
the many flaws of traditional taxi companies.

Before Uber, customers had to track down a cab themselves,


guess how much the final ride would cost, and fumble with
bills and coins. With Uber, customers can order a cab through
a smartphone, get an automatic price estimate, pay by credit
card and even track the progress of the cab online!

It can take a long time for people to change their minds.


Category kings need to have great timing.

When the automobile was first invented, consumers didn’t


take to it quickly. People thought cars were unsafe, and it
was some time before this prejudice would wane.

This can be true for any new category. When a company


comes up with a revolutionary idea, it often has to wait for
public opinion to catch up.

It’s one thing for companies to identify and develop a


category, but it’s another thing entirely to make potential
customers realize a problem needs solving.

Picture a middle-aged IT manager who works in the


corporate sector and knows the traditional ins and outs of his
industry. When an innovative platform such as
Salesforce.com comes along – a service that helps clients
more efficiently connect with customers – it may take him
years to accept it.

This isn’t surprising. Neuroscience research tells us that if an


idea is completely ingrained in a person’s mind, it can take
between six to ten years for it to be replaced with a new,
better idea.
So people need time to change their minds. What’s more, to
help this process along, a company should clearly understand
the problems and needs of potential customers.

In 2002, Microsoft’s Bill Gates developed the Tablet PC to


address what he saw as a technology problem. Cell phone
screens were too small to use comfortably for any reasonable
length of time; laptops weren’t portable enough. Gates
thought he’d nailed a solution with the tablet computer.

However, the Tablet PC as a product bombed.

Yet just a few years later, Apple’s Steve Jobs identified the
same problem and created the iPad – a tablet computer.

So what was the difference between the perceived solutions?


People didn’t need a personal computer in a tablet form, but
an internet device on which they could surf and deliver
presentations.

Jobs correctly identified this need and met it with the


lightweight, intuitive iPad.

You can discover opportunities for new categories using


market and technology insights.

So how do you go about pinpointing what’s missing in today’s


world to find a market ripe for revolution?

More often than not, you’ll stumble upon a gap in the market
by sheer luck. To make your idea a reality, however, you’re
going to need market insight.
Market insight means you’re intimately familiar with how the
market in which you plan to operate works. You can then use
that knowledge to bring your plan to fruition.

Do you know how the electric guitar came to be invented, for


example?

Les Paul used to play his guitar and harmonica in a parking


lot. One day, a person came up to him and said that he
couldn’t hear the guitar over the sound of the harmonica.

This was a lightbulb moment! Paul realized he needed a


louder guitar. And while it was a random comment that set
Paul on his path, his knowledge of the market made him
confident that his problem was shared by others, and was
thus worth solving.

There’s another way to discover a gap in the market, and


that’s through technology insight.

It’s usually scientists or engineers who have technology


insight, inventing a new product or process often without
deep knowledge of a market’s needs. It’s only afterward that
an application is found.

When the founders of VMware created virtual computers


that could run virtual software, for example, they had no idea
which problems their invention could solve.

It was only once the company did some research that


VMware’s founders discovered their solution could be useful
for companies that wanted to test software safely.
And just like that, a new category was discovered!

Stories can help customers understand your business better


and help motivate employees.

The need for stories doesn’t disappear once we become


adults and outgrow bedtime fairy tales.

A good story still has the power to influence how we feel and
what we think.

According to a 2010 study by Professor Paul Zak at Claremont


Graduate University, stories affect people more deeply than
facts alone. Stories lead to better understanding, cooperation
and motivation because listening to a story raises oxytocin
levels in the brain. Oxytocin is the chemical that makes us
feel empathy.

So how can you make use of the power of storytelling?

You can present your product and the problem it’s going to
solve in the form of a story. Doing so will allow you to convey
your point of view (POV) effectively – how you define your
company’s place in the world and how it finds solutions to
problems.

Your story could be about your company’s mission, where it


fits into the lives of your customers and how your new
category is going to solve their problems.

Coverity is a software company that finds bugs in aircraft


computer code. Coverity’s story is that there are more than
100 million lines of software code in a jet airliner, and to
keep the code running properly – thus keeping planes in the
air – they need careful testing.

In this way, the work Coverity performs suddenly seems


essential – a matter of life and death!

It’s not enough for the CEO to have a clear idea of the
company’s point of view, however. Every employee needs to
have a sound understanding of it, too.

After creating your POV, your entire company needs to learn


and internalize it to guarantee its effectiveness. A training
course for employees can help ensure your story is the
guiding principle at all levels.

The introduction of a new category in a market must be as


dazzling as a strike of lightning.

When a fork of lightning flashes across the sky, it lights up


the night with its brilliance.

In the same fashion, designing a lightning strike for your


product can help gain the attention of a market.

Your strike could take the form of an event that attracts


everyone from potential investors, stakeholders and analysts
to the media and future customers.

An extraordinary event can also take potential competitors


by surprise.

Sensity, a tech company working in the LED lighting industry,


staged such an event at Lightfair International in 2003. At this
annual convention attended by lighting manufacturers and
customers, Sensity unveiled a groundbreaking discovery: that
light fixtures can be digitized with LED lights.

This revolutionary idea allows lights to collect information on


motion, sound, air quality and even weather data. Sensity
dubbed its system the Light Sensory Network. The company
even briefed a reporter from the Wall Street Journal about
the new category a few days before the fair, and the
resulting newspaper article helped to build anticipation for
what was a highly successful event.

To be effective, then, you have to direct your lightning strike


at your target market.

Sensity was clever in its choice of market. It could have made


its pitch to the sensor industry, but the impact would have
been minimal. By choosing the lighting industry, the company
was able to show how conventional lighting was not keeping
up with technological innovation.

Like Sensity, you should single out a specific market, as a


blanket approach won’t work.

A carefully planned strategy to strike a single market will


pave the way for your company to be crowned a category
king!

Pour Your Heart Into It


How Starbucks Built a Company One Cup at a Time
Get business advice from a coffee master.

What makes a great cup of coffee? According to Starbucks


CEO Howard Schultz, his coffee deli became so hugely
popular because it has always had extremely high standards
for their products and work environment.

The story about Starbucks shows that the success of a


business depends on the authenticity of its product, and that
trust, brand renewal and strong principles are essential to
keep a business growing.

Success in business comes from selling an authentic


product.

If you bring up Starbucks in conversation, chances are pretty


much everyone will know what you’re talking about.
You know Starbucks as a successful business, but have you
ever wondered how it came to be?

The secret to Starbucks’ success is, for founder Howard


Schultz, no secret at all. Plain and simple, the success of
Starbucks lies with the brand’s authenticity, achieved by
selling only the highest quality coffee.

Back in 1981, Starbucks was just a small retail store. It sold


exclusively dark-roasted Italian style coffee, which may be
ubiquitous today, but was still a novelty back then. By
roasting the coffee dark, the coffee grows in strength, gains a
more powerful aroma and has the distinct taste of authentic
Italian coffee.
Starbucks never compromised its beans, and became known
for its premium-quality, dark-roasted flavor profile that its
founders were so passionate about. Because of those early
business decisions, Starbucks had an undeniable feeling of
authenticity about it since the start.

The company has held true to its authentic coffee profile, in


tough times to the present day. In 1994, coffee prices shot to
an all-time high on the world market, from $0.80 to $2.74 in
a matter of days, after a frost that destroyed much of Brazil’s
coffee plants.

During this coffee crisis, a lot of shareholders promoted the


purchase of cheaper beans, to keep the price of a cup of joe
stable. But Starbucks was unwilling to compromise quality
and continued to sell the highest quality coffee they could,
instead reducing other costs to account for the higher price
of beans. When the world coffee market recovered,
Starbucks had an even stronger customer base because its
quality remained consistently high.

In business you have to be stubborn to succeed.

From what we’ve learned in the first blink, Starbucks adheres


to uncompromising business practices. So what kind of
person does that make its founder? You could probably
describe Howard Schultz as stubborn. In fact, that quality is
what led Howard to become a part of Starbucks in the first
place.

After tasting the great coffee at its store in 1981, Schultz


knew he wanted to become head of marketing in the
Starbucks retail stores. The original founder, Jerry Baldwin,
was interested. But his partners thought Schultz had too
many new ideas and was too eager to create change. So
Baldwin declined to hire Schultz.

At first, Schultz was devastated. But as he was so determined


to join Starbucks, he called back the following day to tell
Baldwin he was making a huge mistake. And, after sleeping
on it, Baldwin, won over by Schultz’ persistence, offered him
the job.

Starbucks’ initial reluctance to hire him wasn’t the only


obstacle. Later on he took leave from the company due to
disagreements about brand development, and opened his
own coffee shop, Il Giornale. Raising money for that venture
over the course of a year, he pitched to 242 accredited
investors. A whopping 217 said no.

In the face of rejection, he grew more stubborn. He


continued to elicit investors until he was finally able to open
Il Giornale. And, his coffee shop eventually became so
successful that he bought Starbucks and developed it into a
billion dollar company!

We can take away two lessons: (1) Business will always


present obstacles; (2) A stubborn attitude is key to
overcoming those stumbling blocks. Still, there’s much more
to success! Read on.

It’s vital to build trust with your employees.


We’ve seen that it pays to be stubborn when dealing with
people at the top of the food chain. But with everyone else
vital to your business, your focus should be entirely different:
build a relationship of trust with your employees.

The Starbucks management team has worked hard to


nurture that trust. It’s reflected in the company motto:
“Treat people like family and they will be loyal and give their
all.” The Starbucks family receives a great benefit package
and even part-time employees are offered stock options
– Bean Stock – so they are partners, not just employees.
Employees are also encouraged to voice their opinions at the
quarterly Open Forums, a source of valuable feedback.

As a result, there is a great bond of trust between


management and employees. Starbucks workers are in fact
so pleased by their company that they have refused to be
represented by unions since 1992, making the following
statement: “You trusted us, and now we trust you.”

It makes sense that if your employees trust you, they’re likely


to stay with you longer. But did you know this can also
improve your customer bond?

For example, Starbucks has a lower turnover rate than other


comparable retail stores – up to 65%, compared with up to
400% per year. Low turnover means the business is saving
time and money on training new hires.

But, it also helps the business in a more personal way. Many


regular customers can expect that their baristas will
recognize them and greet them with, “Same as usual?” That
familiarity gives the customers a strong connection to the
Starbucks brand, a connection that keeps them coming back.
We can see that for Starbucks, trust is an invaluable
commodity.

Not only does a good business need strong values; it needs


to stick to them no matter what.

We’ve all got those friends that seem to be changing their


values on a whim, chasing the latest fads and trends. If
they’re an acquaintance, we’ll tolerate that kind of behavior,
but how would you like it if your business was changing its
core principles from week to week? Neither employees nor
customers would put up with it for very long, which is why
it’s crucial that a business stands by its values.

As we know, the core value of Starbucks is authenticity. So,


taking this principle seriously has sometimes meant denying
customer requests.

For example, when flavoured coffee beans became available,


many customers asked for the ones they could find in other
stores. However, Starbucks refuses to produce them to this
day, because they don’t want to pollute their high quality
coffee beans with flavoring chemicals.

This goes to the point where a Starbucks’ employee would


grind another company’s beans for you, but they would not
grind flavoured coffee beans in their grinders, as some traces
of chemicals could be left behind and pollute the other
coffee.
In this way, values are so important at Starbucks that it’s
sometimes necessary to have lengthy discussions on matters
that seem, at first, totally trivial. When Starbucks began to
receive customer requests for low fat milk, fights broke out.
Again, authenticity drives the Starbucks visions, and it was
widely considered that a Caffe Latte could only be authentic
using whole fat milk.

But, on the other hand, another core value at Starbucks and


in any sensible business is to fulfill the customers’ wishes. So
Starbucks had a dilemma on their hands. Not willing to
compromise either value, the company conducted extensive
testings on low fat products in order to make sure that the
authentic taste would not be sacrificed.

The low fat Caffe Latte was introduced only once they were
sure it tasted just as good as their original whole fat Caffe
Latte. To those who aren’t particularly enthusiastic about
coffee, this may seem like a lot of effort for such trifling
issues.

But you’ve got to admire the way Starbucks fiercely upheld


its values as the company grew and changed. And, as we’ll
find out in the next blink, there certainly were a lot of
changes in store.

It pays to invest above the curve.

We all know it’s wise to be cautious with our money, be


sparing and only spend what we can afford. But in business,
it’s a different game where it’s often necessary to take big
risks. The truth is, if you want to be successful, you’ve got to
take the plunge and invest.

Starbucks’ impressive and rapid growth wouldn’t have been


possible if it hadn’t started “investing above the curve,”
which means investing in themselves even beforethey
needed it.

Today Starbucks has 21,000 stores. But, even when they only
had 20, Schultz already knew he wanted to make it big. He
soon realized that his investments were most needed in one
area: infrastructure.

With plans to grow to 300 stores in the near future and to


continue roasting its own beans, Starbucks needed roasting
facilities that were up to the task. Their current roasting
facilities simply wouldn’t stand the test. So, it needed to build
a new one.

The company also needed to attract a high-performing


management team, one that had already worked with huge
enterprises, with an ability to handle fast growth. In addition,
it needed a sophisticated computer program, custom-built to
deal with the company’s thousands of sales in hundreds of
places.

Altogether, these changes required a large and risky


investment. Many investors were concerned by losses
between 1987 and 1989, and pressured the business to
change strategies. But, it became apparent that the losses
were a result of investment that had not yet paid off, and
that the storefronts were in fact operating at profit. So once
again, Schultz stuck to his guns and the investments paid off
over time. By 1990, Starbucks was making a profit and had a
firm foundation for further growth.

Starbucks wasn’t alone in its early losses. Most companies


struggle in their initial phases. But if the reason for your
losses is because you are investing above the growth curve,
then you can be sure that your company will profit and
expand in years to come. That strategy applies to both
business plans and people, as the following blink discusses.

Invest in people who are smarter than you and then let
them do their job.

Let’s face it: we can’t do everything ourselves. Still, superiors


often feel threatened by their brightest employees, rather
than tapping into their skills as an asset. Schultz, on the other
hand, was smart enough to give the reigns to those with
expertise in their specific areas.

For example, when confronted with the challenge of creating


a sales computer program for hundreds of stores, Schultz
hired a programmer who had worked on the McDonald’s
sales program. Having worked in a company that was far
bigger than Starbucks, she was well-suited.

Instead of micromanaging her every step of the way, Schultz


trusted her, offered her a clean slate and let her develop the
Starbucks sales program. That program is still used
worldwide today.
This shows just how valuable it is to trust that your specialist
employees know what they’re talking about; after all, it
is their specialty. In 1989, a new manager, Howard Behar,
joined Starbucks. He began to rapidly change the corporate
culture and openly disagreed about many tactics – not so
dissimilar to Schultz in his early days at Starbucks!

At first, working with Behar was uncomfortable for some


Starbucks managers. But the clever ones learned to adapt
and recognize his criticism for its constructive value. With his
help, Starbucks made the shift from a product-oriented
company to a company that was centred on people.

Behar was responsible for the Open Forums that give


Starbucks employees the opportunity to provide their
feedback. If management had rejected Behar because they
felt threatened by him, they wouldn’t have been able to
benefit from his great new ideas, ideas that make Starbucks
the successful company it is today.

Openness to new ideas isn’t just vital within a company;


sometimes new ideas come from other sources, leading to
revolutionary collaborations. In the next blink, learn how
Starbucks optimized collaboration!

Working with others can revitalize your brand, or even


revolutionize your product.

If you want to get ahead in business, the old “if it ain’t broke,
don’t fix it” mantra won’t cut it. Brand renewal, on the other
hand, will boost your success; the key is to change
things before they stop working.
Starbucks managed to apply brand renewal to a product as
old and traditional as coffee. And, the company applied
renewal at a scientific level. Don Valencia, a biomedical
scientist, began experimenting with coffee in 1988. His
research led him to develop a coffee extract, which he then
refined until it was completely indistinguishable from real,
freshly-brewed coffee.

He took his idea to his local Starbucks shop, where the


managers were impressed, as were those higher up in the
Starbuck hierarchy. Starbucks onboarded the coffee extract,
and Valencia’s invention made it possible to create products
such as coffee-flavored ice cream and ready-to-drink bottled
beverages. These products could be sold in supermarkets,
making Starbucks popular to a wider market.

Another way to create brand renewal in your company is by


working with another company on a joint venture. In 1994,
Starbucks began working with Pepsi to distribute cold coffee
drinks, making it possible to sell Starbucks in places where
there weren’t any Starbucks stores.

But it wasn’t an easy match. At first, the companies couldn’t


have been more different: Starbucks was a small business in
which people worked on several different projects at once,
whereas Pepsi employees were used to focusing on one
project at a time.

But instead of challenging each other, both companies chose


to view these differences as complementary, and with a
positive outlook they began to look for win-win solutions.
This way, they were able to put the bottled Frappucino on
the market, which was so popular that stores were already
selling out soon after its release.

Having the courage to work with others to renew your


product can pay off greatly, and can even propel you to an
international market. But as a company expands, it must be
true to its founding spirit – the principles behind its success.
Starbucks strives to keep its original culture alive, as we’ll see
in the next blink.

It’s important for a company to stick to its principles and


ensure its employees are happy.

It’s a classic story for big chains to sell their soul in order to
stay ahead in the game, but the same isn’t true for Starbucks.
Instead, the company takes the initiative to stay intimate
with its employees – no easy feat when there are about
25,000!

By offering Bean Stock (stock options) Starbucks generates a


sense of partnership among its employees. It tends to offer
higher hourly wages than the industry standard as well other
benefits, such as health insurance for employees and their
partners. Schultz communicates personally with each store
via email and voicemail, and each region holds quarterly
meetings for store managers so that management remains in
touch with the base.

A survey in 1996 revealed that corporate culture was


exceptional: 88% of the employees were satisfied with
working at Starbucks and 89% were even proud to work at
Starbucks!
Not only does Starbucks strive to take care of its employees;
it also strives to stand by environmental principles. For
example, its disposable paper cups are a predominant
environmental issue. Single use disposable paper cups
generate an unseemly amount of waste, not to mention that
sometimes hot beverages necessitate two cups.

While disposable cups continue to be a necessary part of the


business, Starbucks developed cup sleeves, so that hot
beverages no longer need a double cup. The sleeves are
made of half the material as a cup, and protect people’s
hands from the heat, just the same. The stores also sell
reusable cups to encourage people to reduce waste. And
they conduct Green Sweeps, in which employees pick up
trash around their neighborhoods.

Every big company risks losing the small business culture


from which it began, but, as Starbucks has demonstrated, it’s
possible to continue to strengthen the brand, authenticity,
and employee- and customer-loyalty.
Predictable Success
Getting Your Organization on the Growth
Track – and Keeping it there
Get yourself to the sweet spot in the business cycle – and
stay there.

Like Dorothy’s famous journey in The Wizard of Oz, a


company’s path to success is paved with danger. Many
companies start out aiming to achieve greatness, yet few
actually make it. Most fall back somewhere along the yellow
brick road, sapped by lack of customers, lack of money or
lack of management.

These blinks show you how your business can traverse this
perilous path and reach a level known as predictable success,
where you can plan your objectives and know you’ll reach
them. The blinks will also show you how to stay there. As
hard as it is to get to where you want to be, it’s just as tough
to stay relevant and dynamic. So, if you want to reach – and
hold onto – that sweet spot, read on.

Any company can consistently meet its objectives –


regardless of size, age or finances.

Business is tough: for many companies, success – or failure –


is often a matter of sheer luck. No matter how good your
idea may be, it’s impossible to predict how it’ll fare upon
execution.
Want to change that? Wouldn’t it be nice to
achieve predictable success, when you consistently meet the
goals you set for yourself? That might sound impossible, like
a privilege solely reserved for companies that have been
around for decades. But the truth is, neither age nor size nor
finances determine a company’s predictable success.

Consider Little & Co. The credit-card payment processing


company hit the top of the Inc. 500 just five years after it was
founded, putting it in the same league as the 120-year-old SC
Johnson.

Finances don’t determine predictable success either.


Microsoft might have billions of dollars in reserve, but it
doesn’t consistently meet its goals; meanwhile, the small,
self-funded graphic design firm the author works with has
never fallen short of its annual targets.

So, if age and cash don’t lead to predictable success, what


does? The answer is management. Managers with strong
visions and unrelenting commitment to a set path will help
their companies achieve predictable success. These leaders
stay calm even when external or internal problems arise,
working to assess the problem and determine the optimal
response.

Flowing water is a great metaphor for the management style


you need. When a stone falls into running water, the water is
utterly indifferent to the motives of the stone. It simply
responds accordingly, with minimal drama; when the stone is
pushed downstream, the water quickly returns to its calm,
still state.
In the following blinks, we’ll show you how companies learn
to embody running water and achieve predictable success.

There are three stages on the path to predictable success,


beginning with “early struggle” and “fun.”

No company can achieve predictable success right from the


get-go if it doesn’t follow a process. And though each stage is
filled with challenges, if a company plays it right they’ll be
unstoppable.

First, a company will hit the early struggle. This initial stage
requires you to address two simple problems:

1. Are there enough buyers for my product?

2. Do I have enough cash on hand to pay my bills?

Of course, most companies fail to find an answer to these


questions, which means they never advance past the first
crucial stages.

To join the elite 20 percent of businesses that move further


along the path to predictable success, follow this simple rule:
do your best to have three times as much cash as you think
you’ll need.

The author learned this lesson while helping Pizza Hut set up
new franchises in Ireland: even though the franchises were
convinced they had sufficient customer base to meet their
cash-flow demands, they quickly ran out of money. So, to
reiterate: figure out how much money your operations
require, then triple that sum.
Next, once you’ve identified a viable market and stabilized
your cash flow, you’ll be able to move into the second
stage: fun.

In this period, your company will likely grow very quickly.


Sales will flood in, bringing large amounts of revenue. Since
this happy period follows the difficulties of the early struggle,
it may seem like you’ve finally made it. But as a result, you
may be tempted to overspend just to keep the good times
rolling.

Don’t do it! Remember, you still have to pass through the


third stage before you can finally achieve predictable success.

During the third stage – “whitewater” – demand for your


product outpaces supply.

So, in the second stage you’re having fun. Your business is


doing well and you have plenty of customers. Seems great,
right? Well, here’s where things get tricky.

When an organization grows too quickly, decision-making


and execution become more difficult. During this third
stage, whitewater, mistakes become very common. Prepare
yourself: you’ll have to devote much of your time and
resources to trying to solve these problems.

In whitewater you’ll be unable to meet the accelerating


demand for your product or service. And when you can’t
keep up, you might get sloppy (for example, mixing up
orders) or be forced to cancel on customers. In either case,
you’ll end up with unhappy customers and negative reviews,
ultimately slowing down your growth.

But it doesn’t have to be that way. Any company can get out
of the whitewater through effective management: make sure
your sales and operations teams are working together
closely. If your sales team knows how much their operations
counterparts can handle, they can better manage customer
expectations.

The author once advised a woodworker named Ian. During


their first consultation, Ian was in deep whitewater: an
onslaught of customer orders had undermined the quality of
his work. As a result, he was losing clients and seeing his
profits decline.

The author instructed Ian to finetune his communication and


feedback system, to better align his sales and operations.
And that’s how Ian managed to get out of the whitewater
stage and achieve predictable success.

Of course, maintaining predictable success in the long-term


can be tricky. But in the next few blinks, we’ll show you
exactly how it’s done.

The three stages that follow predictable success can send a


business into freefall.

Congratulations, you’ve achieved predictable success! Time


to breathe easy? Unfortunately, there are still challenges
ahead.
Immediately after you’ve arrived at predictable success, you
may encounter the treadmill. This phase occurs when a
company becomes overly dependant on established systems,
thus losing its creative streak.

At this point, many founders are tempted to leave their


companies because their influence is waning and their energy
diminishing.

That’s exactly what happened to Derek, the founder of a


successful PR agency. Once his firm hit the treadmill stage,
his work became increasingly bureaucratic and he could no
longer identify with the company he started. As a result, he
sold the majority stake to a national advertising
conglomerate and moved on to new projects.

After the treadmill period, companies may fall into the big
rut – the penultimate stage of organizational development.
This occurs when businesses lose sight of their mission,
shifting their focus away from the customer and wholly onto
the company itself.

Organizations heavily populated by bureaucrats are


particularly susceptible to the big rut. The author
experienced this firsthand when he met the owners of a
chocolate factory that had been around since 1908.
Management was narrowly focused on upholding the
tradition and staying faithful to the “way it’s always been
done,” at the expense of innovation and progress. That’s a
surefire way to lose ground to upstart rivals!
Also, it can lead to the final stage of organizational
development: the death rattle, which signifies the end. As a
rule, companies that aren’t creative will eventually fall
behind when new innovative competitors disrupt the market.

Consider what happened when the music industry shifted


from CDs to MP3s: plenty of big players lost out when they
failed to adapt to changing consumer demands.

Don’t let that happen to your business! Because once the


death rattle has sounded, there’s no way back from the brink
– the company must fold.

We’ve seen the challenges that face organizations before and


after predictable success. In the upcoming blinks we’ll learn
how to maintain the perfect balance.

Simplify decision-making and unite employees around a


collective vision to move from whitewater to predictable
success.

Every stage on the path to predictable success has its


challenges. But the most difficult shift occurs when your
company moves from whitewater to predictable success.

At this point, you may see your organization’s decision-


making process become overly complex and bureaucratic.
Management needs to work against this impulse, simplifying
the company’s decision-making at every level.

For example, when hiring new staff, management should ask


employees who will be working closely with the new team-
member to define the parameters of her role and guide the
search process. So, if you’re looking for a new head of
marketing, ask people in the marketing department to
describe what they would need and expect from a person in
that position.

That way, you’re more likely to find someone who’s the right
fit for the organization. What’s more, by allowing people at
every level to make decisions, you simplify and speed up the
process. No one wants to wait around for overworked
managers to make the call.

Another problem occurs when an organization scales too


quickly: alignment and self-accountability are lost. In the
whitewater stage, tried-and-tested company values like, “We
believe in total quality” or “The customer always gets what
the customer wants” may start to seem like pure rhetoric, to
the detriment of quality and customer satisfaction.

As a result, employees in various departments will rewrite


the vision to suit their needs. Customer service staffers may
start to placate the customers or simply ignore them, while
meanwhile the manufacturing department might try and
stem the problem by cutting the manufacturing rate.

To deal with this, management has to work with employees


to design a new company culture that everyone believes in.
It’s important that you come up with a realisticvision, one
which will empower employees. Doing so will recalibrate
everyone’s self-accountability and align departments within
the company, pushing the organization to predictable
success.
After achieving predictable success, install effective systems
and institutionalize risk-taking.

As we’ve learned, it’s difficult to maintain predictable


success. Luckily, there are two steps you can take to avoid
the treadmill, the big rut and the death rattle.

The first step requires you to install two systems.

The first system turns your organization into a highly efficient


decision-making machine. The author learned this lesson
from one of his clients, who had implemented a very specific
process: “data, debate, decide or defer.” They started by
collecting the relevant information, openly debating what to
do for as long as necessary, and then finally either making a
decision or deferring the subject to a subgroup. This was an
efficient and effective process.

The second system centers on your employees. It means your


firm focuses on company- and people-driven visions, drawing
on the skills and expertise of staff rather than forcing
management-generated strategies onto them.

Now comes the second step for maintaining predictable


success – and it’s a tricky one. You must institutionalize risk-
taking and innovation. Management often fears that
“institutionalizing” risk will lead to mistakes and misuse. But
the thing is, risk-taking is crucial for any business; it’s the only
way you can learn and innovate. So managers have to find
ways to support it.
But here’s why it’s tricky: you need to be able to allow some
risk-taking in order to make your company more flexible, but
you also need to protect your organization from unnecessary
risk – especially if it doesn’t align with your overall mission
and vision.

The key is to limit risk-taking to the core business. Don’t


make any “wild bets” on extraneous products or services.
Also, don’t ever engage in any unethical activities.

By following the predictable success framework and these


two further steps, your organization will set itself up for
positive long-term outcomes.

To avoid decline and to maintain predictable success, be


flexible with systems and prioritize good HR.

If you’ve achieved predictable success but feel that you might


be backsliding, there are a couple of things you can do to get
back on track.

Most importantly, make sure you’re using your implemented


systems effectively – not being used by them. After all,
having a perfectly organized calendar doesn’t make for an
effective CEO. A CEO who doesn’t have a single moment of
free time in the next five weeks has no time to innovate,
dream or create.

The author would advise this CEO to break free from his
system and create regular “office hours,” allowing employees
to drop in for an impromptu discussion. That would boost
creativity and create a beneficial feedback loop between
management and employees.

Prioritizing recruitment and training is another way to


maintain predictable success and to avoid slipping into either
treadmill or decline.

Motivate new employees and help cultivate the right mind-


set by emphasizing “why” over “what.” Open up a dialogue
and explain the company’s processes. That way, the
employee understands the reasoning behind the systems,
thus potentially finding ways to improve them.

You should also focus on success by encouraging innovation


and creativity; if an employee fails to comply with a system,
don’t linger on it if his decision works. That’s why your
evaluation system should be more qualitative than
quantitative: give employees actionable steps to improve
their performance, not numerical scores.

Think of yourself as a coach with her team after the game:


watching a clip of an effective, correct play will motivate the
team; screening ten fumbled plays will only discourage them.

All in all, by following all these steps, your organization can


maintain predictable success, avoiding both the treadmill and
the decline.
ReWork
Unorthodox advice for growing companies
You need less than you think to start your own company –
launch as soon as the core of your business is ready.

Founding your own business has never been easier than


today. If you start small, you need far less time and resources
than you imagine.

First, test the waters: don’t quit your day job to slave 100-
hour weeks, but rather gauge your enthusiasm by squeezing
in a few hours each week to work on your idea. You don’t
need to take on crippling amounts of debt either; just use
whatever facilities and equipment you have at your disposal
or can easily afford. Only use external investment as a last
resort, as it will not only dilute your stake in the idea but the
process of looking for funding is time-consuming and
distracting. In most cases, all you need is a laptop and an idea
to get started; everything else is peripheral to your success
anyway.

When starting your company, focus all your efforts on


building the core of your business. Without this core, your
business cannot function. For example, hotdogs are the core
of a hotdog cart operation. The core should be something
you think will be stable in time. Amazon’s core isn’t only
about books; it’s about fast shipping, affordable prices and a
great selection. Publishing fads come and go, but these are
things people will always be willing to pay for.
Once your core is ready, launch immediately. Don’t wait for
every aspect of the business to be fully complete. You can
work out the details later. When 37signals launched its
Basecamp product, they could not even bill customers yet.
But with the monthly billing cycle, they knew they had four
weeks to fix the issue. Just get started and wing it.

Make a stand for something you care about.

The only way you can attain the sense of urgency and
devotion that running a successful company requires is by
doing something that matters to you. If you’re going to do
something, make it something you can be proud of.

Some people start their business with an exit in mind from


day one. This is the equivalent of entering a relationship with
the aim of breaking up – absurd. Just like a relationship,
running a business should be based on commitment and
passion rather than the willingness to sell out at any
moment.

Making a stand for something that is important to you is also


a great way to attract loyal followers and fans. Consider
Vinnie’s Sub Shop in Chicago: they stop selling sandwiches in
the afternoon because the bread is no longer as fresh as it
was in the morning. The extra income they could earn in the
afternoon would not make up for the loss of pride they
would suffer from selling mediocre sandwiches. Their
customers love this devotion to freshness.

Once you have a stand, a great way to emphasize it is to pick


a fight with an existing competitor. If you run a small coffee
house that you see as a haven for individualists, position
yourself as the anti-Starbucks. Having an enemy will provide
you with instant positioning in the customer’s mind and a
great story to tell.

Do not, however, let your competitors dictate your own


strategy. If your immediate goal is to copy the iPhone 5 or to
come up with a response to it, you are doomed to always be
one step behind your competition. Focus on what you’re
doing, not on what others have done.

Make your product inimitable so that you can share


everything you know.

If your company is successful, others will try to copy it. Your


only defense is to make your product inimitable by injecting
it with what is unique about you.

For example, Zappos CEO Tony Hsieh is so obsessed with


customer service that he decided to make it the guiding
ethos of his company. While competing shoe stores can sell
the same sneakers as Zappos, they cannot imitate this utter
devotion to good customer service.

A great way to find your passion is to make a product or


service that you yourself would love to use. For example,
when track coach Bill Bowerman wanted lighter running
shoes for his team, he poured rubber into his family’s waffle
iron, inventing the famous Nike waffle sole.

Usually, people expect great things from products they buy


but are disappointed at the actual performance delivered.
Your product should be the opposite: make it so simple and
easy-to-use that people will love it even more than they
expected and tell their friends about it, too. If you accomplish
this, you can sell your product like a drug dealer: give people
a taste for free, knowing they will happily come back for
more.

Once you have a product that is unique and keeps customers


coming back, you can share everything you know without
giving away any secrets that would create imitators. Just as
great chefs can promote themselves by publishing cookbooks
with their prized recipes, you too can promote your company
by sharing your valuable experiences and specialized
knowledge openly.

Better yet, teach people with how-to guides, courses and


videos! Most companies – especially big ones – are so
secretive that you can gain a real competitive advantage by
actively teaching people about things you’ve learned.

Relish the good sides of being small, but don’t forget you
are running a business.

Many small start-ups long for mass and greater recognition,


but bigger is not always better. Consider elite schools like
Harvard and Cambridge. Do you think they aim to expand
their campuses all over the world, educating hundreds of
thousands of people annually? Unlikely. Instead, they are
comfortable being the size they are, as should you.

For example, having less mass and being off the media radar
allows you to experiment with your business without
potential screw-ups being publicized. Just like Broadway
musicals are first tested in smaller cities before reaching New
York, you too should take advantage of your obscurity in the
beginning to experiment with different ideas and processes.

Being small also allows you to keep your entire team on the
frontline of the business, interacting with customers
firsthand and hearing their requirements and feedback. A
complex hierarchy can muffle that feedback and slow you
down. When everyone is responsible for customer
satisfaction, you can respond to any problems quickly, which
is essential for effective customer service.

Nevertheless, being small to begin with does not mean you


should forget that you’re running a business. Many start-ups
live in a make-believe land where they happily spend
investors’ money without worrying about profitability. Such
companies are not really businesses but merely glorified
hobbies of their founders. If you want to build a successful
business, you should have a clear path to profitability in mind
from the very start.

Less is more – start saying no and keep your product lean.

When chef Gordon Ramsay fixes ailing restaurants in his TV


show, Kitchen Nightmares, he always starts the process the
same way: by cutting out around two thirds of the menu
items.

Similarly, when you run into problems with your product,


consider cutting features from it. If you want to make
something great, you need to chisel away stuff that is merely
good. In fact, embrace your constraints. Just like Ernest
Hemingway wrote Nobel-winning fiction with very sparse
language, you too can make a great product or service with
very few features.

If your competition offers a product with lots of features,


don’t try to one-up them by offering everything they do plus
more. Instead, offer less features, making your product
simpler and easier to use. Add value by deciding what not to
sell. Think about it: great art galleries don’t display every
painting in the world but rather a select few. You too must
cut out the garbage and personally vouch for whatever is left.

Keeping your product or service simple is not easy, though.


As you gain more and more customers, you’ll start getting
more and more requests to develop the product further,
both from users and from within your own team.

Never overreact to these requests by immediately modifying


your product and adding new features as requested. If you
do, your product will rapidly become unrecognizable, and
probably scare away new customers since the changes have
been catered to the wishes of existing ones.

Say no to even the best-sounding ideas at first. If a customer


request is truly important, it will keep coming up so often
that you can’t ignore it.

Don’t emulate big corporations in your marketing and


communications – be honest, personal and nimble.
There’s nothing wrong with having communications that
reflect the true size of your company. Be proud that your
small size lets you communicate frankly, contrary to the
meaningless jargon-filled press releases of big corporations.
For example, don’t talk about how “transparency is a corner
stone of your communications strategy,” when you could just
say you’re honest.

Advertising and active marketing are expensive ways to


connect with customers. Instead, build an audience by
sharing information that they value and willingly come back
for. This way you will get their attention without paying a
dime.

Remember that in a small organization, marketing is


everyone’s responsibility. Every email, phone call, blog post
and social media update constitutes marketing and can
deepen your bond with customers. In fact, why not give
customers a behind-the-scenes view of your company, so
they can get to know you and your employees.

When you do strive for actual press coverage, go for niche


rather than mass media. An article in a well-targeted small
magazine or blog will create much more website traffic and
sales than a story in a well-known newspaper. This also
allows you to approach journalists with personalized calls or
notes rather than with mass press releases.

The bond you form with customers will inevitably endure


some rough weather as well, and being a straightforward
communicator means being frank about your shortcomings
and imperfections too. No one likes companies that try to
sweep problems under the rug. If there’s bad news to be
told, skip the pseudo-apologies in corporate lingo such as
“We apologize for any inconvenience this may have caused
you.” Instead, think about what kind of apology you would
like to hear as a customer.

Create an environment where people manage themselves


and communicate with each other honestly.

If you treat your team like children, they will act accordingly,
and you will need to spend half your time managing them
and making decisions on their behalf. Your team will quickly
turn into non-thinkers and non-doers, and end up costing you
a lot of time and effort while accomplishing very little.

What you need are employees who can manage themselves,


and such individuals only thrive in working environments
where they are given trust, responsibility and autonomy.

One defining characteristic of a good environment is


directness in communication. Avoid abstractions and long-
winded, high-level explanations. Get real, and show your
team exactly what you mean. Don’t sit in meeting rooms
discussing problems but go to the problem sites themselves
to get a grip on what’s wrong.

Criticism should be equally honest. If your team is too large


and unfamiliar with each other, you will find that the
discussion does not flow freely. You need frank, honest
communication within your team so that bad ideas are
criticized when they should be.
Finally, there are certain words you should avoid when
communicating within your team. Consider a situation where
you’re facing a seemingly impossible task, and someone
belittlingly says to you “We can’t survive without this; it
should be easy for you to do.” It doesn’t exactly leave a lot of
room for discussion, does it? Abrasive, value-laden words
like need, must, only and can’t imply judgment about the
realities of someone’s situation and can rapidly obliterate any
hope of a fruitful discussion.

Also, stop using the word “ASAP” entirely when asking


someone for something. It suffers from inflation and merely
makes other, non-ASAP requests seem less urgent.

Don’t over-plan – stay agile with quick and flexible


decisions.

As a small company, one of the key advantages you have


over your larger competitors is your ability to make quick
decisions without getting bogged down in bureaucracy. Start
saying, “Let’s make a decision,” instead of, “Let’s think about
it.” Don’t look for a perfect solution; get to good
enough quickly and keep moving.

Don’t over-analyze or over-plan. Unless you have a crystal


ball, estimating and planning are basically guesswork anyway.
If you start assuming your plans are correct and following
them blindly, you lose your ability to improvise, which is
downright dangerous.

Instead, just wing it. Don’t make decisions far in advance but
rather on the spot. Think about things that affect you this
week, not next year. Small, reversible decisions that work for
the time-being are much easier to make than big, life-
changing ones where you have to worry about long-term
consequences.

Similarly, don’t make wide-ranging estimates like, “This one-


year project will cost us about $1 million.” If you want to
have any semblance of accuracy, chop your estimates into
more manageable bits, like weeks rather than years. The
impact of being wrong will also be far smaller this way.

Finally, when you’re trying to make a decision, don’t be


daunted by what might go wrong. There are always possible
downsides to any decision but you can always deal with them
when they actually happen. (Most never will.)

Productivity doesn’t follow from long hours, but rather


from focused work and quick wins.

Many people equate productivity with working long hours,


when actually the opposite is true. The best employees have
busy lives outside of work so they work hard to leave at five
o’clock. Workaholics who stay late can even hurt the overall
productivity of an organization by making non-workaholics
feel guilty and less motivated.

The way to maintain high productivity at work starts by


stripping away interruptions that break people’s
concentration. Ensure your team has some designated time
during the day or week when there are no interruptions.
The worst kind of interruption, of course, is a meeting. A one-
hour meeting of ten people will in fact cost at least ten hours
of aggregated working time. In some rare cases this may be
warranted, but often meetings lack goals, agendas and any
connection to actual work. In short, they only generate talk,
not action.

Another enemy of productivity is perfectionism. Getting


bogged down in complex problems and trying to devise
perfect solutions for them can consume weeks’ worth of
effort, when in fact a quick fix would often be fine. To really
be productive, go for solutions where you achieve the
maximum effectiveness with minimal effort. “Good enough”
is often better than “perfect.”

One way to encourage this non-perfectionism is to chop large


projects and tasks into small chunks and to-do lists. This not
only makes complex endeavors more manageable but also
provides more causes to celebrate along the way as minor
milestones are reached. Such quick wins help sustain
momentum and motivation.

Hire people only when absolutely necessary, and forget


about resumes – trust your instincts.

Some companies are addicted to hiring people. They find


someone great and decide to hire her, even without a
specific job or title in mind. This is where trouble starts.

When you hire someone, it should only be to solve an acute


problem that is causing your company immense pain.
Keeping your team lean for as long as possible will force you
to adopt time-saving practices and an efficiency ethos,
whereas hiring unnecessary people, no matter how great
they are, will just lead to frustration and the creation of
unimportant, artificial work to keep them busy.

You might worry about missing out on “once-in-a-lifetime”


hires, which might be a legitimate concern if your hiring pool
is small. But if you are willing to hire employees from across
the globe, you’ll always be able to find more great people.
Almost anyone can work online these days, so the
geographical location of your employees is basically
irrelevant.

When you do end up hiring someone, ignore the established


recruitment doctrine of analyzing resumes, grade point
averages and years of experience. Instead, trust your
instincts and concentrate on what they have actually learned
to do thanks to their past experience.

Finally, test-drive your employees. No amount of


interviewing will show you how a person will actually
perform on the job, but giving them a mini-project to work
on will let you judge them by their actions, rather than their
words. BMW even went as far as to build a fake assembly line
where recruiters could watch prospective employees in
action. To better facilitate this on-the-job testing, always hire
people to do jobs that you yourself have done at some point
or another. This will also help you to manage them later on.
Real Artists Don’t Starve
Timeless Strategies for Thriving in the New
Creative Age
Thrive, don’t starve, as an artist.

There’s something gripping about the image of the poor


poet, leading a bohemian life and surviving on the bare
minimum. But even though the idea of the so-called starving
artist might seem romantic, the reality of having to fight to
make ends meet is a tough grind.

By contrast, being able to live off and even thrive from one’s
art is a dream that most aspiring creatives share, and these
blinks will explore how this lofty dream can become a reality.

These blinks will outline – and debunk – some of the popular


myths about what makes a true artist, and will explain how
any artist can prosper. From the fallacy about the natural-
born genius to the misconception that artists have to
relentlessly promote themselves, you’ll learn how to
separate genuine, helpful advice from damaging cliches in
the artistic world.

Anyone can be an artist, and real artists know how to steal.


For ages, we’ve been holding on to popular misconceptions
about what it means to be a “real” artist.

In the media and in our minds, true artists are depicted as


starving, naturally talented and deeply original.
Unfortunately, these types of ideas can scare some people
away from ever entering the arts and fulfilling their creative
potential.

So let’s start with two of the biggest fallacies about artists,


namely that they’re born with natural talent, and that their
artwork must be completely original.

First off, you don’t need to be born with natural talent to


become an artist; what you need to do is put in hard work
and show persistence and determination. With these tools in
hand, even a corporate professional can become an artist.
Just consider the case of lawyer turned best-selling author,
John Grisham.

He began by finding just 30 to 60 minutes each day to write


one page of his book. Three years later he had finished his
first novel, A Time to Kill. And even though 40 different
publishers would come to reject it, he persisted and got to
work on his second book, The Firm.

Eventually, his perseverance paid off, and both books


became bestsellers. They did so well that Grisham was able
to quit his day job and devote all of his time to writing. His
books even launched a new literary genre, the legal thriller.
While you do need to be dedicated to your craft, you don’t
need to reinvent its form or be wholly original to succeed. On
the contrary, what you need to know is how to steal.

Like Picasso said, “Good artists copy, great artists steal.”

This doesn’t mean being lazy or mimicking someone else’s


work; there’s a code of conduct among artists that allows for
taking something that’s been done and expanding upon it or
pushing it further.

A great example is The Muppets. The show’s creator, Jim


Henson, took the puppetry of the puppeteer Burr Tillstrom,
along with the humor and jokes of other artists, like the
comedian Ernie Kovacs, and combined them to create
something new and exciting.

Next, let’s look into what makes an artist thrive.

Thriving artists are both humble and stubborn.

While the image we have of the “starving artist” is a fallacy,


this doesn’t mean that being an artist is easy.

There’s bound to be moments of rejection, and the best way


to get through these tough times is to put your stubborn side
to good use.

Luckily, if you feel a calling toward the arts, you probably


have a stubborn side – a part of you that refuses to give up or
play by someone else’s rules. Psychologist Paul Torrance
believes that most creative types are misfits and rule
breakers who had trouble fitting in at school.
So, while you should expect to hit difficult times along the
way, you can overcome these hurdles by remaining true to
your stubborn self.

When F. Scott Fitzgerald was trying to launch his writing


career, his apartment was littered with 122 rejection letters.
Yet Fitzgerald kept at it and didn’t stop until he got his first
two books published, which eventually brought him critical
acclaim and financial reward.

Fitzgerald would later experience a major drop in his


confidence and self-image, however, particularly when critics
turned on him and panned his third novel, The Great Gatsby.
Eventually, alcoholism and a heart attack would lead to his
death at just 44 years of age.

His story is especially tragic since, three years after his


death, The Great Gatsby would come to be reevaluated as a
modern classic, once again demonstrating the importance of
persistence.

Another much-needed quality is humbleness, which is


necessary for an aspiring artist to learn what they need
through a fruitful apprenticeship.

One of the reasons the starving artist myth has prevailed is


because artists who think they know it all have ended up
broke.

However, while the starving artist thinks they already have all
the talent it takes, the thriving artist expands their skill set by
seeking an apprenticeship under a true master – as
Michelangelo did when he studied under the renowned
Renaissance painter Domenico Ghirlandaio.

For any such apprenticeship to work, you must show


humbleness and a willingness to be taught; no mentor wants
to teach someone who thinks there’s nothing left for them to
learn.

Artists often succeed by joining a scene and cultivating


collaborators and patrons.

Another side to the starving artist myth is that they live


isolated lives and work in solitude, only to emerge when they
complete their masterpiece.

It’s a romantic notion, but not an accurate one, since genius


doesn’t benefit from existing in a vacuum.

What is far more likely, and beneficial, is for artists to create


vibrant communities and nurturing environments where they
can support one another.

We’ve seen this throughout the years in many contexts, such


as in post-WWI Paris, when Ezra Pound, Ernest Hemingway
and James Joyce, among many others, lived and worked in
the same neighborhood.

More recently, in areas like Silicon Valley, creatives in the


tech field have come together to invent amazing software
that one lonely programmer in a basement would probably
never have come up with.
To cultivate collaborators, you have to know where to look.
So study your field to become familiar with the best artists
and find out what they do well.

We see this a lot in today’s hip-hop music scene. While some


have been critical of artists like Beyoncé and Kanye West
because their albums have had dozens of writers
collaborating on them, this isn’t a sign of inferiority; rather,
it’s a sign of visionaries who can bring together great talents
to create a powerful work of art.

Similarly, Michelangelo worked on projects that were bigger


than he could handle himself, so he worked like an engineer
and a foreman, directing people to complete individual tasks.

Michelangelo also knew the value of a patron, which a


thriving artist must also seek out.

There isn’t one kind of patron; they could be a critic or


tastemaker, or anyone who can help move the artist’s career
forward.

Famously, Elvis Presley was catapulted to stardom with the


help of Sam Phillips, the owner of Sun Studios in Memphis,
Tennessee. A 19-year-old Elvis was able to calm his nerves in
front of Phillips long enough to belt out one perfect tune,
“That’s All Right Mama,” and Phillips made sure it was played
on the radio that very night.

Two years later, every American teenager knew Elvis’s name.

The thriving artist shares and interacts with their audience.


Finding an audience is crucial to being a thriving artist and
not a starving one. But, luckily, there is more opportunity
than ever for an up-and-coming artist to get noticed.

While a lot of artists despise the idea of marketing and


advertising and find it all rather sleazy, these days there are
ways to share your art and build a following in a more natural
and organic way.

One of the most common ways is through a regularly


updated blog that offers a peek into your creative process.

As an example, let’s look at the trajectory of Stephanie


Halligan, an artist who always dreamed of being an animator.
Despite these dreams, Halligan was $34,579 in debt after
college, so she took a job working as a financial consultant
for low-income families.

This led to Halligan starting a blog called the Empowered


Dollar in 2012, which was a way for her to pass on the best
and most effective tips she’d learned. But she still felt an
artist’s calling, so after two years of the blog growing its
audience, she began to add her own cartoons to accompany
her new posts.

Suddenly, for the first time in years, Halligan felt alive – and
this feeling grew as she began to sell prints of her cartoons to
her readers. Soon, she was starting a new art blog and taking
on clients, such as banks and universities, who liked her
motivational cartoons.
But an artist can use the internet for more than just sharing
their art with people.

Many artists today find ways of interacting directly with their


audience online. New musicians can test out new songs and
release demos, while artists can share works in progress in a
variety of different ways, such as through the website
Bandcamp.

This is essentially like practicing in public, and it’s the best


way to not only build an audience, but to get better as an
artist as well.

You can practice guitar in your bedroom for years and only
improve so much; once you start playing in front of an
audience, you’ll start playing better than you have before.
This is the simple rule of the audience.

Avoid working for free and fight to keep ownership of your


work.

One of the worst habits an artist can get into is working for
free. This often happens when someone tries to tell you that
a project will be “good exposure” or a “valuable
opportunity.” But much like the unpaid internship, it’s often
just a way for someone to exploit your talents and take
advantage of you.

To be a thriving rather than a starving artist, you need to


adopt a mindset in which you tell yourself that you are an
artist, and that your work is worth money.
Placing value on your creative work is also a way of valuing
the entire artistic profession, which is something
Michelangelo fought for. He insisted that artistry should be
considered a noble profession and that artists should be
called by their last names, which was customary for only the
aristocracy at the time.

More recently, the novelist Steven Pressfield has stated that


you become an artist once you start saying that you’re an
artist. So, you can start printing those business cards that say
you’re a painter, writer or graphic artist – and make sure you
charge accordingly.

Another thing to be aware of if you want to thrive as an artist


is ownership.

Countless artists have signed deals when they were just


getting started that gave up ownership of their art for a lump
sum of money – and they virtually always live to regret it.

Luckily, The Muppets’ creator Jim Henson didn’t make this


mistake. When he was just starting out, the Purina dog food
company offered him $10,000 for the rights to his Rowlf the
Dog puppet. His agent thought it was a great deal, but
Henson wisely turned it down. If he hadn’t, he wouldn’t have
been able to use Rowlf as a beloved character when he
launched his television show The Muppets years later.

So, the bottom line is, if you want others to respect you, you
have to take ownership and always charge money. This way,
you can take part in the New Renaissance, which we’ll have a
look at in the last blink.
The New Renaissance is here, with artists that have a
diverse set of skills and don’t starve for their art.

Often, someone who dabbles in a variety of vocations is seen


as being less talented than someone who concentrates on
just one skill.

But it wasn’t this way during the Renaissance. In fact, the


term “Renaissance man” described a well-rounded
craftsman, someone who could work in many different
trades.

This is the kind of person we’re starting to see more of today


– a kind of New Renaissance artist.

Since there have never been more ways to share the art we
create and get our hands on the tools we need to make art,
we are seeing the dawn of a New Renaissance.

Much like during the original Renaissance, today’s artists are


those who are restless in their pursuit of more than just one
craft, as this makes both life and work a richer experience.

Mark Frauenfelder is one such artist. He’s a mechanical


engineer by trade who cofounded the website Boing Boing,
which began as a zine for creative-minded people in the late
1980s. Since then, it has become a popular website, and
Frauenfelder has gone on to become an associate editor
for Wired magazine and the publisher of a book on magic
tricks. He is also an artist in his own right, with work
displayed at exhibitions across the United States.
Frauenfelder knows that people have traditionally looked
down on those who don’t fit neatly into one category, but
he’s found success by following his artistic inspirations,
wherever they may take him.

For Frauenfelder, this mentality helped ensure that he never


became a starving artist. He has always seen the goal of
making money as a way to become your own patron; this
way, you can use the money you earn to make more art and
keep the cycle going.

So, get out of the starving artist’s mind-set and enter the
psyche of a thriving artist by studying and stealing from the
great artists. Then, find an apprenticeship to learn from a
master, and if you venture out on your own, be persistent
until you find your audience.

And finally, always remember: never work for free.


Rejection Proof
How I Beat Fear and Became Invincible
Through 100 Days of Rejection
Learn to overcome your fear of rejection and become more
successful.

If you’ve ever been stood up by a date or left off an invite list,


you know how painful rejection can be. One thing is certain,
however: you’re not the only person who’s ever been
rejected.

Rejection in business or in life is common. Whether you’re


passed up at a dance audition, turned down for the baseball
team or ignored by potential investors, it’s all too easy to let
rejection drain your spirits and make you give up.

These blinks will show that letting rejection rule you is a big
mistake. If you look at rejection from a different perspective,
you’ll discover that there’s a lot to learn from it. And it isn't
just about learning how to be more successful; it’s about
growing as a human being.

To make your dreams come true, you have to face many


obstacles, including rejection.

Picture this scenario. You’ve a great, six-figure job at a


Fortune 500 company, a wonderful spouse and own a 3,700-
square-foot house.

Sounds pretty fantastic, right?


This was the author’s life, yet he was still unhappy because
he was too scared to realize his true calling: to become a
world-class entrepreneur.

It’s not so hard to get yet another job or promotion, but not
pursuing your lifelong dream is a heavy burden to bear.

The author’s wife realized that he was unhappy, and advised


him to take six months off to set up his dream company and
work as hard as he could to make it a success. If by the end of
the period the company still had no investors, he could
always go back to his old career.

This deadline approach is effective, as it minimizes risk and


forces you to set fixed goals and time limits. After a trial
period, you can either keep going, or call it off.

To better your chances of success, though, you need another


trick up your sleeve. You have to find your own way of
handling rejection.

The author’s vision was to create a personal development


app that helped people achieve their goals. As a newbie
entrepreneur, the author assembled a team of skilled
engineers to build the gamification app of which he had
dreamed.

But still, he needed an investor to get his company off the


ground. He and his team rehearsed their sales pitch for
weeks, yet in the end, the investor unfortunately said “no.”

The author found he wasn’t very good at dealing with


rejection. So to deal with his fear head-on, he resolved to
embark on a 100-day rejection journey, blogging and
recording video to chronicle his experience.

Though the author’s journey was unorthodox, the lessons he


learned during his challenge are certainly applicable to
anyone who wants to better understand and cope with
rejection.

To deal with rejection, you have to understand why we as


humans fear it.

To begin to deal with rejection, you have to first understand


the psychology behind the phenomenon. For example, why is
rejection still a social taboo? And why does it feel so painful?

Our fear of rejection is rooted in our biology and reinforced


by our instinct to stay alive.

When you feel physical pain, your brain releases opioids –


the body’s natural painkillers – to help you cope. In a recent
experiment, researchers at the University of Michigan
Medical School wanted to see if the brain would release
opioids if the stimulus was instead a rejection.

Interestingly, the researchers discovered that the brains of


people who experienced a rejection indeed released opioids,
just as they would had the subject suffered
actual physical trauma.

It’s probably no surprise that being rejected sits on the top-


ten list of people’s greatest fears. But why is that? The
distress associated with rejection actually has an
evolutionary foundation.
Fear has always been necessary for the survival of the
species. Being ostracized by our peers or protectors would
leave us to face dangerous animals or environments alone,
potentially leading to injury or death. No wonder we’re
terrified of rejection!

Yet to truly understand rejection, it’s also necessary to


distinguish it from failure.

While we might see failure as unfortunate yet


understandable due to factors outside our control, rejection
instead feels personal, since it’s another person who is saying
“no,” and frequently doing so face-to-face.

The nature of rejection involves an unequal exchange,


between the rejector and the rejected. And of course it’s the
rejected person who takes the biggest hit. Unlike failure, it’s
hard to blame rejection on external factors, such as the
market or the economy.

It’s true that fear might have saved our ancestors’ skins, but
today it’s more handicap than precaution. So to understand
the positive aspects of rejection, we need to reframe our
concept of it.

You have to learn to rethink what rejection means. It’s not a


judgment on who you are.

Think of all the amazing, potentially life-changing ideas and


opportunities that you didn’t act on for fear of rejection.
To overcome your fears, you have to see rejection not as an
objective final verdict about you but as the subjective opinion
of others.

You must realize that different people will respond to the


same request in many different ways. It’s not the whole
universe evaluating your skills and abilities, but a diverse
array of people with varied backgrounds, personalities and
ambitions.

Rejection is just one of many human interactions in which at


least two parties are involved and because of this, every
interaction is going to be unique and will often lead to a
different outcome.

As part of his rejection journey, the author decided to


explore rejection in the context of applying for a job.

He decided to try to find a job for one day by personally


introducing himself to different companies. In his first two
attempts, he was rejected by office managers who brusquely
informed him that he couldn’t just drop by and apply for a
job.

In his third attempt, however, the author met a friendly


manager who offered him a job at her technology firm on the
spot.

So you see, facing rejection is a matter of simply trying again,


even if it takes several attempts. In fact, you should bear in
mind that rejection always has a number.
Though it seems odd at first, it’s possible to get a “yes” just
by talking to enough people. Because people’s opinions vary,
eventually you are bound to find a person who can fulfill your
request.

Take best-selling author J.K. Rowling, for instance. In 1995,


she submitted her first Harry Potter manuscript to 12 British
publishers and all 12 rejected it. Yet, when Rowling’s work
was eventually picked up by publisher Bloomsbury, the book
went on to sell over 100 million copies.

Rejection, then, is subjective. Avoid treating other people’s


opinions of you as the final word on your character and what
you have to offer!

There is a lot to learn from rejection. Don’t run away when


people say no; learn why, and improve.

Sometimes after a rejection, we want the ground to swallow


us up. At the very least, it’s tempting to make a swift exit
from the scene.

But wait! There is value in resisting the urge to run. Now is


your chance to find out the reason behind the rejection.

It’s a good idea to stick around and ask why you were turned
down. This makes a rejection easier to deal with, and helps
you formulate a more successful strategy next time.

This is similar to “retreat or rout” tactics in military warfare.


A retreat is a withdrawal to regroup, and is usually
temporary. A rout, on the other hand, is a disordered and
confused running away, a breakdown of discipline and
morale.

Therefore, an orderly retreat is far more desirable. Retreating


means asking questions about a rejection to help you
regroup and adapt your approach, according to the answers
you receive.

In addition to asking questions and tweaking your approach,


frequently changing the audience, environment and
circumstances for your pitch to will increase your chances of
getting a “yes.”

This effective approach involves posing your request to


different people, rather than trying to repeatedly hammer
home one idea to the same person.

Take the case of basketball star Stephon Marbury. Getting to


the top wasn’t easy, and he had lots of trouble along the
way. In 2007, Marbury sank into a deep depression when his
father died and his shoe company Starbury failed.

After switching teams and arguing frequently with coaches


and team members, he was essentially forced out of the
professional league. But Marbury found a new calling, and
took his career to China.

In the new, different environment of Beijing, Marbury was an


instant success, so much so that he became a local legend
and is now even the subject of a theater musical.

To make people accept your pitch and make rejection less


likely, you have to set the stage for “yes.”
Before getting out there and gathering as many “yes”
responses as you possibly can, you first need to learn the
fundamentals of decision making.

First, being authentic and disclosing the reason behind your


request will greatly increase the chance of receiving a “yes.”

In 1978, Harvard psychologist Ellen Langer carried out a study


that proved the effectiveness of providing a reason behind a
request. In her experiment, she approached people waiting
in line to use a copying machine and asked if she could skip
the line to make her copies first.

She wanted to see if her reasons and the way she phrased
the request had an immediate effect on the person’s
response. She found that it did. If Langer offered an
explanation, even a trivial one, to jump the line, the
percentage of people willing to let her do so rose
significantly.

As well as being open about the motivation behind your


request, acknowledging other people’s doubts will also,
surprisingly, put you in their favor.

In a 2009 survey of consumer taste preferences, Domino’s


Pizza ranked at the bottom. Domino’s knew it desperately
had to change, so the company completely overhauled its
menu and pizza recipes.

When it came to the advertising campaign to launch its new


image, however, Domino’s was bold and openly slammed the
former quality of its pizzas, as based on actual customer
complaints.

In addition to understanding other’s doubts, be sure to pitch


to the right audience. Failing to do this can yield
underwhelming results.

One social experiment conducted by The Washington


Post and violinist Joshua Bell aimed to find out how many
people would recognize the musical prowess of a world-class
musician if he played incognito in a New York subway station.

Guess how many people stopped to listen to Bell’s 45-minute


performance? A grand total of six.

Talent and brilliance don’t matter if you’re targeting the


wrong audience in the wrong setting. Rejection is based on a
host of factors that aren’t necessarily about you.

One part of overcoming your fear of rejection is to


appreciate the positive aspects of “no.”

Although hurt feelings might be inevitable, a rejection


doesn’t have to be a completely negative experience. Each
rejection has an upside, if you’re willing to look for it!

You can use rejection to motivate and increase your ability to


work on even greater goals.

Take NBA basketball legend Michael Jordan. When Jordan


was inducted to the Basketball Hall of Fame in 2009, most
people expected a run-of-the-mill acceptance speech.
But Jordan’s talk was everything but ordinary. Jordan
itemized every personal rejection he had ever received in his
career, and what it had done to motivate him. He recounted
everything from not being selected for varsity by his high
school coach to journalists who said he’d never see the kind
of success as players like Magic Johnson.

Jordan concluded that each rejection had actually fed him


and his goal of becoming the top-ranking player in U.S.
professional basketball.

In addition to being highly motivating, rejection might just be


the mark of a radically creative idea, especially when the
rejection is heavily influenced by a “herd mentality” or
conventional thinking.

Throughout history, we have seen countless examples of


rejection signifying that someone is well ahead of the curve
in terms of discovery and innovation.

Galileo is a remarkable example of this. In 1610, Galileo


published his work Sidereus Nuncius (Starry Messenger),
offering his heliocentric theory in which the sun sat in the
center of our known universe.

Galileo's discoveries were vehemently opposed by the


Catholic Church, and Inquisition authorities banned the idea
of heliocentrism, ordering Galileo to refrain from defending
it.

But as we know now, his ideas turned out to be not only


correct but also revolutionary.
Experiencing rejection will help you develop empathy for
others and clarify your goals.

People face rejection everywhere and every day, from


amateur entrepreneurs being shown the door to beggars in
the street addressing passers by who won’t even look at
them.

So what can we learn from daily rejection? Rejection and


suffering can be viewed as tools to better understanding
people.

As part of his rejection challenge, the author spent time with


beggars and panhandlers and experienced firsthand what it
felt like to be rejected constantly and often cruelly. It was the
most taxing part of his journey, but through it, he became
more empathetic.

One of the people the author spent time with, a man named
Frank, related an incredible story. He had served in Vietnam
until he suffered an injury, which prevented him from
fighting further.

Frank waited a long time for the government to upgrade his


veteran disability benefits so that he could cover more than
just the costs of his food and shelter. The author decided to
share Frank’s ordeal in his book to help him get the money
he needed to make a better living.

Rejection doesn’t just foster empathy; it can also teach you


how much your dream really means to you.
Before comedian Louis C.K. became famous, he struggled for
eight years performing stand-up comedy in an obscure
Boston nightclub.

One night, the director of Saturday Night Live was in town to


scout for new talent. He selected every comic who
auditioned, except Louis C.K.

Although the rejection stung, Louis C.K. saw his failed


audition as an opportunity to really think about whether he
wanted to pursue a career in comedy. He eventually got his
break and was hired by late-night host Conan O’Brien as a
writer for the show.

We define ourselves through our reactions to our


experiences. Using rejection wisely, we can understand
others better and can choose to continue our mission or find
a new calling.

Greater success means staying true to who you are and


being detached from the outcome.

Overcoming rejection encourages you to take more risks in


life. But it’s not just about external outcomes. You have to
look inside and value yourself before you seek approval from
others.

The trouble is, we’re not brought up to think like this. As


children, we are taught that we have to fulfill other people’s
wishes, especially the wishes of our parents.
But this incessant approval-seeking bleeds into other areas of
our life too, and we end up wanting everyone to accept us, in
our social circles and in business.

Yet constant approval-seeking leads us astray from living


fulfilled lives and staying true to who we really are.

Your goal should be to feel comfortable in your own skin.


That is, acceptance by others is not the purpose of your
rejection journey.

Once you value yourself, enjoying long-term success also


means being able to detach yourself from the outcome.

Concentrating on factors within your control, such as your


effort and behavior, will promote greater success in the long
term. The benefit of focusing on controllable variables means
you won’t waste your energy on fretting about the unknown
future.

Take John Wooden, the legendary UCLA basketball coach


who won ten collegiate championships over 11 years. He
never rallied his team by ranting about winning or losing. All
he cared about was the effort his players put into the game.

Wooden was smart, as focusing on players giving their all and


not agonizing over results led the coach to groundbreaking
success with his team.
Remote
Office Not Required
Learn why you no longer have to work in an office to be
productive.

When you think about work, you probably think of an office.


A worker behind every desk, typing away on a computer.
Afternoon meetings in the conference room to discuss recent
projects. Gossip at the water cooler; take-away lunch in a
paper bag.

Yet modern technology has completely changed the way we


think of work. New ways of sharing information mean that
sitting in an office from 9 to 5 is no longer necessary to get
things done.

More and more, company employees are working outside of


a main office, and employers are also sharing in the benefits
of this new type of working arrangement.

But as more companies begin to offer more flexibility to their


workers, both employees and managers have discovered that
working remotely has its own complexities. Yet with the right
attitude and a few simple ground rules, companies can
benefit greatly from remote work.
Allowing employees to work remotely is a great way for
companies to keep the best and brightest.

Recent technological developments have cut the strings of


workers tied to their cubicles in an office, day in and day out.
Employees can now choose remote work, or work done away
from an office.

Remote work is immensely popular with both employees and


their employers. For employers, hiring remote workers gives
them access to a larger talent pool, helping them to find the
best person for a certain job.

Even if you don’t live in a major metropolitan area, you can


still access world-class talent if you consider hiring people
who live elsewhere, allowing them to work from home.

Technology has made it easier to work with someone on the


other side of the world. For example, a basic (and free) Skype
account allows you to videoconference with co-workers,
regardless of where they are.

But what about the employees you already have? Should


they work remotely, too?

Because people often switch jobs for personal reasons,


offering your best employees the option to work remotely
can help keep them on your team.

Even workaholics have a life outside their job – the needs of


family, friends or other interests outside work sometimes
require an employee to move to a new location.
Rather than simply firing workers who need to move,
employers can instead offer the option to work remotely.
After all, it’s better to hold on to a good, trained employee
than to have to manage a new employee who needs
extensive training and time to get up to speed.

Media production company Jellyvision considered remote


work options when a skilled employee needed to move with
his spouse to another state. The company didn’t want to lose
him, so they offered the employee a remote position, and
since have opened up the option to all employees.

Remote work gives employees the freedom to be


productive and have a life outside the office.

Remote work isn’t just good for employers, but can also
improve employees’ quality of life.

Remote work offers an employee the flexibility to complete


daily chores while still being productive. As workers can
organize their time the way they want, they can make sure
that they have time for work as well as for other things, such
as housework or family time.

This sort of situation is perfect for employees who require a


greater degree of flexibility in their day.

For example, if you work in an office, your day is dictated by


the office schedule, and cutting out for two hours to pick up
your children requires permission, cancelling meetings, and
whatnot. Yet if you worked remotely, you could easily stop
what you’re doing and quickly take care of things.
Moreover, not everyone works efficiently at the same time.
Some people are energetic in the morning, while others
prefer working in the late afternoon or even the evening.
Unconstrained by traditional working hours, remote work
allows you to work whenever you’re most productive.

This is especially important for people involved in creative


projects. It is almost impossible to force inspiration just
because the “official” work day has begun! If you’re trying to
develop a cure for cancer, you can’t guarantee that your
muse will be ready to go exactly between 9 a.m. and 5 p.m.

Finally, the flexibility of remote work means that you can


start working toward your dream right away. Many people
put their dreams on hold until retirement, as the daily grind –
a long commute, time at the office – doesn’t allow enough
time to pursue them.

Yet with remote work, you can find more time without
having to choose one or the other – your hobby or your
career.

For example, if your dream is to travel the world, you don’t


have to wait – as long as you pack a laptop you can still work
full-time and finance your next great adventure.

Working remotely improves the quality of work done by


eliminating common office distractions.

Employers might be wary to introduce remote work as they


might think that allowing employees to work outside the
office would encourage them to be lazy.
Think again! In fact, working in an office can be far less
productive than working remotely.

When you work in an office, you are surrounded by other


people. Distractions are rife – a coffee break here, a little
chat there, and soon enough half of your work day is already
squandered.

Additionally, much of your work is tied to the work of others.


This can lead to you being peppered with and distracted by
questions that probably could wait, but that your co-workers
nonetheless harass you with, as you’re sitting right there
– and “it will only take a second!”

Of course, if you work remotely from home or at a coffee


shop there are bound to be interruptions and distractions as
well. The difference is that you can better control such
disruptions.

You can ignore emails that aren’t urgent until you finish your
own work; you’re protected from pestering co-workers; and
you can tell your spouse that you’re unreachable until noon.

In this way, remote work can allow you to better focus than
you would if working in an office.

In addition, remote work helps employers see through the


noise of unimportant details of the work day to the true
quality of an employee’s work.

Many managers judge the value of an employee based on


secondary factors, such as how often a worker takes breaks,
how often he is late, or how nice they are to other
colleagues, and so on.

If an employee works remotely, an employer can evaluate


that employee solely based on the actual quality of his work.
Think about it: What does it matter if someone starts their
work day half an hour later, if the work they submit on time
is impeccable?

“Face time” doesn’t equal productivity; neither does desk


time. Give remote work a chance!

We’ve seen the benefits that remote work can offer. But if
working remotely is so great for both employees and
employers, why do so many companies still resist it?

One frequent argument against remote work is that having


employees in many different places makes it more difficult to
build a company culture. However, this perspective confuses
“company culture” with “team building.”

Company culture isn’t about ensuring that your workers have


the same lifestyle and lunch hour; it’s about how your
company’s values are reflected through your employees.

Things like a positive attitude toward customer needs and


long-term productivity goals are what counts in building a
lasting company culture. Regular face-to-face meetings
between colleagues aren’t necessary, however, to
understand and implement that culture.

Another reason that companies resist remote work is


because they believe that innovation only happens when
people collaborate face-to-face. Even if this is true,
companies still struggle to implement ideas that
have already been developed through such face-to-face
meetings.

If you can’t implement each day’s new idea, there’s no need


for employees to meet every day!

Furthermore, many managers think that a body in a chair in


an office equals productivity. In other words, if you’re not at
the office, you’re not being productive. However, a manager
doesn’t have more control over an employee just because
she’s sitting across the hall. If anything, a manager is simply
fooling himself into thinking he has control.

Consider this: Some 30 percent of the internet bandwidth at


the headquarters for J.C. Penney is used to watch YouTube
videos. Is that productive? Not in the least.

Many companies reject remote work offhand. These


companies lazily contend that, while remote work might be
fine for others, it just wouldn’t work for their organization.

However, companies of all sizes from all industries have


successfully introduced remote work, including some
organizations you might think too traditional or too big to
change – AT&T, Aetna, Intel and even the U.S. government!

Simply saying no to remote work without giving it a chance is


foolish.
So now you’re convinced, and want to give remote work a try
at your company. The following blinks deal with how to make
this transition.

Test the waters and take it slow to see whether remote


work really works for your company.

Some companies believe that they are too invested in office


work to make a successful shift to remote work.

However, it doesn’t matter whether you manage employees


at a start-up or at a multimillion-dollar established
corporation: you can always introduce remote work into your
normal work flow.

“Going remote” simply means that your employees aren’t


chained daily to their desks at the company office.
It doesn’t mean, however, they can’t be there at all.

Working remotely isn’t an all-or-nothing commitment. You


might first test the waters by offering a few employees the
opportunity to work remotely for a few days per week, for
example.

This way, you can see for yourself whether remote work is a
good option for your company and can get an idea of what
you’ll need to pay particular attention to, before allowing
more employees to work remotely for a longer period of
time.

But whatever you do, don’t jump to make a decision. If you


want to introduce remote work, don’t base your final
judgment on one single employee who has worked at home
for just one week.

Instead, have an entire team work remotely for a few days a


week over a couple of months to get a better sense of
whether the concept works for everyone, you and your
employees.

Interestingly, you probably use remote work already without


even thinking about it. It’s quite common for companies to
outsource certain tasks to third parties, such as lawyers or
accountants, advertising agencies, and so on. This is actually
much riskier than allowing employees to work from home!

As many companies already entrust work to professionals


outside the company, it shouldn’t be so hard to imagine
allowing your own employees to work outside company
headquarters.

Make sure that effective collaboration is nurtured between


employees and with clients.

Most work projects involve some sort of collaboration.


Designers need to talk to web programmers, project
managers reach out to clients. So how do you make sure
employees are collaborating effectively while working
remotely?

One way or another, you’ll have to ensure that your teams


can communicate with each other. These lines of
communication don’t need to be open around the clock, but
there must be at least some effective and consistent flow of
information between remote workers and the home office.

Make sure that your team members can work simultaneously


– wherever they may be in the world – at least some portion
of the time, so members can discuss urgent matters
together.

At 37signals, the authors required a four-hour overlap


between employees working on the same project. This way,
each employee had a half-day to work however he or she
wanted, but also had at least four hours to discuss topics of
concern to the whole team.

You can also make collaboration easier by making company


information, aside from company secrets, open and easily
accessible online or in some shared space. One way that
37signals successfully does this is by creating a shared
calendar, so that everyone knows who’s available and when.

Importantly, you and your employees will have to be


available for clients, who might be uneasy about dealing with
remote workers. It’s understandable: building trust is just
that much more difficult when a client can’t shake your hand
or come visit an office to see your progress in person.

You should then be upfront and clear about your remote


working system from the start. Be sure to be very attentive
to your clients and give them plenty of opportunities to
contribute to projects wherever they may be in the world!
This way, they’ll be able to see the fruits of their investment
with their own eyes.

Don’t forget there’s a person behind that email address;


personal relationships need to be nurtured.

Colleagues can turn into close friends or at least good


acquaintances as people work together over time. But how
does this work if employees never see each other in person?

It’s a fact that no one can work 24/7 without having some
sort of social interaction, and remote workers especially so.
We all need to unwind from time to time, and it’s ideal when
employees can do so with other colleagues to build and
maintain a sense of team spirit.

Of course, remote workers can just go for a walk if they’re


feeling stressed. Nonetheless, it’s important for workers to
get to know each other on a more personal level.

To do this, 37signals created an online chat room for remote


employees where they could spend breaks, just as an in-
office team would in the coffee room or lunch room.

Furthermore, remote workers and their employers need to


be sensitive to how remote work can affect personal
relationships. For instance, when you can’t see the other
person’s smile or body language across the table, it’s easy to
misinterpret just their words. From this, negative
relationships can develop.

Remote workers thus must be extra careful about the way


they communicate with each other. Managers too must pay
close attention to employees’ communications and
encourage a friendly atmosphere.

Finally, you have to recognize that technology simply isn’t a


perfect substitute for real-life interactions. You’ll have to
make sure there’s some socializing in the “real world,” too.

While there are countless tools that make virtual


collaboration possible, people still need to connect an online
name with a face at some point. It doesn’t have to happen
every day or even every month, but it does need to happen
eventually to build trusting, loyal relationships.

37signals does this by inviting the entire company to meet


twice a year, even when there is no particular project to
discuss. By doing so, employees feel more connected, and
the company as a whole is better united.

Some remote workers can get caught in the trap of working


too much, and then burn out.

Because of the flexibility inherent to remote work, the work


day looks a lot different for remote workers. So remember to
keep their needs in mind.

For starters, remote workers run the risk of becoming lost in


their work. While some people believe that these employees
don’t do as much work as office employees, in fact, there is a
real danger that remote workers actually do too much.

Because they aren’t bound to normal office hours, remote


workers might feel tempted to do a little extra here and
there, and because of this, can eventually burn out.
Be extra careful not to encourage this kind of behavior. After
all, you can’t see burnout symptoms in front of you as you
would if your employee was working in the office with you.

To help avoid burnout, you might consider offering remote


workers an extra day off between May and October, so that
they can enjoy the weather and not be tempted to work too
much.

After all, you want your employees to be happy and


productive; to ensure this, you don’t want them spending all
day in their home office. Working out, meeting new people
and other leisure activities might fall by the wayside if an
employee lacks the social contacts that come with working in
an office.

Managers, therefore, have the responsibility to encourage


remote employees to live a healthy and diverse lifestyle. For
example, remote employees at 37signals receive help in
paying for health club memberships as well as get extra
money to buy fresh fruits and vegetables for healthier meals.

Employees are also supported by the company in their


pursuit of hobbies outside work, as company holiday gifts
help bankroll travel, as one example.

Finally, if remote workers aren’t a majority of your


workforce, they can easily start feeling like “second-class
workers,” as they aren’t part of everyday office dynamics. Be
sure to ask them what their needs are to make them feel
included. Or, ideally, have a manager do some remote work
as well to see how life feels in a remote worker’s shoes.
Rocket
Eight Lessons to Secure Infinite Growth
Fire your company to the stars.

For most companies, the road to success is paved with hard


work over the course of years and years, taking one small
step at a time. But then there are some companies – rocket
companies – that take off unexpectedly to achieve massive
success in a way that seems to defy all logic and
expectations.

So what’s their secret?

Well, at the heart of many of these companies’ success is


their relationship with their customers; you should never
underestimate the power of an engaged, loyal customer to
spread the gospel of your brand.

And while this is a core aspect of many companies’ overall


strategies, it is just one of the many lessons to be learned
from some of the most successful companies in the world
today.
Sometimes you’ve got to tell consumers what they want.

What do successful brands have in common?

They know that consumers aren’t interested in abstract


concepts like performance statistics and technical
specifications; customers want to see and touch products
that they can relate to in an instant. To accomplish this,
brands need to create products that aren’t just innovative,
but also intuitive.

In fact, you can open your customers’ eyes to a new world by


simply forming a new market. Just take the serial
entrepreneur Les Wexner, who, in the 1980s, identified the
huge gap between the luxury and budget markets for
women’s undergarments.

Wexner noticed that although women wanted to be sexy,


they couldn’t do so without breaking the bank. It was this
realization that led him to found Victoria’s Secret, a brand
that endeavored to forge a new market for glamorous
women’s underwear that was neither too cheap nor over-
the-top luxurious.

By forging a middle ground in the market, he enabled


countless women to rediscover underwear as lingerie – and
the business results were incredible.

But even if you have a stellar brand and a lucrative market,


you should never be satisfied; it’s essential to continually
reappraise your market and reinvent your brand. For
instance, when Victoria’s Secret’s annual revenue stabilized
at $2 billion, Wexner went looking for ways to rebrand the
company.

His search led him to hire the authors, who conducted 100
interviews with young women to gather data on their
relationships to the brand.

The results?

Most of the women were only wearing Victoria’s Secret


products on the weekend and would rather sacrifice glamour
for comfort during the week. So, armed with this
information, Wexner developed models that were both sexy
and comfortable. Helped along by this change, the
company’s annual revenue is now over $8 billion!

The more loyal a customer, the more revenue they


generate.

Did you know that the most loyal customers to a brand can
generate up to eight times more revenue than their personal
purchases alone?

The more loyal a customer, the more they pitch your brand
to others. These are your apostle consumers and they’re
worth more than anything else. So, while these dedicated
consumers will return time and again to buy your products,
they’ll also spread the word about your company.

This is what makes apostle consumers essential, and the


authors have explained their real worth through what they
call the 2/20/80 rule. Here’s how it works:
Say your apostle consumers comprise two percent of all your
consumers. Since they always return to your brand, they
actually make up 20 percent of all revenue and, more
importantly, their recommendations can produce up to 80
percent of your remaining sales.

Apostle consumers are a fundamentally important aspect of


your business, which is why it’s essential to reward them
every time they engage with your brand. For instance, the
health food store giant Whole Foods works hard to make its
apostle consumers feel special every time they enter the
store.

To do so, the company spends huge amounts of money and


energy to make sure that every visit to a Whole Foods is a
memorable experience that leaves customers hungry for
more – sometimes literally.

The store often hands out complimentary samples of


expensive products like wine and shrimp. In fact, many of the
stores maintain a space for their customers to meet each
other and enjoy free classes on cooking and health.

One of Whole Foods’ apostle consumer said that each trip to


the store taught him more about nutrition and health. He
even gives the company credit for helping him improve his
quality of life. So, if a friend told you Whole Foods changed
his life, wouldn’t you want to pay the store a visit?

Constantly re-evaluate the needs of your core consumers.


When a company is faced with impending failure,
management often looks back to past decisions that
produced previous successes. But as a rocket company, to go
backward you first have to learn what your customers
want now.

It’s crucial to constantly take stock of what your core


customers need. If your business starts to slow down, it
might be time to rethink your brand’s demand spaces, a
category that helps you determine the unique needs of your
customers and the different moments or spaces in which
they occur.

When the food manufacturer Frito-Lay came up against a


revenue wall, they used demand spaces to determine which
snacks their customers wanted, when they craved them and
why. For instance, the company analyzed ways in which
different customer groups consumed snacks on different
occasions, whether it was by themselves, with others or at
certain times.

Then, they considered how they could fill these demand


spaces in the market while accounting for the strengths and
weaknesses of their competitors. Finally, they evaluated each
opportunity and the commercial rewards made available by
every demand space.

But identifying your demand spaces is just the beginning. In


fact, doing so is useless without strong and effective
implementation. So, once Frito-Lay finished their first round
of demand space analysis, they began bringing products to
market.
For example, their analysis had identified one untapped
demand space that was termed “Fun Time Together” – that
is, the foods consumers eat while spending time with friends.
Part of the implementation for this demand space was the
release of a chips and dip combination that was marketed as
a snack to be enjoyed with others.

And guess what? It worked like a charm. The product’s first


year saw over $100 million in sales.

So, running with this success, the company continues to


delve deeper into the desires of consumers and the untapped
demand spaces they can fill. To stay on top of this program,
they conduct just this kind of research and implementation
every year.

First impressions are crucial and every aspect of your brand


should be aesthetically pleasing.

Have you ever considered the sensory impression that


consumers get when engaging with your brand?

Well, if the answer is anything remotely ugly or unappealing,


it’s time to reconsider your brand’s aesthetics. After all,
rocket companies know that brands need to appeal to every
sense.

Just take the Italian artisanal clothing manufacturer Cucinelli.


They stick to the principle of great aesthetics and it has
helped them build a $1-billion international business. Every
item Cucinelli produces is made from high-quality, distinctive
fabrics that are recognizable without any obvious branding.
As a result, one apostle consumer says that converting ten of
her friends to the brand simply took a single touch of her
Cucinelli cashmere sweater.

But the brand’s backstory also touches on the emotions of


potential customers. Cucinelli paints its founder, Brunello, as
an artisanal craftsman who supports his tiny Italian village
while treating his employees like family. All of these factors
combine to produce a compelling and long-lasting positive
first impression of the company’s brand.

So, a beautiful brand is essential and it’s important to accept


that having one is going to cost a pretty penny. As visually
pioneering companies such as Disney consistently prove,
there’s no such thing as spending too much on aesthetics.

For example, the attention to detail Disney invests in their


different theme parks costs a fortune, with new rides often
costing around $200 million. Not only that, but when
designing new areas in their parks, they enlist the most
talented artists and architects the industry has to offer. In the
process, they may well spend upwards of $1 billion for
projects that take five years or longer to complete.

But all this investment in aesthetic detail is worth it, since it


plays a huge role in Disney theme parks that produce yearly
profits of over $1 billion!

Passionate employees make for satisfied customers.

Your employees are the first people your customers interact


with, so be sure to have only the best people on your team.
Remember, every new hire is meaningful because new
employees are the future of your brand.

In the same way that good wine doesn’t start with bad
grapes, passionate employees need to come prepared with
the right attitude on day one.

Just take the online shoe store Zappos. The company’s


rigorous hiring process identifies a specific type of person
who embodies the company’s values in everything they do.
To accomplish this, every job offer is the result of a
democratic process involving every person who has
interacted with the potential employee.

For instance, if a potential hire makes it to the campus


interview stage of the process, even the driver who gives
them a lift from the airport has a say in the hiring process.
And if that driver or anyone else in the process has anything
bad to say, the hire is a no-go.

But building a stellar team is just the first step. Once you’ve
got one, it’s important to care for your employees. In the
end, the better you are to them, the better they’ll be to your
customers. In fact, a golden rule of customer service is to
treat your employees like you want them to treat your
customers.

For instance, the Four Seasons hotel pays every employee


above the industry average and offers them and their
families free stays at the company’s hotels worldwide. As a
result, the employees treat their customers fantastically.
So, during the horrific Indian Ocean earthquake of 2004, the
Maldives Four Seasons became famous for the way it cared
for its frightened guests. Every one of the hotel’s 400
employees assisted the guests in reaching safety and
reserved for the guests what little food and water remained.
But what’s most incredible is that not a single employee left
their post throughout the entire ordeal.

Excellent virtual relationships with your customers are vital


in the digital age.

Did you know that 83 percent of Americans say they would


rather give up fast food than go without internet access? It’s
true, and it’s because the internet offers consumers instant
gratification at the mere click of a mouse.

As a result, your brand needs to pay serious attention to its


internet presence. The digital world has paved new avenues
for understanding and connecting with its customers, and it’s
imperative to take advantage of the rise of big data analysis.

After all, the ability to gather huge quantities of information


from every virtual interaction gives you a detailed look at
what customers want. Just take the online retailer Amazon,
whose success is founded on its effective use of big data.

The company analyzes every action their customers take and


uses the information to build relationships with them. What’s
particularly effective is the company’s ability to predict a
customer’s next purchase. What’s more, this relationship
gets stronger every time a customer returns to the site to
find new recommendations based on their interests.
Loads of Amazon users are converted to apostle consumers
as a result of this extremely convenient shopping experience.
These loyal consumers spend an average of $2,873 per year
and bring in more than twice that amount by recommending
the site to others.

So, virtual relationships are important. In fact, such


connections can be even more special than their “traditional”
counterparts. Just look at Airbnb, a site that forges virtual
relationships that often lead to users meeting and sharing
real-life experiences.

The site enables this possibility through its excellent review


and identity verification protocols that serve to build trusting
relationships between strangers. Not only that, but the
company is also extremely financially successful, with a 2014
valuation of $10 billion. And it has all been made possible by
the powerful virtual relationships at the core of Airbnb’s
business model.
Scaling Up
How a Few Companies Make It...and Why
the Rest Don’t (Mastering the Rockefeller
Habits 2.0)
Discover the secret of successfully scaling your business.

Every year a sea of new companies are born around the


world. Most fail within a few years; some make it a bit
longer. Only a small number of them grow to become big,
successful game-changers. Why?

Even if you have a great product and your business is going


well, scaling poses important, and often unexpected,
challenges to any company that wants to grow. It’s a
paradox. Getting bigger should make things easier, shouldn’t
it? More brains, more cash, more momentum? Wrong.

As these blinks will show, even something as simple as


leaving the old, pokey one-floor office for a new two-floor
one might have unexpected consequences for your business.
So how do you get it right?

These blinks break down everything you need to take into


consideration into structured checklists and thought-
provoking processes.

Meet the four “D’s” that can grow a company, double your
cash flow, triple profitability and increase value tenfold!
Imagine you’re an executive manager at a 500-employee
company. Your CEO has just informed you that by the end of
next year, the company will comprise over 1,500 employees.
What would you do first?

When your company is scaling up, there certainly is a lot to


consider. If you don’t want to run out of cash or lose track of
strategic decisions, your organizational structure and
decision-making processes have to be brought to perfection.
That’s why the Gazelles team – a global executive coaching
company – developed a 4D framework to grow your business
successfully. So what are the essential four D’s for successful
scaling?

First, you and your team have to be drivers of personal and


economic growth. Think of it this way: your managers are
coaches! One-on-one coaching is essential for employees to
stay focused and motivated. Consider offering additional
training to enable constant learning.

Secondly, leaders also have to find the balance between


the demands of your stakeholders and those of the actual
processes of doing your work. Even though your company’s
processes must be profitable, it’s also important to keep your
reputation with your stakeholders in mind. Balance both by
creating a custom-tailored strategy.

To execute your strategy successfully, you’ll need to


implement routines to enable sufficient discipline – the third
D. Your entire company must be aware of the number one
priority for each quarter or year – the first element of
discipline. With a defined target in mind, you’ll be able to
prioritize effectively. Another aspect of discipline is a regular
meeting routine, complemented with constant data review.
This way, you’ll be able to detect problems immediately and
tackle them as quickly as possible.

Finally, it’s essential that you know which questions are the
most pressing ones and start making decisions. When scaling
up, a company should start by tackling the biggest issues first,
then working through other problems – in the same way you
might fill out a sudoku puzzle. Start where you can and
proceed carefully.

So the four D’s are drivers, demands, discipline and decisions.

Growth is very complex and there are loads of things to keep


in mind. But don’t despair! The following blinks offer a
framework for dealing with the four major problem areas
that are also opportunities to grow the four D’s
– People, Strategy, Execution and Cash Flows.

Companies must enhance their personnel management in


tandem with their growth.

Only two to three percent of all US companies will become


high-impact firms that last for over 25 years and contribute
substantially to overall economic growth. Why do so few
make it to this stage? It’s all about People.

The truth is that growth doesn’t always lead to success in the


long-term. If the team, the strategy and the organizational
and physical infrastructure don’t grow alongside each other,
success simply won’t last.
This is called the growth paradox. You’d think that the larger
a company gets and the more soundly its routine is
established, the easier things get. The reality is that the more
employees you have, the more it takes to organize them
effectively.

Consider a company that is expanding its team while also


moving from a one-floor office into a two-floor office. If
planners don’t create room for communication spaces, such
as a common kitchen or break room, it will be much harder
for information to flow between employees.

Communication is vital in any growing organization, so it’s


essential that you structure your teams and sub-teams to
keep information flowing. If teams are too big,
communication will be hindered. Instead, try breaking them
up into sub-teams of seven to ten people.

So if you’re feeling stuck in your growth process, it’s likely


that your team structure and size isn’t perfectly organized
yet. But remember, growth doesn’t happen overnight! If you
want your success to be long-term, you’ll have to view
expansion as a long-term process too.

Ask yourself: What do you want your organization to achieve


within the next 25 years? It took Apple 25 years to grow to
9,600 employees in 2001, whereas today, 14 years later, the
company employs more than 150,000 people.

Make sure that the right people are doing the right things –
and doing them correctly.
No executive team could ever declare that everyone was
responsible for marketing without something going wrong.
We need clear responsibilities, otherwise nobody can be held
accountable. And a lack of accountability is a surefire way to
drive a business to collapse.

In order to create accountability and make it visible, the


author has developed the Function Accountability
Chart (FACe) and Process Accountability Chart (PACe).

The FACe can be used to measure success and define who is


responsible for what. To begin, you’ll need to find out about
your company’s functions. Write them all down.

Then, let each of your executive team members fill in who is


responsible for each function (one person) and what key
performance indicators (KPIs), such as profit per project, for
example, can be used to measure success.

After creating this chart, consider which team members are


responsible for more than one function, but perhaps don’t
have clear accountability. When the executive team of Perly
Fullerton filled in the chart they recognized that they were six
people in the room but only three on the chart. It was clear
that founders needed to delegate tasks more specifically.

The processes that drive the business and the people who
are responsible for them should also be specified. Enter the
PACe.

To use a PACe, first identify the key processes of your firm,


such as recruitment or product development. Give one
person oversight for each process. Next, outline which KPIs –
such as time, quality and cost – measure the process. Next,
describe how you’d like to improve each process – perhaps
by making it faster, or more cost-effective. Finally, map who
is involved in each process at each of its critical steps.

Start motivating and make the switch from managing to


coaching.

It’s said that a single excellent employee can replace three


good ones. So invest in all of your people to grow them!

Start by replacing the word “manager” with “coach.” The


people analytics team at Google discovered that personal
coaching was the most important factor in great
management. This is because managing a team isn’t just
about delegating tasks and supervising processes, it’s also
about leading a team and inspiring its members to grow and
improve.

One way you can encourage your team members to boost


their strengths and learn from their weaknesses is
through training. In fact, it’s worth spending an additional
two to three percent of your payroll on training. Your team
will reward you with higher productivity and loyalty: The
Container Store pays salespeople 50 to 100 percent more
than the industry average. Within the first year, salespeople
also get 263 hours of training.

You should also strive to make your team’s job easier


by listening to them. Regular meetings allow team members
to discuss what motivates them, what doesn’t, what could
make their job easier, and what resources they need. Even
the smallest changes, like an additional break room or a
different email provider, can make a significant difference.

Finally, be sure to set clear expectations. Tell your employees


what their top priority should be, but let them find out how
to achieve it on their own. Encouraging team members to
think for themselves is challenging, but will strengthen their
problem-solving abilities in the long run. You could even
modify tasks and responsibilities from time to time to give
employees the challenges you think they’ll need for personal
growth.

You’ll need a strong strategic vision for strong scaling.

You’d be hard-pressed to find a company with over 50


employees and a boss that can remember all their names. As
your organization grows larger, it’s vital that you retain the
sense of purpose that keeps smaller businesses so motivated.
But how? It’s a matter of strategy.

By establishing core values, you give your organization


comprehensible guidelines for every decision. These are the
norms of a company’s culture, and should be stated in a
succinct, realistic sentence. For example: “Practice what we
preach.”

You should also make your company’s mission clear by


formulating a core purpose. This can be as brief as one word,
and should simply signify what you want to achieve. For
Disney, the core purpose is simply “happiness.” So how can
you get your organization to engage with core values and
purpose with confidence?

Credit card transactions company VeriFone came up with a


clever solution to keep their corporate culture strong. Its
founder created a pocket-sized “blue book” that contained
all of the organization’s core values illustrated with real case
studies. This blue book was translated into eight languages
and is a fixture in every meeting as a powerful and accessible
summary of the company’s vision.

Your company’s vision summary should also include two


other elements: your brand promises, and your Big Hairy
Audacious Goal – BHAG for short.

Brand promises – the things you guarantee your customers –


are strongest in threes, with one key promise at the
forefront. For example, BuildDirect promises best price, then
best customer service and product expertise. By referring to
your three brand promises during decision-making, you can
ensure your actions satisfy customers’ expectations.

Your BHAG should be reached within 20–25 years. To make it


easier, set smaller goals every three to five years, as well as
annual, monthly and weekly goals. In fact, you could even
visualize your goals as a mountain climb, where you reach
small plateaus before achieving that view from the top.

By collating your core values, purpose, brand promises and


goals, you’ll have gained a helpful tool that you can always
refer to when dealing with potential customers, suppliers, or
tricky situations. By making copies of your vision summary
available in common areas, your team will be able to make
the most of this tool too.

Use your company’s strengths to improve your revenue.

Now that your vision summary is ready, you’ve got the bones
of a clear strategy. But if you want to reach your goals even
more quickly, you should understand exactly where your
organization’s strengths lie.

First, you’ll need to look into your customers’ minds. What


do they think when they hear your company’s name? Car
manufacturer Volvo has used marketing to make the word
“safety” one of the first associations with the brand. Even
googling “safest car” will lead directly to Volvo.

87 percent of all customers search the internet to find


options for purchasing. To find out which words you should
own, use the Google Adword planner to see how often some
words are being searched in relation to your brand.

The next place to look for your strengths is your X factor. This
is a small strategic detail that differentiates you from your
competitors. By recognizing it, you can turn it into a
competitive advantage to multiply your revenue.

Take Outback Steakhouse. They recognized that most


restaurant managers are constantly on the move to new jobs,
so quality isn’t stable. So they decided to create their own X
factor.

Outback Steakhouse created a new compensation for future


managers, who first had to invest $25,000 of their own
money. For three years they were trained to run a restaurant
and got a competitive wage. Following this, managers could
run their own restaurant and, if they met certain milestone
criteria after two years, were rewarded with a $100,000
bonus.

By taking the time to create a calculated strategy, Outback


Steakhouse created an X factor that made planning easier
and boosted their product’s quality, to give their customer
experience an edge over competitors.

Design a strategic plan to keep everyone on the same page.

The One-Page Strategic Plan (OPSP) is a framework that will


help your company visualize and achieve your goals. More
than 40,000 companies use OPSPs to know if everything is
running smoothly or not – and then to respond rapidly to
new challenges.

There are a number of questions you’ll need to answer when


designing your own OPSP: Who is responsible for each step?
What is your number one priority for the next year? Which
metrics can you use to track your progress toward it?

Suppose your goal is to make HR more efficient. Actions


could include “Hiring an additional HR manager” or
“Improving the onboarding process.” Now what’s your
critical number? Maybe “Reducing hiring and onboarding
process time from six to three months”?

An execution checklist like the Rockefeller Habits Checklist is


often extremely helpful. This list summarizes all important
factors you’ll need to keep an eye on, from “The team is
healthy and aligned” to “The company’s plans and
performances are visible to everyone.” This way you’ll be
able to recognize any missteps or potential issues a whole lot
faster!

And your OPSP isn’t just about goals. Rewards need to be


clearly stated too. Think about it: working hard only makes
sense when you know what you’re working for. So why not
make your annual, monthly or weekly goals a fun challenge?

You could dream up a theme to turn your goals into a game.


For example, if your goal is to speed up processes, you could
call the project the Fast & Furious. You could even design a
scoreboard where the whole team can see their
achievements and write down how they’re going to
celebrate.

Focus on executing your plan with a steady rhythm of


meetings and reviews.

Great firms are like great jazz bands. Even without a strict
plan, they’re able to work together with confidence. But, like
members of a band, your team members should know their
parts and practise together too. That’s why meetings are so
important.

A steady meeting routine allows information to flow


accurately and prevents communication barriers. To stay on
top of current activities and issues, hold your team meetings
daily or weekly. John D. Rockefeller met every day for lunch
with his key people. Your executive managers should also
participate in one day of learning every month, and a bigger
strategic meeting offsite in every quarter.

Even spending just five minutes every day with your team
could help solve small dilemmas much faster. In Managing
Up: How to Forge an Effective Relationship With Those Above
You, Rosanne Badowksi says that meetings needn’t take up
more than ten percent of a standard work week for senior
leaders and five to seven percent for middle managers.

However, the faster you’re growing, the denser your meeting


rhythm should be. If you’re growing by between 20 and 100
percent a year, treat one quarter as if it were a year and
organize meetings accordingly.

Another way to keep tabs consistently is by gathering data.


Quantitative and qualitative data will strengthen your
decision-making in every scenario.

Additionally, ensure everyone in your company knows her


KPIs and the team’s critical number. Only then can they
measure their daily performance. If data shows a gap
between goals and performance, ask what the current
barriers are and tackle them.

Customer feedback is just as important as financial feedback.


So don’t forget to speak with your clients to see if they’re
facing problems with your team. The more closely you
observe your data, the faster you can respond to difficulties!

A growing company needs the cash flow to feed it.


We’d all like to save up for something big, but this is often
made tricky as we don’t know how much we need to spend
each month. Financial statements are even neglected entirely
by some firms, though funds are of course central to
expansion.

It’s essential to understand how cash flows through your


company and to have some cash reserves. In Great by
Choice, Jim Collins and Morton T. Hansen revealed that
outstanding companies have three to ten times more cash in
reserve than their more mediocre competitors.

If you want to expand your cash reserves, take a look at


your Cash Conversion Cycle(CCC). This figure shows how long
it takes until a dollar you invest comes back as turnover.
Remember, the shorter, the better.

Take Dell, who were going broke in the mid-1990s. It found


out that its CCC was 63 days. That’s simply too long! So Tom
Meredith, the new CFO, worked to reduce it. Within just ten
years, the CCC had shrunk to 21 days. At this point, Dell
finally grew faster and began producing cash instead of
consuming. In 2013, founder Michael Dell finally had enough
cash to privatize the company.

To shorten your CCC, first break it down into four


components – sales, delivery, billing/payment and
production/inventory – and work separately on them. In each
of these components, you’ll find opportunities to shorten
your cycle time, reduce typical mistakes or improve the
business model.
For example, Benetton India found that they were spending
too much on production costs, which in turn extended their
CCC. To solve the problem, they improved their business
model for finding cheaper suppliers by using software that
allowed vendors and suppliers to bid on production
contracts.

Calculate which small changes could take your cash flow to


the next level.

Perhaps you’ve looked at your CCC and seen that you need to
improve your cash flow. Not to worry – it’s just a matter of
tweaking here and there.

Examine your company’s sectors and you’ll find several


financial levers that you can modify to boost your cash flow.
It could be the price for your goods (could be increased),
your inventory (you could reduce the stock) or accounts
payable (slow down the payment of creditors). But how do
you know which levers are worth changing?

With the Power of the One you can work out which factor can
reduce costs in the most efficient way. In this method, you
attempt to visualize how a one percent or one day change of
each of your potential levers would affect your cash flow.

For example, you could calculate the effect of reducing your


operating costs by one percent, or reducing stock days by
one day. Then do the same for another lever, and so on. By
comparing this information, you’ll find the most financially
efficient lever.
Finally, present your plan for change in a formalized structure
of KPIs and targets, and assign tasks and responsibilities
clearly.

Simple Numbers, Straight Talk, Big


Profits!
Four Keys to Unlock Your Business
Potential
Learn simple but vital metrics to determine your firm’s
potential success.

You own a small business and things seem to be going well.


You’ve managed to survive the first few turbulent months
and have even started to grow the business a little. What
should you do next?

Common wisdom would suggest that you focus on revenue


and maximizing sales. You borrow, you hire more staff and
take all the orders you can, anything to keep the money
coming in.
Yet that’s not the right path. These blinks show you how
sticking to this common yet flawed strategy will lead you
toward ruin.

Far from the money you think you want to come in, it’s the
money going out that matters. Revenue means nothing if you
are spending more than you earn. Profit is king, and these
blinks show you how to go about securing it.

Business owners should always pay themselves the correct


market wage.

Here’s a surprising figure: 90 percent of small business


owners pay themselves less than a fair market wage.

And in many ways, this is a rational choice: After all, by


lowering their own wage costs, business owners can make
pre-tax profits look much healthier.

But despite this, business owners should always pay


themselves the correct market wage. There are two reasons
why this should be the case.

First, not paying yourself (or your employees) a market-based


wage actually undermines your business. Pre-tax profits and
labor expenses are key figures which affect important
financial measures such as labor productivity, or the
percentage of pre-tax profits to revenue.

As we’ll see in later blinks, these two metrics are crucial in


defining the success of your business. And artificially altering
them could affect your ability to grow your company.
You should also know that the U.S. Internal Revenue Service
has included this tactic – that is, underpaying wages – in a list
of “dirty dozen” tax scams used by closely held (or “S”)
corporations. Accordingly, the federal tax agency is
increasingly choosing to audit firms suspected of employing
this practice.

Second, paying yourself a market-based wage is crucial when


it comes to selling your business or making an exit. That’s
because a firm’s profitability is a key factor in determining its
fair market value.

So when an outside party looks at your books prior to


purchasing your company, artificially lowered wages could
cast doubt on your company’s value in the eyes of a potential
buyer.

Alternately, paying yourself a market-based wage from the


outset will spare your business cash flow problems (and the
nasty surprise of diminished profits) if you decide to make an
exit and replace yourself with an outside CEO who’s
expecting to earn market wages.

Focusing on healthy profits will guide your business through


its critical adolescent years.

At some point, every business risks falling into a black hole.


We aren’t talking about space travel: A black hole is when a
firm’s revenue first surpasses $1 million and there’s an
increased demand for staff, but not enough capital to pay for
new employees.
At this point, many business leaders will focus on balancing
the budget, but that’s not good enough. If you want to
escape the black hole, you have to aim for 10- to 15-percent
pre-tax profitability.

To put it another way, getting through a black hole is like a


pioneer making a wagon journey from Kansas to California.
Even if you stock provisions from the outset, if you deplete
your resources too quickly without adding more as you go
(or, if you incur losses but don’t build profits as you grow),
you’ll never make it to California!

That’s precisely why your goal should be to accrue healthy


profits while you grow. By reinvesting profits and building
your capital reserves, you’ll make it through that black hole.

What’s more, the benefits of being profitable while you’re in


a black hole don’t end when you get out of it. Because if you
decide to sell your business, historical profitability will have a
significant effect on your company’s value.

Prospective buyers will want to see your last three years of


pre-tax profits and business equity – a widespread measure
used to gauge a company’s value. Thus, a company that has
achieved 10- to 15-percent pre-tax profitability will have a
substantially higher market value than another firm with
smaller profits or none at all.

Do you want to position your company to achieve an optimal


market value? Of course! The next blink will show you how.
Keep labor costs down and protect ten percent of your
profits by implementing a salary cap.

As we discussed in the previous blink, 10- to 15-percent


profitability should be your company goal. But how can you
achieve it during that black hole period, when you’ll need to
hire new staff to fulfill growing demand?

First, you need to understand the relationship between labor


expenses and profitability.

You already know that labor is a significant cost in running a


business. But unlike rent and supplies, labor is a cost you can
control. And that’s exactly why you should introduce a salary
cap to protect at least ten percent of your profits.

Imagine you’re earning $1 million in revenue. In that case,


you should aim for profits of at least $100,000. Simply
combine all of your non-labor costs and subtract them from
your $900,000 operating budget. Whatever is left is your
firm’s total salary cap, and should include all labor costs
(including your own market-based wage).

But then to keep growing, use the salary cap as an anchor to


fluctuate between 10- to 15-percent profitability. So once
you have a salary cap based on ten percent profits, you can
set your sights on growing profits to 15 percent by
recalculating your salary cap accordingly.

During this period, you should focus on enhancing


productivity, rather than growing revenue.
And then, once you’re at 15 percent, you can afford to hire
new staff strategically (with the goal of increasing your
revenue) until your profits are back near ten percent.
Repeating this process again and again is the best way to
safely grow your business while always remaining profitable.

If you’re worried that the salary cap will limit your company’s
ability to perform, consider Bill Belichick’s many victories (the
New England Patriots coach has won the Super Bowl a
disproportionate number of times), which observers
attribute to his savvy navigation of the National Football
League’s strict salary caps.

Belichick gets more for every dollar he spends by hiring


younger talent and investing in their future. And you can do
that too!

Increasing labor productivity is a crucial part of meeting


your salary cap and achieving profitability.

We’ve learned that often you’ll need to focus instead on


enhancing the productivity of your existing employees
instead of just hiring new staff.

But what does it actually take to increase and maintain labor


productivity?

Start by measuring productivity at your company by using the


following equation: productivity equals gross profits divided
by dollars spent on labor. (And to calculate gross
profits: gross profits equal revenue minus the cost of goods
sold.)
While it may seem simple, this is really a powerful tool as it
provides evidence for your intuition and allows you to quickly
spot and respond to negative trends. And once you’ve
calculated this metric, you can start implementing new
practices to enhance productivity at your company.

Start by ensuring your employees are being compensated


appropriately. This is important, as paying too little leads to
high turnover, which is not only costly but also disruptive to
the workplace and detrimental to productivity.

Overpaying is also a problem as it eats into gross profits and


thus negatively affects productivity. You might be overpaying
someone if their job requires fewer skills than it did in the
past, due to the emergence of new technology, for example.

So instead of overpaying or underpaying, strive to pay your


employees a reasonable market-based wage. And once
you’ve calibrated your compensation structure accordingly,
you can implement an evaluation system to further improve
productivity.

The benefits of doing so include instituting a better way to


manage employee expectations; a way to highlight areas for
improvement; and especially, turns your focus toward career
planning.

This last point is especially beneficial for productivity, in that


it encourages employees to develop their skills and stay
motivated. It will also improve employee retention, which
saves time and money.
And to get the most out of employee evaluations, it helps to
identify three to five skills that could improve productivity for
each role. Additionally, it’s good practice to ask each
employee to describe how their role contributes to the firm’s
targeted profitability level.

Pay attention to the four forces of cash flow: tax, debt, core
capital target and distributions.

Labor costs aren’t the only thing involved in running a


healthy business. If you want to stay solvent, understanding
the four forces of cash flow is crucial.

So here they are – the four forces:

1. Tax: Put money aside to pay taxes. Failure to do this can


create liquidity problems, even if your business is
profitable.

2. Debt: You run the risk of default and foreclosure when


you fail to meet debt payments.

3. Core Capital Target (CCT): A buffer to cover normal


fluctuations in cash flow. We’ll discuss this in further
detail below.

4. Distributions: Once you’ve covered the first three


forces, you can safely start distributing some of the
company’s profits to yourself.

This is crucial, so we’ll say it again: distributions shouldn’t be


paid until you’ve built up enough cash reserves to handle the
first three forces.
And this gets us back to our 10- to 15-percent profitability
goal. This principle is also crucial for cash-flow management,
as profit reinvestment will help your business reach your CCT.

It’s important that you keep these forces in mind and follow
them, as unquestionably, there are always highs and lows in
the business cycle. You will experience periods when money
is tight – just think about tax time when all that cash flows
out of your bank account!

The Core Capital Target (CCT) is there to cover these cyclical


swings. And you can calculate the CCT simply by reviewing
your firm’s history.

As a rule of thumb, it’s recommended that you build up two


months of operating expenses. In very rare cases – for
example, if your start-up deals with long waits on account
receivables – the CCT might need to exceed two months of
operating expenses.

As we mentioned earlier, you can invest your profits to build


this buffer. This should be a major priority before you even
think about taking distributions from the company.

If you need to raise capital, it’s better to live off your


savings than go into debt.

As we’ve learned, maintaining 10- to 15-percent profitability


is the best way of raising capital.

But couldn’t you also borrow to raise money? If you can


avoid it, do so. Debt is dangerous, so it should only be your
last resort.
That’s because when you borrow other people’s money,
you’re way more likely to take risks with it. When you start a
business with your own money, in contrast, it feelsmore
precious so you tend to be more careful with it.

You should treat borrowed money the same way.


Remember: debt is dangerous. This also applies to start-up
capital from venture capitalists. These people tend to be
canny investors who expect growth and a high return on
investment. And all too often, after a company’s growth
plateaus, investors decide to wind up their interests and sell
business assets.

But what should you do if you don’t have that much money
to invest upfront? It’s called sweat equity.

As we’ve discussed, when you’re running a business, it’s


important to pay yourself a market-based wage. But
temporarily paying yourself a below-market wage is way
better than taking on debt. Just make sure you’re living on
your savings and not your firm’s after-tax profits!

Let’s say your market-based wage would be $75,000


annually. And if you don’t pay yourself a salary the first year
and only pay yourself $25,000 the second year, you’ve just
added $100,000 to your firm’s equity.

Plus, having this kind of blood-sweat-and-tears work ethic


will allow you to focus on productivity and profitability. It’s
the safest path to rapid wealth creation!
Regularly monitoring key measures will allow you to spot
trends and quickly take action.

The secrets to your company’s success are already there,


they’re just hidden in the data. And that’s why constantly
monitoring key measures will help your business thrive.

Don’t overwhelm yourself with too many numbers – find just


a few, ones that are important to your company’s survival
and positive development and growth.

Crucially, pay attention to your cash balance on a daily basis.


This is especially true if you’re a new business, as younger
firms are at risk of falling into a cash deficit the first few
months.

For new companies, being vigilant about the cash balance is


an existential matter. Knowing what’s happening daily will
allow you to focus on getting your bills paid.

And then on a weekly basis, you should mind three metrics:


sales, labor productivity and the cash-flow forecast for the
next two weeks. This is where you should be looking for
trends.

For example, if you notice a decline in labor productivity over


the course of two weeks, you can work on turning things
around before any serious harm is done.

Creating a meaningful profit-and-loss (P&L) statement will


also help you spot trends and give you time to make
necessary adjustments. And that’s why you should look
specifically at “rolling” profit-and-loss statements.
Ordinary P&L shows revenue, costs and expenses, along with
key performance measures like labor productivity or any
salary caps.

Separately, a “rolling” P&L focuses on just the last 12


months, revealing many trends. For example, if you aren’t
meeting your 10- to 15-percent profitability goals, you can
see what your salary cap should have been to meet the
target.

Carefully monitor metrics to forecast your cash flow and


identify problems before they pop up.

Once you’re in the habit of regularly monitoring key metrics


and looking for trends, you can also implement forecasting to
dynamically manage your firm’s growth.

Cash-flow forecasting might sound daunting, but it’s easy to


master. Here’s how it works: When you take your profit-and-
loss (P&L) statement, you’ll note several future key costs that
you can predict with some certainty, like rent. And you’ll see
other costs, like labor, over which you have significant
control.

And then, looking at your performance over the last few


months, you can make solid educated guesses for things like
operating expenses and projected revenue.

Since we’re forecasting cash flow, your P&L history will also
reveal payments that haven’t yet come through. This
information will allow you to predict future cash flow and
also spot any discrepancies.
And that gets to the power of forecasting – going back
periodically and checking the accuracy of forecasts will give
you insight into potential problems, before they do too much
damage.

To do this effectively, you have to forecast all your key


metrics (like labor, productivity and accounts receivable) with
reference to your profit target. By working backwards from
your profit goals and Core Capital Target (CCT) targets, you’ll
be able to identify desirable productivity rates, labor costs
and other factors.

And once you’ve done that, you can then ask yourself: Have I
reached my goals? Am I moving in a positive or negative
direction?

The answer to the second question is especially crucial,


because it provides a warning sign if things are going south.
That way, you can check your metrics, figure out the problem
and fix it.

Don’t forget that companies can’t be moved or turned on a


dime! Understanding the relationship between the various
metrics buys you time and gives you the opportunity to steer
your company true before you crash and burn!
Smart People Should Build Things
How to Restore Our Culture of
Achievement, Build a Path for
Entrepreneurs, and Create New Jobs in
America
Learn how entrepreneurship shapes the world we live in.

What drives the US economy? Is it Fortune 500 companies?


Banks? Megacorporations?

According to Smart People Should Build Things, the answer


lies in the innovative spirit of entrepreneurship and start-ups.
So it’s no surprise that the tendency of young American
graduates from elite universities to prefer careers in
professional services, such as law firms and consultancies,
might not benefit the national economy.

In these blinks you will learn why elite university graduates


tend to take jobs in the professional service industry, and the
steps we can take to correct this flow. Along the way you will
learn about the valuable lessons that entrepreneurship can
teach us, and how anyone can become an entrepreneur,
even you!

Predictable careers: why most top students end up in


professional services like law or finance.
At some point toward the end of their studies, every student
has to make a decision about their future career. They ask
themselves questions like: Where should I start? And what
should my first job look like?

At elite universities like those in the Ivy League, these


questions usually leave students looking in only one
direction. In fact, students leaving elite universities often
seek out a career in prestigious professional service
companies. They find their work homes in places like
management consultancies, banks or the legal profession.

We see this is true when we look at the numbers: on


average, 40 percent of Princeton graduates go into finance or
consulting, while each year almost 13 percent continue their
studies in law school. In the same vein, 29 percent of the
Harvard graduating class of 2011 went into finance or
consulting, while 19 percent applied to law school.

What is it that draws students from elite universities to


professional service companies? In short, it’s mostly the high
payment prospects and a challenging work environment.

What’s more, students from elite universities are well suited


to the formal application processes that they must overcome
in order to land a job at these firms. It’s not so different from
the application processes for the elite universities where they
got their education: in almost all these universities, students
have to pass challenging and highly selective application
processes in order to be accepted.
Finally, students influence one another in their career
choices. Young students often feel insecure about their
future, and look to others to figure out how to orient
themselves. That means they follow each other into the same
careers, year after year.

As one student said: “It seems like everybody around you is


doing banking interviews all the time. This has an effect on
you after a while.”

Hooked: how professional service firms attract student


recruits.

It’s not just students who influence one another in their


career choices. Major professional service firms have an
interest in recruiting, and therefore also play an important
role in shaping students’ choices.

For starters, professional service companies compete for the


best students, and thus invest heavily in recruitment. In fact,
there is a virtual arms race for talent taking place at dozens
of universities each year.

For example, Goldman Sachs has its own room in Columbia


University's career services office, and it’s estimated that the
company spends an astonishing $50,000 per recruit. If we
take this number and project it to the overall recruitment
expenditures of professional service companies, it adds up to
tens or even hundreds of millions of dollars per year.

Because there is only a limited number of students, and


therefore a finite amount of available talent, firms must fight
hard to secure their next generation of employees with
immense spending.

Moreover, the opportunities at prestigious firms for personal


and professional growth make them more attractive for
students.

They make this quite clear in their marketing: work


with us for two years and you will have
learned everything you could possibly need for success in any
field. More concretely, they say, for example, that if you work
for a while as a management consultant you will develop the
key skills necessary to later find work as a lobbyist or an
investment banker.

But how do you develop these skills? The blue-chip firms


claim that they teach you to deliver “high-quality work,” one
of the core value propositions for professional service
companies. For example, every model, report or presentation
has to be highly sophisticated and free of errors, and these
skills can easily be applied to any other role.

When students feel insecure about their career path,


professional service companies seem to be a great starting
point: their recruits learn essential skills and then switch to
their preferred field later on.

Golden handcuffs: why leaving a career in professional


services is difficult.

When you apply for a job, you have specific ideas about the
tasks, the culture, the expectations, and so on. But have you
ever found that these ideas turn out to be completely
divorced from the reality of your work?

The same is true for professional service companies: not


everyone makes a good fit.

Often you’ll have to work extremely hard, travel extensively


and work in intense environments that people find difficult to
cope with. It’s no wonder that the attrition rate at a top
consulting company can exceed 30 percent per year.

As a result, people have to get used to seeing colleagues and


friends come and go. This can be harmful to their well-being,
and can lead to stress and unhappiness.

In addition, it’s not as easy to move from a big company to a


small one as we might think. Even if these workers do
manage to find an attractive job offer with a smaller
company, they’re still bound by golden handcuffs.

Leaving their old roles usually means a decreased salary, and


managing this requires significant lifestyle adjustments, seen
in our vacations, cars, and even relationships. And every year
that you stay in the same role, the perceived risk of changing
career paths becomes higher and higher.

Furthermore, small- and medium-sized companies usually


look for different skill-sets than larger professional services.
Most small companies want to see that you can get things
done. This action-oriented approach differs highly from the
analytic and theoretical approach found at professional
service firms.
What’s more, most small- to medium-sized companies
need one finance person, not twelve, and hiring a banker or
consultant only makes sense once a company has reached a
certain size.

Finally, start-ups often hire from within their personal


networks or from other start-ups, rather than reaching out to
the banking, consultancy or legal sectors, thus making it that
much harder to leave once you’re in.

Growth engines: why start-ups are vital for the US


economy.

So far, we’ve focused on professional service companies from


an individual’s perspective. But how do they affect entire
economies? Is it good to have lots of highly specialized
consultants? Not necessarily. In fact, the evidence indicates
that a healthy economy depends on other things.

In fact, it is start-ups, not professional service companies,


that accelerate national economic development. This was
clearly demonstrated in one study by the Kauffman
Foundation, which showed that new firms accounted
for all net job growth in the United States from 1997 to 2005.

Added to this, firms in the United States with fewer than 500
employees account for thirteen times more patents per
employee than larger firms.

In contrast, the economic benefits of larger firms, such as


those in the financial sector, are less clear.
For example, 63 percent of Goldman Sachs’ 2010 revenue
came from trading. But share trading doesn’t necessarily add
value to the economy: one party wins, while the other party
loses, implying that a great share of their revenue came at
the expense of other areas of the economy.

Innovations, on the other hand, are far more beneficial to


national economic development. Therefore it seems that the
American economy is developing in completely the wrong
direction. Just take a look at the facts:

 In 1982, companies that had been in business for fewer


than five years comprised almost half of all US
companies. By 2011, that number had declined to just
over one third.

 In 2008, for the first time in the country’s history, the


majority of US workers were at companies with 500 or
more employees.

These trends have consequences for everyone: because the


most productive areas of the economy have been
sidelined, Bloomberg Businessweek has projected a surplus of
176,000 unemployed or underemployed law school
graduates by 2020.

By now you should have a good understanding of the


importance of innovation and the role small companies play
in our economy. The following blinks will give you some tips
on how to get in on the action.
Perseverance and preparation: why your success as an
entrepreneur depends on them.

So let’s say you make the decision to help drive innovation by


starting your own business. What steps can you take to
ensure your success?

For starters, the decision to start a company should be


buttressed by solid preparation. Think of starting a business
as you would of having a child: you have a moment of
profound inspiration, followed by months of thankless work,
ruined sleep, and frustration.

In order to prepare yourself for this, start by following three


steps before leaving your full-time job.

1. Research your idea: Figure out the size of the market,


talk to prospective customers, see who your
competitors would be.

2. Grab a web URL, build your website, and make company


e-mail accounts.

3. Get your friends, colleagues and those you trust excited


about your idea in order to secure co-founders, staff,
investors, and advisers.

Once you’ve laid the groundwork through preparation, you’ll


find a lot of roadblocks obstructing your path.

The greatest barrier for entrepreneurs is finding the initial


funds to get started. And product development isn’t much
easier – even when you’ve hired someone to do this, you
should expect it to take twice as long and cost twice as much
as planned.

Not only that, but you’ll likely need quality partners and
employees, and finding them can be time-consuming and
unpredictable.

When confronted with these problems, you must remember


that success usually comes after a long period of failure. This
is true even in the tech world, where hit applications seem to
come out of nowhere and skyrocket to success. For example,
people think of Rovio’s Angry Birds video game as an “instant
success,” yet the company was around for six years and
underwent layoffs before their game became a hit.

Instead of feeling disheartened by the inevitable frustrations


of starting a business, remember the words of LinkedIn
founder Reid Hoffman: “Remarkable careers are unlikely to
advance in a straightforward, linear fashion.” In other words,
it’s bound to be a roller coaster.

It’s about who you know: why an entrepreneur’s network


and location are crucial.

If you try to approach entrepreneurship as a lone wolf, then


you’ll find it very hard to be successful. Think of the most
successful entrepreneurs, such as Steve Jobs and Steve
Wozniak at Apple – they usually started as a team.

When it comes to raising money and finding potential


employees, it’s a good idea to look within your network of
friends. For example, the author had lots of help from his
friends when he was starting Venture for America (VFA), a
non-profit organization aimed at helping talented students
gain start-up experience.

It all started when he received a pass to


an Economist conference from a friend of his who could no
longer use it. There, he met two people who would be
integral to VFA’s success: Tony Hsieh, CEO of Zappos, and Jeff
Weiner, CEO of LinkedIn. Tony ended up spending $1 million
on VFA, and Weiner became an adviser.

But successful start-ups aren’t just about finding the right


people – they also need to find the right location. Every
region of the world has its own focus, so you should find the
one that matches yours.

A good example of this is Cincinnati-based General Nano,


which manufactures a carbon nanotube material that can be
used to make planes more resistant to lightning strikes. Their
base in Cincinnati means that the company can take
advantage of the military connections in the city to find
buyers for its products.

However, location isn’t all about finding contracts. It’s also


about affordability. It goes without saying that office space in
New York City is more expensive than that in smaller cities
like New Orleans. Situating yourself in a “nontraditional” –
and therefore cheaper – city isn’t necessarily bad news: for
example, Zappos.com is located in Las Vegas, and Under
Armour is in Baltimore, and both of these companies are
wildly successful.
Get in on the ground floor: why joining a promising young
start-up can be great for your future.

Do you have any idea who Google’s seventh hire was back in
1999? Probably not. Back then, Google wasn’t cool. However,
this person probably had an incredible experience and is now
loaded. Rather than starting your own firm, another
attractive option could be joining a young, promising start-
up.

Joining a start-up before it is “cool” can make you rich. With


young start-ups, it’s possible to snag a position with real
responsibility, and your personal contributions can make the
difference between taking off or languishing at the bottom.

Moreover, if a company gains enough success to become a


household name, typically only dozens or hundreds of early
employees have their careers defined by this success. It’s
better to be in that small pool of contributors than to join
once they’ve already “made it.”

For example, the yogurt producer Chobani started out by


purchasing a defunct yogurt plant in New York in 2005. Since
then, they’ve grown to make over $1 billion in revenue and
have more than 1,000 employees. Those early decision
makers, however, are the ones who get all the glory.

Furthermore, if you encounter some misfortune along the


way, you are very likely to bounce back. This resilience
develops as a result of building a habit of creating things and
getting things done. These skills are more easily acquired by
working for a start-up than in the professional service
industry, and they will help you to overcome the difficulties
of entrepreneurship.

For example, when the tech bubble burst in 2001, virtually


everyone was out of a job. However, a friend of the author,
whose own company had gone bust, simply started another
that was later acquired by Zynga, and he was thus able to
recover.

So if you want to find new ways to define your career path,


you should check out promising start-ups in your area and
apply for a job!

Now you should have a good idea of what you need to focus
on for your first adventure in entrepreneurship. But you’re
only one person! The final blink will look at ways to get
college graduates to see the value in entrepreneurship.

Encouraging young entrepreneurs: how we can increase


entrepreneurial activity among top students.

By now we’ve seen the traps that high-potential students fall


into during their early careers, and we’ve also seen the
enormous benefits of getting them interested in
entrepreneurship. But the question remains: how do we
convince them to get excited about entrepreneurship?

First, we need to find them the right role models: builders.


There are many ways to tackle this. For example, universities,
media companies, and public figures should actively promote
start-up entrepreneurs as role models and invite them to tell
their unique and exciting stories to students.
In addition, every university should have an “entrepreneurial
hour,” such as the one at University of Michigan, where
experienced entrepreneurs come to speak in front of
hundreds of students about their own stories and careers.

Next, we should enlist entrepreneurs as mentors. One way to


do this would be for universities, business schools, and even
law schools to produce a roster of alumni entrepreneurs who
are willing to offer their advice to budding young minds, or
even take on paid apprentices.

This sort of program is not without precedent. For example,


the Yale Entrepreneurial Institute is one such successful
university’s effort to enlist experienced entrepreneurs as
mentors for current students.

Finally, we should improve upon and invest in


entrepreneurship education. A program like this would be
more action-oriented and real-world driven than current
business programs. At present, the study of entrepreneurship
is too abstract and often ends abruptly after graduation,
when it’s time to get a “real job.”

A successful entrepreneurship program would instead be


action-oriented, producing real, functioning businesses and
contributors.

If the United States is serious about keeping its place as an


economic powerhouse, it has to foster a strong
entrepreneurial spirit. It must offer students easy access to
entrepreneurial mentoring or a goal-oriented
entrepreneurship education in order to kickstart innovation
and drive the economy.

Start-Up Nation
The Story of Israel’s Economic Miracle
Learn what drives a nation’s start-up spirit.

Can you be born into entrepreneurship with the gift of an


“innovative” nationality? According to Senor and Singer,
being from Israel can give you a considerable head start.

These blinks show how Israel has become a global


powerhouse in innovation and entrepreneurialism. Its culture
and geopolitics make the country swirl with both creative
and sustainable start-ups developing everything from electric
cars to money transfer systems. So if you’re curious to learn
about the social and economic building blocks that provide
the foundations for successful start-ups, Israel is the country
to investigate.
Israel has a high concentration of innovation and
entrepreneurship – fertile grounds for creative start-ups.

The media invariably offers a skewed portrayal of Israel, only


reporting on its ongoing political conflicts with neighboring
countries, conflict with the Palestinians, or the Iranian
nuclear issue. But a major facet of Israel is often disregarded,
and that is its economic and innovative achievements.

Many people are unaware that Israel represents one of the


most densely concentrated centers of innovation and
entrepreneurship in the world.

In fact, Israel is the word leader when it comes to the


percentage of the economy spent on research and
development. As a result, Israel also has the highest density
of start-ups in the world, with a total of 3,850 – one for every
1,844 Israelis.

Today, it’s difficult for technology companies to overlook


Israel – and most haven’t. Cisco, for example, has acquired
nine Israeli start-ups and is on the hunt for more.

Israeli start-ups also reel in a large amount of venture capital,


which is the most crucial measure of technological potential.
In 2008, venture capital invested per capita was two and a
half times larger in Israel than in the United States, more
than 30 times greater than in Europe, and 80 times greater
than in China.
Israeli companies also have a powerful presence on the
American stock exchange NASDAQ, accounting for more than
all European NASDAQ companies combined.

Israel’s start-up scene is vibrantly creative. One example is


BetterPlace, which was founded to promote electric cars.
There are well-known disadvantages to electric vehicles, such
as expensive batteries, a short driving range, and a lengthy
recharge time. However, if car buyers don’t need to purchase
the batteries outright with the car, then electric cars can be
as cheap as gasoline cars. So BetterPlace used this to their
advantage by leasing car batteries and creating stations
where the batteries could be swapped.

But why is the start-up scene flourishing so well in Israel and


not elsewhere? Let’s find out!

A culture of doubt and argument, assertiveness and


informality shape the national ethos of Israel.

One reason for Israel’s entrepreneurial achievements can be


found in its people’s mentality. Israeli people live in, and are
framed by, a culture of rebelliousness, informality and
assertiveness.

In 2008, PayPal bought the Israeli start-up Fraud Sciences – a


company offering solutions to online payment scams. Scott
Thompson, president of PayPal at the time, stated that the
demeanor of the Fraud Sciences employees during his first
meeting made quite an impression on him. The employees
were unintimidated and openly challenged Paypal’s methods
for detecting fraud.
Scott Thompson was experiencing what is known to Israelis
as chutzpah – a Hebrew word meaning “cheek” or
“audacity.” To Israelis, chutzpah is the norm. Whether at
home, in school, or in the army, they learn that assertiveness
is welcome and expected.

Israeli people are also traditionally open to questions and


foster an anti-hierarchical ideology.

Questioning is built into the Jewish faith thanks to centuries


of Rabbinic debates concerning the interpretation of the
Bible. These open-ended interpretations and counter-
interpretations produced a culture of doubt and argument
that spilled over into civilian life. As a result, anti-hierarchical
mind-sets are present throughout Israeli society.

Take the Israeli military: the Israeli army is deliberately


understaffed at senior ranks, because fewer senior officers
lead to more individual initiative at lower levels.

In addition, once a year, thousands of men are enlisted into


the military reserve forces. This curtails social hierarchy
because in the reserves, taxi drivers can give orders to
millionaires, and young adults can train their older relatives.

The Israeli military serves as an incubator for high-tech


start-ups and prepares its cadets for business environments.

Because every Israeli has to serve in the army for a minimum


of two years, their military is an integral part of society. It’s
also where much of the country’s creative energy comes
from, so it acts as an incubator for high-tech start-ups.
In Israel, all 17-year-olds must report to military recruiting
centers for screenings that include psychological testing and
medical evaluation. Those who do particularly well in the
screening are offered training in the military elite units – the
highest of which is the Talpiot unit.

Talpiot cadets complete an accelerated university degree in


math or physics while they are introduced to the
technological requirements of all military branches. The aim
of this is to mold them into leaders who can seek out cross-
disciplinary solutions to military problems.

Although Talpiot training is designed to develop the military’s


technological elite, the acquisition and combination of
leadership experience and technical knowledge is also
applied when founding new companies, making cadets the
ideal people to do exactly that.

But it’s not just Talpiot graduates who enjoy this kind of
training: every military unit provides training in innovative
and adaptive problem solving, which is helpful in business
environments.

Furthermore, the military is a space where young men and


women work closely with people from different cultural,
socioeconomic and religious backgrounds. Learning how to
deal with a wide variety of people is something that the
cadets can benefit from later when dealing with international
business partners.

As an added bonus, many business connections can be


formed during the long hours of operations and training.
So we can see how the Israeli military fosters an
entrepreneurial culture, and it’s no surprise that the
graduates have become founders of some of Israel’s most
successful companies.

The collective kibbutzim communities and a new venture


capital industry characterize two great leaps in the Israeli
economy.

Israel’s economic history is marked by two significant leaps.


The first came during 1948 to 1970, and the second is still
happening today, having started in 1990. During these leaps,
Israel was transformed from a less-developed country into a
trailblazing hub of innovation.

The collective communities known as kibbutzim were at the


core of Israel’s first great economic leap. Kibbutzim were
created as agricultural settlements devoted to abolishing
private property and forming an egalitarian community. They
were both hyper-collective and hyper-democratic, and
through them technological breakthroughs were made.

For example, in the Hatzerim kibbutz in the Negev Desert,


the soil was found to be too salty and troublesome to
cultivate adequately. To solve this dilemma, the members of
the kibbutz came up with a way to flush the soil so that they
could grow crops there. They were successful, and in 1965,
the kibbutz started a business to manufacture irrigation
systems. This was the beginning of what became Netafim, a
global drip irrigation company.
During Israel’s second great leap, a new venture capital
industry emerged.

In 1993, the Israeli government began an initiative


named Yozma that offered tax incentives for foreign venture
capital investments in Israel, and promised to double any
investment with government funds. This created an
eagerness in the US venture community to invest in Israeli
start-ups, allowing the Israeli tech scene to participate in the
tech boom of the 1990s.

During this time, Israel’s information-technology revenues


rocketed from $1.6 billion to $12.5 billion.

Eventually the Yozma program created a new venture capital


industry which revamped the Israeli start-up scene. This was
pivotal to Israel’s second great economic leap.

Immigration has been a boon to the Israeli economy – as


has the movement of Israelis abroad.

Imagine being able to have anything you want for dinner,


from Yemeni cuisine, to Russian specialities, to
Mediterranean dishes. This is a reality in Israel, which is
home to over 70 nationalities and cultures due to large
influxes of immigrants.

Immigration has also boosted the Israeli economy in other


ways.

Take, for example, the Russian Jewish immigrants. By the


1990s, large waves of Russian Jewish immigrants began to
arrive after the fall of the Soviet Union. Russians with
doctorates and engineering degrees flowed into Israel in
huge numbers. Though finding jobs and building houses for
the new arrivals was quite an undertaking for the
government, the Russians had arrived at an ideal time.

By the mid-1990s, the international tech boom was gaining


momentum, and Israel’s technology sector was eager for
engineers. The Russian engineers were the right people for
Israeli tech start-ups and contributed a great deal to their
success.

An influx of new talent is a considerable benefit to the


economy, but what about those leaving the country? Well,
the movement of Israelis to and from the country also helps
foster its economy.

For example, after earning an engineering degree at Ben-


Gurion university in Beersheba, Israel, Michael Laor attained
the position of director of engineering and architecture at
Cisco in California. In 1997, 11 years later, he decided to
return to Israel.

In order to keep hold of such a talented employee, Cisco


agreed that Laor should start a research and development
center for the company in Israel. By 2008, Laor’s center had
700 employees, and Cisco has spent at least $1.2 billion
purchasing and investing in Israeli companies.

People like Michael Laor contradict the notion of the widely


discussed Israeli “brain drain.”
Israel turned geopolitical disadvantages into economic
advantages.

Israel is surrounded by political adversaries on every border


and is in a constant state of conflict. This may seem harmful
to the Israeli economy, but these geopolitical circumstances
have actually been advantageous in the long run.

Israel has managed to turn its political isolation into an


economy built on knowledge and innovation.

Because of the political problems, Israelis weren’t able to


travel to any neighboring countries until recently. Living in
such isolation, it was therefore natural for Israelis to look
internationally and embrace fields in technology and
telecommunications, which would make borders and
distances essentially irrelevant.

In addition, Arab trade boycotts forced Israel to export to


markets further abroad. As a result, Israeli companies
spurned the production of large, readily manufactured goods
with high shipping costs in favor of small technical
components and software.

Israel’s geopolitical confinement positioned the country


perfectly for the worldwide turn toward knowledge- and
innovation-based economies – a trend that is still vibrant
today.

Moreover, Israel turned its enduring military threat into an


advantage in the high-tech economy.
Initially, Israel opted to buy large weapon systems from other
countries, as opposed to investing the massive resources
required to produce them.

After 1948, Israel formed an alliance with France, which


included the French supply of military equipment and fighter
aircraft. But in 1967, France withdrew its military support,
leaving Israel exposed and vulnerable considering its
geopolitical situation and the continual risk of war with
neighboring countries. However, this sparked Israel’s drive
for technological independence and, as a consequence, Israel
started to develop its own military technology.

The impressive technological talent that was poured into


military projects was later unleashed into the economy,
where military engineering graduates entered the private
technology sector and helped instigate the high-tech boom.

There are several threats to Israel’s economic success.

The Israeli start-up scene may seem fairly established, but it


began just over a decade ago. So what if Israel’s economic
success was simply a fluke resulting from random events? In
order to ensure its ongoing strength, Israel’s economy will
likely have to overcome several challenges.

One of these challenges could well be that Israel’s economy


gets too dependent on venture capital.

A dwindling venture capital supply means less money for


Israeli start-ups. This was already evident during the global
financial crisis in 2008, which reduced the dollar amount
available for venture capital investments. With insufficient
financing, many Israeli start-ups were left with no choice but
to shut down.

Israeli companies also lean too heavily on export markets.

Over half of Israel’s GDP (gross domestic product) comes


from exports from Europe, North America, and Asia. When
those economies fall on hard times, this means fewer
customers for Israeli start-ups. Due to the Arab trade
boycott, Israel has no access to the majority of regional
markets and the domestic market is simply not big enough to
act as a substitute.

Yet probably the most worrying threat to Israel’s economic


growth is its minimal participation in the economy.

Israel’s low workforce participation rate (just over 50


percent) is mainly attributed to two minority
communities: Haredim, or strictly orthodox Jews, and Israeli
Arabs.

84 percent of men in mainstream Israeli Jewish society


between ages 25 and 64 are employed, and 75 percent of
women in that group. Among Arab women and Haredi men,
these percentages are almost reversed: 79 percent and 73
percent, respectively, are unemployed.

The primary reason behind this low participation is that these


groups generally do not serve in the army. This means that
they are less likely to learn and develop the entrepreneurial
skills that the army offers, and they cannot cultivate the
business networks that Jewish Israeli youth form while in the
military.

Start-up Wealth
How the Best Angel Investors Make
Money in Start-ups
Make smarter investments, like a top angel investor.

Angel investing in recent years has become a common way


for start-ups to get funding and jump-start a business.
Although angel investors usually don’t have the money that
larger investors do, angel investments, however small, can
make an entrepreneur’s dreams come true.

But how do you get an angel investor on the hook? A good


place to start is knowing what sort of angel investor you
need. And if you want to invest in start-up ideas yourself, you
should consider which strategies will serve you best as you
seek out the next big thing.
There is no better place to start than by looking at the skills
and experience of some of the most successful angel
investors out there.

There are three types of angel investors; each has its


reasons for investing.

Before we examine what makes an angel investor successful,


let’s first define the category. Angel investors – the wealthy
individuals who financially support start-up companies –
come in three types: momentum investors, value
investors and alternative investors.

Momentum investors are characterized by a reliance on


instinct and vision. In other words, their selection technique
doesn’t involve much in the way of specifics or hard data.
Rather, if a momentum investor feels a connection with or is
somehow engaged by a company, he will offer his support.

Brad Feld, a managing director at Foundry Group, is a leading


momentum investor and has a particular approach when
evaluating his gut feeling about an entrepreneurial project,
that we’ll explore in depth in the next blink.

Value investors invest in companies that come to the table


with solid financials. David Verrill, founder and managing
director at Hub Angels Investment Group, is a renowned
value investor who takes the time to investigate a company’s
revenue sheet before taking the plunge. He prefers to review
company data from the last 12 to 24 months, which helps
him determine whether a business idea will eventually take
off.
Finally, alternative investors want to do more than make an
investment; they want to send a message. Rather than
investing in stocks or bonds, alternative investors focus
efforts on a specific business area, such as health care,
antiques or even wine, to create a significant impact.

Catherine Mott, the founder of the BlueTree Capital Group


and the BlueTree Allied Angels, is a good example of an
alternative investor. Her organizations assist entrepreneurs
in building solid businesses, with a focus on private equity
investments, to ensure local start-ups receive the necessary
financial support.

Let’s now take a closer look at each angel investor category,


starting with the momentum investor.

Momentum investors invest in ideas that excite them and


entrepreneurs who engage them.

Have you ever wondered why there aren’t more people like
Bill Gates? The answer is simple: not all business ideas have
potential. This is a problem with which every budding
investor has to wrestle.

So how do you decide which businesses are worth


supporting? Angel investor Brad Feld, an established
momentum investor, has a few pretty good ideas.

Feld believes that any potential investment target must offer


three things: a passionate entrepreneur, great initial product
feedback and a long-term relationship.
Any person who is passionate about his or her idea is an
entrepreneur with potential in Feld’s book. After all, how can
a business leader get customers excited about a product if he
isn’t thrilled with it himself? As an investor, however, Feld
believes it’s crucial that the product excites him, too.

But of course even the most exciting products can fail. So,
before making an investment, Feld ensures that the product
has been properly road-tested with the company’s target
audience.

Let’s say Feld is interested in a start-up selling all-natural


sweets. He’d first share the product with his family and
friends, to gauge its market potential. If feedback is positive,
and Feld’s family and friends feel that such a product is
missing in the market, it’s likely that Feld will decide to
invest.

But there’s one more test that a start-up needs to pass


before Feld is on board. Feld asks himself whether he’d
consider investing in the company for the long term, even if
he were only to play a small role within the company itself.

Here, Feld doesn’t place too much weight on the experience


or past achievements of the start-up’s entrepreneurs. What
matters most is a feeling of connection between the business
and the investor. Only when this connection is solid, and the
business has successfully met his other two criteria, will Feld
decide to invest.

Value investors crunch the numbers to determine whether


a start-up is worthwhile.
David Verrill is a value investor. He first worked in corporate
fundraising at the Massachusetts Institute of Technology, and
later joined other investors to found the Hub Angels
Investment Group.

This group focuses on local, capital-efficient start-ups; that is,


companies that use relatively low capital expenditures to
produce output that is, nonetheless, great. Hub Angels
doesn’t look for grand visions but instead considers whether
a start-up's finances genuinely show growth potential.

Because most Hub Angels founders have a background in the


life sciences, the group invests largely in areas such as
diagnostic and health-information technology, yet avoids
pharmaceutical companies.

Why? Well, according to Verrill’s experience, such companies


– often seeking funding to the tune of $20 million to $40
million – simply weren’t profitable investments.

Hub Angels is a relatively small investor group, and might


struggle if faced with competing investors in the pharma
field. So Hub Angels adapted its strategy to its scale and only
invests in start-ups with lower capital requirements.

Another feature that makes the Hub Angels strategy stand


out among other angel investors is that the group doesn’t
just invest in a company once.

Investors usually offer a single investment to a start-up and


then are done. But Hub Angels discovered that by following
investments attentively, the group could invest multiple
times at certain moments that could boost returns.

A case in point is the company Localytics, which enables apps


to analyze a user’s mobile-phone activity and generate
targeted in-app advertisements. Hub Angels participated in
two investment rounds for the company. Based on its initial
success, Localytics has since raised $16 million from other
venture capital companies.

Like other successful start-ups, Localytics will soon reach a


point where it no longer requires help from Hub Angels. At
this point, the angel investor’s job is done!

Both investor and founder can also benefit from short-term


investment relationships.

David Bangs became an angel investor in 2007, when he


joined the Northwest Energy Angels investment group. A
typical alternative investor, Bangs invests in clean technology
and has clear ideas about what makes a good investment as
well.

Bangs believes that, as a good investor, you must have a


strategy that provides you and your money with a quick exit.
But what if a company simply doesn’t seem to be set up for
such a contingency? There are alternatives. Bangs often
suggests purchasing some of the company’s shares, but only
with the condition that company owners will repurchase your
shares at an agreed price if you decide you want out.
So if Bangs wanted to leave an ongoing arrangement to
invest in another start-up, for example, his pre-agreed
condition would allow him quick access to his money – which
is much faster than having to find another buyer to take on
his shares.

This simple strategy is highly advantageous not only for


investors but also for founders, although you might be
wondering why any entrepreneur would agree to such a deal.

Many companies appreciate the opportunity to repurchase a


given percentage of shares, so long as this percentage is
smaller than the company’s margin. This arrangement offers
the benefit of a greater ownership stake and the potential for
a bigger exit, should company owners decide to sell.

To illustrate this, let’s imagine a start-up with a 40-percent


margin. If the company allocated five percent of its returns to
repurchase shares, it would have an effective margin of 35
percent. This, in turn, is an attractive result for shareholders!

Consider joining forces with other angel investors to help


keep your feet on the ground.

We now know how angel investors evaluate potential


investment targets and decide to direct funds to an inspiring
start-up company. An angel investor’s strategies and
principles allow him to make decisions effectively.

But sometimes, it’s not so easy to make the call alone. This is
when you need other investors around you.
Catherine Mott, an alternative investor, is part of an angel
group. Here’s why:

Let’s imagine that you’re excited by an entrepreneur’s idea.


You can’t wait to help him enter the market, and are thrilled
to have found such a great opportunity. But how great is the
idea, really? It’s likely that in your enthusiasm, you’ve
overlooked a few key problems.

This is where fellow angel investors come into play. They can
offer you critical opinions that might bring you back down to
earth, allowing you to make a more rational, informed
decision.

Catherine Mott pays particular attention to the management


abilities of start-ups. She makes sure that start-up founders
display due diligence; she wants to be sure they’re genuinely
ready for the market.

As part of this process, Mott assesses the team leader’s skills.


How well does the person suit the role? Can the person take
criticism? Does the person help the team work smoothly
together? If these questions can be answered in the
affirmative, then the team is ready for the market.

But we’re not quite done yet. Next, Mott examines the target
market, in light of the business model or product. This
process takes between four and six weeks, depending on the
quality of the team.

Although time-consuming, this phase is important, as it


reduces the risk of failure. And the start-up gains too, as Mott
is always there to ensure that the company’s financial
strategy is sound and sustainable.

Startup Growth Engines


Case Studies of How Today's Most
Successful Startups Unlock Extraordinary
Growth
Learn the secrets behind Silicon Valley's greatest success
stories.

It is the dream of every entrepreneur to attain the rapid


growth experienced by the likes of Uber and Facebook – to
take his fledgling business into the stratosphere in next to no
time at all.

Happily, it doesn’t have to remain a mere dream. The hugely


successful start-ups of Silicon Valley got where they are today
through clever marketing and positioning techniques that
any entrepreneur can employ.
But what are these techniques? Well, in these blinks, you’ll
discover a few of the growth hacks that have greatly
benefited companies like Github, Yelp and many more.

Growth hacking is a new type of marketing inspired by the


dazzling successes of Silicon Valley start-ups.

Chances are you’ve heard of Silicon Valley as being home to


many innovative and successful start-up companies. But you
might be impressed to learn just how successful these
companies are.

The figures are truly astonishing: in a very short period of


time these start-ups have generated billions of dollars in
revenue and attracted hundreds of millions of customers.

Take Uber, for example. The transportation service officially


launched in 2011 and in less than five years has achieved
worldwide fame; as of 2015, the company is valued at $62
billion. What’s remarkable is how fast the growth was in
comparison to the traditional economy.

Start-ups achieve this kind of success by largely avoiding


traditional growth techniques.

For instance, Uber didn’t rely on typical marketing tools like


costly paid advertisements. Instead, they targeted their
clients using data analytics and relied on viral and word-of-
mouth marketing to expand their customer base.

This new way of doing business became known as growth


hacking.
This approach to marketing is focused on quickly maximizing
growth and isn’t limited to one specific sector. Growth
hacking can work for mobile applications, business-to-
business services or marketplaces and social networks alike.

And there isn’t one simple formula for successful growth


hacking, either. It involves a wide range of factors that are
combined to achieve excellent performance through
attracting, retaining and generating revenue through new
customers.

To achieve this, growth hackers lead teams of experts in


multiple fields who are just as familiar with scientific thinking
as they are with data, statistics and creativity.

In the following blinks, we’ll look at some of the best growth


hacks and how they were put to use by some of today’s most
successful start-ups.

Solving a problem is the best way to guarantee success.

You may have heard this before, but it is worth repeating:


the best ideas for a successful new business come from
identifying a problem and offering a solution. But how do you
find the right problem to solve?

The best kind of problem is one that affects a broad group of


people.

Square is an example of a company that found success by


providing a solution to a problem many people were finding
difficult to overcome. Jack Dorsey, co-founder of Twitter,
started Square in 2009 after observing his friend’s inability to
conduct a payment transaction when a customer wanted to
use a credit card to purchase a glass faucet.

Dorsey knew many small businesses were experiencing the


same problem. Even though many potential customers use
credit cards, not all businesses can afford the equipment
necessary to allow these kinds of payments.

Square solved this problem by reducing these costs and


offering affordable hardware and software to make credit
card payments more accessible to small business.

This shows that you don’t have to look far to find a problem
needing a solution. Observe your surroundings, focus on
what interests you and pay attention to the problems people
run into. An unsolved problem can be just around the corner.

The crowdsourced review site Yelp is an example of a


solution to a local problem that became a worldwide success.

Before Yelp, local small businesses had the problem of being


unable to compete with the kind of marketing budgets of big
chain stores and restaurants. They had to rely primarily on
word-of-mouth marketing from satisfied customers.

Yelp recognized this issue and created a platform based on


customer recommendations. It disrupted the old model and
offered equal exposure, offering any business a chance to
enjoy the benefits of a good reputation.

Providing a valuable service can turn your idea into a must-


have that changes people’s behaviors and lives.
Have you ever come across a product or service that ended
up becoming an essential part of your life? Some start-ups
like WhatsApp and Facebook have managed to create these
kinds of must-have products that find their way into
customers’ daily routines. So what’s their secret?

These innovations come from keen observation and an


understanding of customer needs. This kind of analysis is
exactly how Uber targeted their customers in the
transportation market. The company found opportunities by
looking at situations when people find driving and getting
around most problematic: during holidays, sporting events,
bad weather or when you’re out on the town.

After starting out in San Francisco, Uber had this valuable


knowledge in mind when they moved to Chicago. Since the
city is known for its troublesome weather, great nightlife and
many loyal sports fans, it was the perfect match for the
company. Nowadays, Uber is such a must-have application
that some users actually question the need to own a car at
all.

Try starting the search for your must-have idea by looking at


your own life and asking what solution you could use to
improve your situation. If you find a problem this way, you
have the added benefit of being able to test out your service
yourself and knowing whether it will meet customer
expectations.

This is how the web platform GitHub was born in 2008.


It started when computer programmers realized they needed
a better way to manage their code. Sharing code on open-
source projects was problematic and inefficient, requiring
downloading, revising and uploading code back and forth.

GitHub offered a solution that disrupted the entire process


and allowed programmers to share code online, removing
the daily struggle and creating what would become a $2
billion company in only a few years’ time.

Starting local and expanding later is a sure-fire way to get


enough initial traction.

Once you find your must-have product or service, it might be


tempting to launch it on a global scale. But many start-ups
have seen this approach backfire. By going too big too soon,
you run the risk of spreading yourself too thin and ending up
a small player stretched across several markets.

To increase your visibility and gain momentum, it’s better to


start big in a local niche market.

Many successful Silicon Valley start-ups followed this advice


by taking advantage of the local San Francisco Bay Area
market to generate momentum.

This is where Uber first launched its services, focusing


intently on one city before rolling out to other locations at a
rate of one per month. Uber knew the tech community
around San Francisco would be receptive to their services;
the company took advantage of this by sponsoring tech and
venture events and even offering free rides to attendees!
Uber used this initial customer base to collect vital
information on the industry and market. With this knowledge
in hand, the company could then successfully adapt its
approach when it came time to expand.

By focusing your efforts to satisfy the expectations of one


specific audience, you can generate the kind of positive
word-of-mouth exposure that will enable you to grow.

This is also what Yelp did in its first year in San Francisco. By
focusing on one city, they proved they could gather an
abundance of reviews and create an entire entertainment
guide for the area. With their reputation in San Francisco
cemented, they could then move on to the next city.

A freemium business model is a good way to get customers


to try your service, but it’s not without risks.

Have you ever been scrolling through mobile applications


and decided to try out a free version before committing to a
purchase? You’re certainly not alone. Many companies know
the benefits of offering a non-cost service, or a freemium
model, to eventually generate revenue.

A freemium model gives customers a chance to use a basic


free service with the option to unlock an upgraded, premium
version for a certain price.

The note-taking app Evernote used this business model to


create millions in revenue. Evernote users can access the
application for free but have to pay a subscription fee for
additional features like storage space, offline access and
syncing across multiple devices.

Evernote could confidently use this strategy because they


observed that the more time users spent with the
application, the more engaged they became with it.

The key to the freemium model is offering an upgrade with a


clear increase in value to motivate customers to buy it.

Otherwise, you run the biggest risk that comes with the
freemium model, which is giving customers no clear reason
to upgrade.

The creators of GitHub faced a similar challenge when they


launched their platform as a free service with unlimited
public storage. With this model they ran into two problems:
first, all the user content was accessible to anyone who
joined, which some major companies didn’t appreciate; and
second, their server bills were quickly adding up.

Luckily, a solution presented itself. GitHub decided to offer


private storage that more protective companies could pay to
use, while keeping the public repository free of charge.

Offering free content or tools is also a good way to reach


wider audiences.

While some companies have found success with the


freemium model, not all free offers have to involve a basic
version of a paid product or service.
Offering free content or tools to the public is another proven
way to generate business. Not to be confused with a free
demo version of a product, this refers to a free stand-alone
offer that aims to help a potential client.

But, like the freemium model, the ultimate goal is for the free
content to draw in paying customers.

This is the strategy that the content marketing service


HubSpot successfully employed when it started in 2006. The
company offers ways to improve a customer’s commercial
visibility through tools and services like social platform
marketing, content management and search engine
optimization.

HubSpot came up with a clever way to market itself and let


clients know that its services were needed. It created a
stand-alone tool called Marketing Grader where people could
add a URL and see the website’s performance grade. If the
site performed poorly, what better way to fix it than by using
Hubspot’s services!

Free tools like this usually end up being good for both your
business and your customers.

This method also lets you provide free assistance to potential


customers while you gather valuable information, which you
can then put to use when they show interest in paying for
your services later on.

This is exactly what HubSpot did, and it allowed them to


dramatically grow their customer base while keeping their
sales force to a minimum. By putting a free tool on the
market, they were able to gather huge amounts of customer
contacts while simultaneously enticing customers to pay for
their services.

Attain improved exposure by achieving virality and going


social.

Now that we’ve learned how start-ups quickly maximize their


growth, let’s look at two ways to quickly maximize a
company’s exposure in the marketplace.

First, viral marketing can be a key to success – even though it


is difficult to control.

Managing virality is about creating the conditions that make


it possible for your idea, product or content to quickly jump
from one person to the next and go global overnight.

The good part about virality: it costs next to nothing. The bad
part about virality: it usually happens unintentionally and
without a clear reason.

One company that might have cracked the code of virality is


Upworthy, a media website that specializes in viral content
and the emotional, surprising videos that users like to share.
A mere 20 months after Upworthy launched, it was attracting
88 million unique monthly visitors.

The articles that Upworthy uploads are all tested to find the
virality “special sauce.” An article might be given up to 25
different headlines to find out which one will generate the
most clicks!
Another way for websites to improve exposure is through
social platforms.

In the age of Facebook, it is clear that you can attract and


grow your customer base by creating a sense of community.

This is one of the secrets to how Yelp succeeded: while other


review sites featured anonymous users, Yelp created a
healthy network of subscribed members, each with photos
and full profiles. The active users had an identity and were
part of a community, which made their opinions more
trustworthy than those of an anonymous stranger.

GitHub also formed a similar network by creating the largest


programmer community on the web. This has transformed
GitHub into a social platform that even headhunters might
turn to when looking for new hires!

Startupland
How Three Guys Risked Everything to Turn
an Idea into a Global Business
Improve your chances of standing your ground in the land
of startups.

Say you’ve just struck upon a brilliant idea for a business. Or


maybe you already had one, but failed to follow through with
it. Either way, you’re hoping to build a successful business
around your new idea.

But in the seemingly open universe of creativity, competition


is fierce. Here, everyone fights tooth and nail to turn their
innovative ideas into a reality. So, how can you avoid getting
swallowed up by the hordes of start-up predators?

You can start by taking advice from one of the heavyweights


in the field. In these blinks, the author shares his personal
story of building his own successful company, Zendesk. From
tentative ideas to a thriving US-based business, the author
invites you along his journey of ups and downs, offering
plenty of tips on how to get your own ideas off the ground.

It’s okay if your first start-up isn’t your last.

When Columbus returned from his journey to the Americas,


some of his peers insisted that any Spaniard could have
“discovered” the new continent – all they had to do was sail
westward. To prove them wrong, Columbus placed a hard-
boiled egg on the table in front of them and challenged them
to make it stand on its own. When they failed, he took the
egg and gently tapped it against the table, creating a small,
flat base that it could stand on.
Columbus’s point was that it’s easy to do something once
you know how – when you don’t, you have to take a risk.
Start-ups work the same way.

Founding a start-up is all about using your entrepreneurial


spirit to try new things. The author worked on a number of
projects before developing Zendesk, a software tool that
enables companies to provide better customer support to
their clients.

His first venture created 3-D illusions based on 2-D patterns,


using a piece of software. He ran his business alone:
customers sent him orders and he sent the disks out himself.

The author’s next product was a tool for producing websites,


and it gave him his first taste of failure when it collapsed
during the dot-com crash of 2001.

When founding a start-up you also have to realize that


sometimes the best ideas are not always the most
interesting.

At first, few people had faith in the idea for Zendesk, as they
weren’t inspired by the thought of a company focused on
providing better help desks and customer support. Alex
Aghassipour, who ended up becoming one of the company’s
core members, initially thought Zendesk sounded incredibly
boring.

Like Zendesk, a lot of important start-up ideas might seem


unexciting at first, but they can become very attractive if
they’re executed well. Take the company Dropbox, for
instance. File-sharing isn’t the most exciting service to
provide, but Dropbox has made this tedious task easy,
interesting and even socially engaging.

Choose your investors wisely.

If you’re a kid on the playground looking for money, the


school bully probably wouldn’t be the best person to go to.
He might give you the money, but if so, he’ll ask for it back
with interest. The start-up scene isn’t all that different.

Not all investors are good investors. Unfortunately, start-ups


don’t usually have a lot of options when it comes to getting
their initial investments; when you first start out, you’ll be
exposed to a lot of investors who are only concerned with
themselves. The best thing for your start-up is to turn them
down and hold out for a bit longer.

The author dealt with this same problem when he founded


Zendesk. The first angel investor who was interested in his
project kept asking for unreasonable amounts of information
and materials from the company. The author eventually
realized this was a tactic to put the young team under
pressure. The investor knew they needed money urgently
and was trying to gain more negotiating power by delaying
the investment decision and asking for more paperwork.

So where should you look for investment? Sometimes your


friends and family members make the best investors. When
Zendesk started to run out of money, the founders asked
their friends and families to invest, and word of the project
spread from the founders’ colleagues to their colleague’s
bosses. One person invested as much as $30,000!

Asking your friends and family for money isn’t easy, however.
The author’s advice is to have low expectations, refrain from
giving investors any influence and be prepared to disappoint
people – you might even lose some friends.

And even if you’ve collected enough funding already, don’t


turn down a good investor.

After the Zendesk founders had raised enough funds for their
business, they were contacted by another angel investor.
Instead of turning him down, they accepted his investment
too, which allowed them to grow even more ambitiously.
What’s more, they gained a new, experienced financial
partner.

Pick a great team – and fight to keep them together.

Did you play team sports in gym class as a kid? Which team
member was the most fun: the person who wanted everyone
to participate and have a good time, or the star player who
scored all the goals but did it alone? Of course, it’s the
former.

Start-ups work in a similar way. People with good team-


building skills often make the best entrepreneurs; however,
it’s not always easy to keep the team on track.

In Zendesk’s early days, the three founding members had a


hard time focusing on the project, as they were all working
without pay. They had little money with which to support
their families and it took a lot of commitment to stay with
Zendesk instead of giving up and moving to something safer.

The author kept the team together by offering to pay one of


the founders a small salary, even though the company didn’t
have any money. He realized that keeping the team together
was more important than breaking apart because of a lack of
funds.

But it can also be hard to get a team to agree, especially


when they are in fragile situations. Zendesk ran into trouble
when the founders had to acquire some major funding and
started selling the company shares. This meant the founding
members would become a minority among stakeholders – a
hard reality to face. The new board members were even able
to fire the founders if they wanted to.

The author lost his temper once during this stressful time,
and at one point when he wasn’t able to persuade his two
partners of the switch, he yelled at them during a meeting
and stormed out. The next few days were awkward, but
things eventually settled down. The team members came to
accept that getting major funding was the only way forward.

The United States is the best place to be in the start-up


world.

Outsiders are often annoyed by American aphorisms like


“fake it till you make it” or “winners never quit.” American
optimism might seem unrealistic at first glance, but it’s
actually helped foster a great start-up environment. You
can’t succeed with a start-up if you don’t have the
confidence to take risks!

In fact, all major internet-related businesses (and the internet


itself!) originated in the United States. Denmark, for instance,
only had one internet provider and very expensive dial-up in
the early ‘90s, but American cities like San Francisco
embraced the internet early on and were enthusiastic about
it right away.

San Franciscans were using the internet to communicate,


advertise and order food long before most Europeans even
had e-mail.

Why? Because a lot of great innovators and big investors


congregate in the United States. It was thus clearly the best
place for the Zendesk team to find their first
investors because the American start-up scene was thriving.

The author attended a TechCrunch summer party in San


Francisco after he launched Zendesk, and nearly all the
guests there had heard about or were using his product!
They were all working on their own start-up projects too. The
author felt much more at home in that community than he
did in the much more conservative start-up scene in
Copenhagen.

So the Zendesk founders weren’t surprised at all when their


first major deal required the company to relocate to the
United States. When the team accepted the venture capital
funding they had been so reluctant about, the offer came
with a condition: Zendesk had to move to Boston, where the
venture capital firm was based. Though Boston wasn’t their
ideal destination, the author convinced the team to make the
move.

Your start-up will have an impact on your family.

Entrepreneurs’ lives often revolve around their work. They


might work over 12 hours a day and when they’re not
working, they’re thinking about work. Naturally, this can be
challenging for their families for a number of reasons.

For one, it’s hard to take financial risks when you have a
family. The author struggled with this when he accumulated
a lot of credit card debt and used up his retirement money
while building Zendesk. He also took out a $50,000 loan that
he was personally liable for. At one point, he was two weeks
away from going bankrupt if he didn’t get more funding.

The author didn’t want his partner, Mie, to be stressed about


these problems, so he didn’t fully explain them to her.

The author’s work also created stress for his family when
they had to move from Denmark to Boston. This was made
even worse when they arrived in Boston that summer only to
discover that their air conditioner had broken down. The
young family had to walk around the house in their
underwear for two months.

The stress for the family didn’t end with that move. In fact,
not that long after, the family had to move from Boston to
San Francisco!
The family moved west when Zendesk got a new, $6 million
investment deal with a company called Benchmark, which is
based in San Francisco. It was a hectic time for the family, as
they had to move on pretty short notice.

On one of their first nights in the new place, the children


somehow managed to lock everyone out of the bathroom.
Mie was sick at the time and the author had to spend two
hours struggling to get the door open before he rushed off to
work. When setting up a start-up of your own, hectic
episodes like these are likely to become a fact of life.

Being adaptable and flexible with your recruitment can help


you find the right employees.

If you’ve ever had to sort through a pile of 80 CVs, all written


in the same cryptic language, you know that picking the right
candidate can be difficult. And sometimes interviews just
make the situation worse: the interviewees get nervous and
speak too little or too much.

Now imagine if you had to go through all this in a foreign


country! That’s exactly what the Zendesk founders had to do
after they moved to Boston, and they learned some pretty
important lessons in the process.

The Zendesk team found that Americans and Danes present


themselves very differently in job interviews. The author and
his team were used to the Nordic approach: humility is highly
valued in Scandinavia and you aren’t supposed to suggest
you’re better than anyone else.
So the Zendesk team was initially thrown off by their
applicants’ displays of American overconfidence and
bravado. They believed all the applicants were amazing
because they thought their bragging was actually modesty
and humility.

The author and his colleagues quickly realized that they


needed to adapt their recruitment process, and they came up
with some great new strategies.

For example, the head of human resources, who was a


former army man, would take potential employees to a
nearby café. On the way over, he’d walk too quickly to see if
they could keep up, and he paid careful attention to how
they handled the bill. He would also use foul language
throughout the interview to see if they deal with it.

Zendesk recruiters also didn’t ask the applicants about their


educational backgrounds. Instead, they asked them about
their travel experiences and how they confronted difficult life
situations.

Be prepared to make mistakes.

Launching a start-up is like jumping from a ten-meter diving


board: you might land a perfect dive, or do a painful belly
flop. And you’ll definitely have to take several dives before
you really figure out what you’re doing.

For example, when Zendesk was starting out, the author had
a few false starts while looking for funding. At one point,
when the company was still based in Denmark, he flew to the
United States to meet a partner in a venture capitalist firm.
But his timing could hardly have been worse: the 2008
financial crisis was underway, mortgages were no longer
available and big banks like Lehman Brothers and Merrill
Lynch had collapsed.

The venture capitalist firm and their partners had a big


argument over whether or not to invest in the author’s
project; in the end, they decided not to.

Another common rookie mistake is to overlook important


details in your early years. The Zendesk team learned this
when they hired Amanda Kleha, a former marketing manager
at Google.

Kleha arrived on her first day without a computer, assuming


the company would provide one. When she left to go home
and get her own, she made a dry remark that she guessed
she had joined a start-up. This made the author realize that
they needed to develop a more comprehensive onboarding
strategy.

The worst mistakes you can make, however, are those that
affect your customers. The author learned this when Zendesk
planned a price increase and their customers turned against
them. Many of the customers’ comments went viral,
jeopardizing the company’s reputation.

He realized the team had taken Zendesk’s customer


relationship for granted. They informed the customers about
the price change but failed to explain the reason for it, so the
customers felt they were paying for something they hadn’t
agreed to. Zendesk made an official apology and withdrew
the decision to raise their prices.

The Creator’s Code


The Six Essential Skills of Extraordinary
Entrepreneurs
Learn the secrets of how to take your ideas to the next
successful level.
Every business, regardless of industry, size or ambition,
needs to be innovative. Because of this, you’ll find no
shortage of publications, courses and websites from self-
proclaimed “experts” who say they know the secrets to
creativity.

As a business leader, how do you know which advice to trust?


One way to ensure you follow the correct path is to look at
what the most successful leaders have done, and then do
likewise.

These blinks, based on a series of interviews by author Amy


Wilkinson with today’s most successful innovators, give you
some tried-and-true tips to push your company to its creative
heights.

Smart entrepreneurs find a gap in the market by applying


one of three different approaches.

One of the keys to becoming a great entrepreneur is to spot


an opening in the marketplace. To do so, consider these
three different approaches.

The first approach is called the sunbird approach. Here, an


entrepreneur takes a solution that has proven effective in
one place and transplants it to another, often with a twist.
(Just like a sunbird, a kind of hummingbird that cross-
pollinates by grabbing objects in one place and dropping
them somewhere else.)

During a trip to Italy, Howard Schultz (today’s CEO of


Starbucks) noticed how locals spent tons of time socializing in
cafes, enjoying coffee and pastries and listening to opera
music. At the time across the Atlantic, Americans had to go to
a diner or restaurant if they wanted a cup of joe.

Schultz saw an opportunity to transplant the Italian cafe


model in America, adapting it to suit the preferences of
Americans. He replaced opera music with jazz and added
tables and comfortable seats, so customers wouldn’t have to
stand at a bar, as the Italians do, to enjoy their coffee.

This model, as we now know, was a tremendous success. In


just one year, Starbucks captured 30 percent of America’s
premium single-serve coffee market.
A second approach is the architect approach. Architects
design entirely new products to address unsolved problems,
an approach epitomized by Spanx founder Sara Blakely.
Blakely wore pantyhose to smooth her figure, and although
she liked the way stockings made her look, she hated how
they were uncomfortable and often fit poorly.

Blakely realized there was an opportunity to invent


comfortable, figure-enhancing pantyhose. And even though
she had no market experience, she went on to make Spanx a
huge success.

The last approach is the integrator approach. Such


entrepreneurs assemble existing elements, often disparate or
even opposite ones, in inventive ways to create brand new
products.

Luxury SUVs are a great example of an integrated idea. These


cars combine a high-end, high-comfort style in an all-wheel,
off-road sports vehicle. This combination of two seemingly
contradictory ideas has actually been a huge success,
appealing to two very different market segments.

Don’t wait for that “perfect moment.” Start small, build


momentum and focus on the future.

Some people dream of starting their own company, but few


actually live those dreams. Too many dreamers wait for that
perfect moment to launch their idea, but end up waiting
forever.
Don’t be an idle dreamer. Focus on where you want to go
and then get to it, dealing with problems as they come your
way. In doing so, you can build momentum and turn your
idea into a success.

Turkish immigrant Hamadi Ulakaya bought a closed-down


yogurt factory from Kraft in 2005, against the advice of his
family who thought he was crazy for buying an expensive
factory without an established business behind him. Yet
Ulakaya had a dream: to make a high-protein but low-fat,
Greek-style yogurt.

On the go, he learned the basics of the yogurt business and


just two years later, was delivering his first small orders. By
2008, his factory was producing 15,000 cases of yogurt per
week. And by 2011, that number had jumped to 1.2 million.

When Ulakaya started his business, Greek-style yogurt was


only 0.2 percent of the $78 billion yogurt market. By 2013,
Greek-style yogurt accounted for almost half. And Ulakaya’s
company had over time emerged as the market leader!

To be successful, it doesn’t help to dwell on what you’ve


already accomplished. Instead, you should look at what’s
ahead.

In 2006, Facebook co-founder Mark Zuckerberg declined


Yahoo’s $1 billion acquisition offer. An average 20-something
probably would have jumped at the chance to earn so much,
especially from a one-off college experiment!
But Zuckerberg knew that if he kept at it, he could achieve so
much more with Facebook. And clearly, focusing on the
future was the correct choice.

Stay flexible by following a simple four-step process:


observe, orient, decide and act.

Things never go as smoothly as you want them to. In


business, there are always unexpected shocks and changes.
Flexibility is crucial in keeping your company afloat.

To tackle uncertainty, incorporate the OODA loop into your


processes. OODA stands for observe, orient, decide and act.
And it’s a loop, because even though there are four separate
actions, the sequence itself is continuous. Once you finish the
final step, you start all over again.

Here’s how the OODA loop breaks down.

First, you observe. Look at what’s happening around you.


How are customers using your product?

Second, you orient. Analyze the information you’ve gathered


and formulate ideas about how to improve.

Then, you decide. Form a hypothesis about how to improve


your product or service.

And finally, you act. Move quickly to implement your


hypothesis.
This brings you back to the first step: you return to observing,
this time around to see how customers are using your new,
improved product.

Online video streaming company YouTube used this process


early on. Did you know that at first, the company was actually
a dating site that allowed users to rate each other’s photos
and videos?

But when company leaders observed user behavior, they


noticed that people were far more interested in
uploading any video, not just dating-related clips. With this
insight, the company oriented themselves, brainstorming
ideas about how to improve.

Next, company executives decided to simply make YouTube


open to all types of videos, with the thought that at the very
least, the move would improve traffic numbers. Users quickly
started posting all sorts of videos, from cats to lectures and
more.

To further its reach, YouTube acted quickly to make


embeddable code available for MySpace users, which was
then the dominant online social network.

Yet YouTube quickly outgrew even MySpace and in 2006, the


founders sold YouTube to Google for $1.65 billion.

To succeed, you have to embrace failure. Own up to any


mistakes you make, but don’t give up.

Behind every success there’s a list of failures. Consider that


director Alfred Hitchcock shot the shower scene in his
movie Psycho some 78 times to get that harrowing
moment just right.

This story epitomizes a crucial principle. If you want to be


successful, whether in the creative arts or in business, you
need to embrace failure.

To do that, you need to stop thinking of failure as a negative


thing. Because every failure brings you one step closer to
finding out what you need to do to succeed. Adopting this
sort of mind-set can be liberating, as it leaves you free to
experiment endlessly – until you reach perfection.

That’s exactly why the Hitchcock scene is so iconic. The


legendary director spent ages experimenting, so he could get
that nail-biting suspense perfect.

Embracing failure is easier said than done, of course, because


it requires being brutally honest with yourself and owning up
to your failures.

Spanx founder Sara Blakely was taught to do this from an


early age. Every evening, her father would ask, “What have
you failed at today?”

Blakely failed at sports, singing and at taking the LSAT for law
school. And as a door-to-door salesperson, she failed to make
sales all the time. But she always owned up to her mistakes,
which is what allowed her to improve.

Being honest about your failures won’t bring you any closer
to success if you don’t keep striving after each setback. And
to do that, you have to believe in your vision.
Netflix co-founder Reed Hastings suffered a major public
backlash when the company decided to raise prices to cover
the costs of its new streaming service. As a result, some
800,000 people canceled their Netflix subscriptions!

Yet Hastings knew his decision was the right one. He


apologized and tweaked his strategy, but kept going. And
today, Netflix has bounced back as an even bigger success.

Teams and networks help to combine skills and establish a


space of interconnectivity and trust.

The idea of a pioneering scientist or gifted artist coming up


with an invention or inspiration completely independently is
a thing of the past. There are no “lone geniuses.”

Today, we see the development of genius as a result of


a collaborative process. Consider that from 2004 to 2013,
seven out of ten Nobel Prizes in chemistry were awarded to
teams of two or three scientists.

But teams aren’t just good for geniuses, they’re good for all
of us. Having a diverse range of skills means that a team has
more resources from which to draw when encountering
problems.

The famous Bletchley Park code-breaking group, assembled


to crack the Nazi Enigma code during World War II, was made
up of a number of specialists.

Allied forces collected British, American, Polish, Australian


and other experts with diverse skills to work together.
Language experts, military strategists, mathematicians,
engineers, cryptographers, historians, philosophers,
classicists – even crossword puzzle experts – eventually
deciphered Nazi Germany’s encrypted war codes.

Teams also give creatives the chance to bounce ideas off


each other, offer advice and critique each other’s work. This
all leads to a better and more complete final product.

What’s more, once you’ve established an environment of


mutual help, you’ll find that generosity is contagious. When
people start helping each other, they’ll keep helping each
other!

Professional social network LinkedIn is based on this principle


of interconnectivity and mutual trust. Co-founder Reid
Hoffman believes that when you’re focused on a small task
that benefits others, people will be eager to help you in
return.

It works like a chain, in that help and assistance move


through the whole network, lifting everyone up.
The E-Myth Revisited
Why Most Small Businesses Don’t Work
and What to Do About It
Learn the secrets for small-business success.

Did you ever realize that the vast majority of small businesses
fail without ever becoming successful? Did you ever wonder
what’s so special about businesses that survive past the five-
year mark and then run smoothly ever after?

In these blinks, you’ll find an easy-to-follow guide to making


sure your business is a success and not just a sad statistic.

You’ll also find out:

 why 80 percent of small businesses fail in the first five


years,

 why founder Ray Kroc’s strategy for McDonald’s is one


you should follow, and

 why your business will be better off without you.

A heroic entrepreneur with a great idea and technical know-


how succeeding in business quickly? That’s a myth.
Did you know that one million small businesses are founded
in America each year, but 40 percent of them fail in the first
year and 80 percent in the first five years? That’s 800,000
failed businesses, and most of these failures are due to the E-
Myth.
The E-Myth, or entrepreneurial myth, is a fundamental
misunderstanding in American business. It’s the notion that
skillful technical work and a good idea form a sufficient basis
for business success.

People often start their own business merely because they


excel at work in a certain field, such as a machinist, barber or
computer programmer.

Then one day the entrepreneurial seizure strikes. They realize


they don’t want to do technical work for someone else. They
want to work for themselves as per their own ideas for their
own business.
Let’s say you work as a barista. You’ve mastered coffee
roasting, brewing and latte art and you have lots of ideas of
how to run a cafe. Suddenly, you realize you’d rather open
your own cafe.

Such a realization is the reason behind the one million new


businesses each year.

But if you start a business from the basis that you have
technical expertise and new ideas, you’ve already started on
the wrong foot. Your business will probably fail.

You’ve made the fatal assumption, the mistaken belief that


knowing how to do technical work means you know how to
run a business.
In fact, technical work and the work required to run a
business are two completely different things.
Here’s an example. A barista opens her own cafe, and soon
realizes that her coffee skills are not enough to make her
business successful. She has to know how to hire more
employees, organize tasks and grow her business.

This is why so many small businesses fail!

Usually an entrepreneur’s business won’t survive past


adolescence.

Have you ever thought about the stages of a business like


those of a person? Interestingly enough, businesses go
through infant, adolescent and mature stages, just like we
do. The difference is that most businesses won’t survive
adolescence.

In the first stage, infancy, the owner and the business are one
and the same.

At first, infancy is romantic. The business owner finally gets


to do all the work herself! For example, the barista opens her
own cafe and is now roasting and brewing her own coffee –
great!

But success at this stage means more customers and more


production. Eventually, the work becomes too much to
handle.

At the barista’s cafe, customers notice the space isn’t as


orderly anymore, because the owner doesn’t have time to
clean every day.
Suddenly, by starting her own business, the owner too finds
herself buried under technical tasks. She’s become the boss
she wanted to avoid!

When she hires someone to help her, the business enters its
adolescence phase.

Adolescence also starts out great, as the owner doesn’t have


to do everything herself anymore.

But most adolescent business owners enjoy freedom too


much and manage byabdication instead
of managing by delegation. They leave their tasks to others
and assume they’re taken care of, instead of ensuring
everything is done properly.

Back at the cafe, customers start to complain about the


lackluster lattes the new employees make.

During this part of the adolescent stage, the owner must be


pulled past her comfortzone, where she controlled
everything in the business herself. The business will fail
unless it can grow beyond the owner’s ability to do and
control everything herself.

What can the former barista, now business owner, do?

She could get small again, fire her employees and return to
her comfort zone, where she’s instead overwhelmed with
work.
Alternatively, she could go for broke and let the growth of
her business accelerate until it got out of control, hiring more
employees and accepting an inevitable decline in quality.

Or finally, as you will see in the following blinks, she can


accept that her business has to grow and plan for this
opportunity from day one.

To nurture your business beyond the adolescent stage, you


have to plan ahead from the start.

Even if you’re prepared to get out of your comfort zone and


relinquish some control to grow your business, where do you
start? You have to start from the very beginning, back before
you even opened your business.

That’s because businesses that make it past adolescence and


into maturity are founded on a broader perspective than
most, and have planned their structures accordingly.

Successful businesses consider the future, focusing on


building a business that works without being dependent on
the owner always being there. That way, when it’s time to
grow past adolescence, they’ll be able to handle the growth.

To launch a business that will make it to maturity, you


need entrepreneurialperspective. This means that you plan
from the very beginning how your business will look, feel and
work toward its goals.

Instead of asking “What work is necessary in the business?”


ask “How will the business work as a whole?”
For example, the barista knows the technical work her cafe
requires. She’ll roast Guatemalan beans and serve lattes. But
what will set her business apart from competitors? How will
she attract customers? What sort of customer does she
want? The answers to these questions
demand entrepreneurial perspective.

Then, to implement your entrepreneurial perspective, you’ll


need an entrepreneurialmodel.

The entrepreneurial model is a plan for your business that


satisfies potential customers’ needs in an innovative way.

Your entrepreneurial model will include your business’s


market opportunities, a clear idea of your ideal customer and
exactly how your product is to be delivered.

To save her business, the barista might have to close the cafe
for a few days to ponder
her entrepreneurial perspective and entrepreneurial model.
She could decide, then, that her target customers are eco-
conscious students and she’ll satisfy their needs by being the
first cafe to offer locally sourced milk and reading cubicles.

Inside, everyone has many different business personalities.

Do you think of yourself as just one single, predictable


personality? Then your business is probably going to struggle.
The truth is that we’re made up of a number of battling
personalities. Specifically, we’re each some
part entrepreneur, manager and technician.
One moment we’re entrepreneurs creating a new product,
and the next we're a technician, frustrated with the new idea
we just came up with a moment ago!

Of our battling personalities, the entrepreneur is the


innovator, looking around and seeing a world of opportunity.

She’s a high-energy dreamer and visionary. She sees all the


angles, all the possibilities toward success and is intently
focused on the future.

Sometimes that energy and constant opportunity-chasing


creates havoc and chaos. She tries to pull people along and
gets frustrated when things slow down or lag behind.

Without the entrepreneur, there’d be no innovation.

The manager in you is pragmatic and craves order. More


than opportunities, she sees problems to fix.

As the entrepreneur innovates and creates new things,


the manager arranges things into rows, organized and
orderly.

Without the manager, the business could never function.

Lastly, there’s the technician, the doer and the tinkerer.

The technician in you loves controlling the work flow and


getting things done.

She’s frustrated by the entrepreneur’s flakiness and need to


constantly change ideas, and irked by the manager’s
meddling in her work flow. But she’s happy when
the entrepreneur and the manager create more work for her
to do.

Without the technician, nothing in the business would ever


get done.

Although the three personalities inside us seem to be totally


at odds with each other, we must utilize the strengths of
each to run a successful business. That’s why the average
small business owner is approximately 10
percent entrepreneur, 20 percent manager and 70
percent technician.

So now you know the daunting odds stacked against you if


you decide to start a company. But how can you avoid
becoming one of the 800,000 failed businesses? Well, there’s
a revolution going on in small business, and within lies the
secret of success.

There’s an ongoing revolution in small business that


provides a path to success.

Did you realize that we’re in the middle of a historic


revolution that will change business forever?

It’s called the turn-key revolution, because more and more,


businesses are being built so that an owner could in principle
give the key to their business to anyone, and that person
would be able to run the business successfully.

Businesses in the turn-key revolution create a model that


works perfectly, provides a predictable product to the
customer with every purchase and can be replicated without
the owner’s presence.

In other words, they’re franchises.

For your business to be a turn-key business, you need to have


a business formatfranchise: the model you give to the
franchisee, the person who will run your franchise. It
contains your business’s processes, organizations and
systems.

The success rate for franchises is amazing. Whereas 80


percent of small businesses fail in the first five years, 75
percent of business format franchises succeed.

The turn-key revolution is so successful because it focuses on


building businesses that anyone would want to buy.

For example, if someone wanted to buy your business, their


first question would probably be, “Does it work?” If your
business’s systems are designed to work in the simplest and
most efficient way, anyone can run the business, and thus it
is appealing to buy.

In the turn-key revolution, you’re not just selling the products


you make to customers. You’re working to sell the whole
business, including its processes and systems, to franchisees.

Ray Kroc started the turn-key revolution in 1952 when he


became obsessed with creating a hamburger stand that
would produce a precisely replicable hamburger to each
customer. He reengineered the way hamburger stands
worked, making everything so exact that, for example, every
hamburger was flipped at precisely the same time. Kroc
defined processes that anybody could follow because he saw
the eventual franchisee, the person who would run the
stand, as his real customer.

Kroc then sold the system of McDonald’s businesses as a


franchise, thousands of times over.

Imagine your small business will one day be a national


chain; now, build the very first store.

So how do you go about making a franchise? The first thing


you have to do is build a franchise prototype, the original
model of your business that will be replicated.

Your franchise prototype has to give people value and be so


simple that it can operated by anyone.

The value your prototype gives customers is whatever they


perceive it to be. Sound confusing? What it means is that the
value can be anywhere: in your reasonable prices, in your
amazing customer service, in a gift your customers receive in
the mail, and so on.

For example, the barista’s cafe value could be her impeccable


lattes that come with free cookies.

Next, the way the value is delivered has to be designed in a


way that is systems-dependent, not expert-dependent.

This means that you should design your systems to be so


simple and efficient that your business will no longer rely on
you or on technical experts.
For example, if the barista designs a flawless training
program that ensures every barista in her cafe makes perfect
lattes, she or other latte experts will not have to do it
themselves.

In addition, the franchise prototype should document


everything in an operations manual.

Why?

If you don’t document how your business works, how will


someone be able to run it without you? Therefore, you must
write down every single process as part of your company’s
how-to guide.

The barista’s cafe, then, should have manuals not just on


how to make a latte, but on how to train people to make
lattes.

Lastly, the franchise prototype also should provide


predictable service, 100 percent of the time.

If people don’t know what kind of product or service they’re


going to receive, they probably won’t become regular
customers. For example, people who come to the barista’s
cafe shouldn’t get a delicious latte one day and a rancid one
the next or they’ll never come back again. And of course, a
franchisee won’t want to run a business with unpredictable
results.

Start a business to satisfy your personal aim in life.


Why did you want to start a business in the first place?
Hopefully it’s at least partially because you wanted
something more than a 9-to-5 job in your life. So as you set
up your franchise prototype, your top priority is to ensure
that your business will give you what you want!

The most important step in building your business is knowing


your primary aim, or what kind of life you want to live.

After all, how can you know what kind of business to build if
you don’t know what it’ll help you achieve?

To know your primary aim, ask yourself questions such as,


“What do I care about most?” “How do I want to live?” “How
much money do I want?” and “How much do I want to
travel?”

After you know your primary aim, you have to make


a strategic objective. That’s a list of objectives that your
business will have to fulfill to help you reach
your primary aim.

The strategic objective is also a tool for measuring progress,


implementing plans and franchising your business. It’s a list
of standards that anyone should be able to understand.

It should include financial projections, including how much


money you expect to make in gross revenue and profit.

It should also define why your business is


an opportunity worth pursuing, meaning that it involves a big
enough market opportunity to fulfill your financial goals and
satisfy your primary aim.
And it should define what kind of business you’re in,
including a description of your ideal customer.

Let’s say the barista’s primary aim is to make $500,000 a year


and travel for one month every year. That means that
her strategic objective should explain how her three cafes
will each make her $167,000 a year, as well as a plan on how
she can close the cafes and wind down operations for one
month each year.

Organizational charts are crucial for your business’s growth


and establishing accountability.

If you’re like most people, you hate drafting organizational


charts. Boring, right? But without a clear way for everyone to
know their responsibilities, how will your business succeed?

You need an organizational strategy to lay out exactly who in


your company will do what work.

Even if you’re still a one-person business, you have to plan


your organizationalstrategy to know how your business will
grow.

So start out by considering how many employees you’ll need,


and what work each one will do.

Then, for each and every position, write out


a position contract explaining who the employee reports to,
what work has to be done and by what standards the
employee’s work will be judged.
For example, the barista knows that her cafes will need three
baristas and one baker in each, a manager to oversee them, a
marketing manager, an accountant and a general manager to
oversee everyone.

At the beginning, the barista will fulfill all those jobs. She’ll
make coffee, bake cookies, design ads for local newspapers
and keep the books. But as the business grows, she’ll need to
know exactly how many people and for which positions she
has to hire for her business to run successfully.

Plus, the barista will learn the best approaches as she works
in each position. She should document them in a specific
manual for each position that can be passed down to future
employees.

Another advantage of a clear organizational strategy is


establishing accountability.

Each employee will be responsible for the work his position


requires, which will be clearly laid out in each position’s
manual and position contract.

Each employee also must sign his position contract, which


shows he agrees to accept responsibility in accomplishing his
assigned work.

At the end, when each position is filled, with employees


fulfilling the standards for their positions, your business will
be on its way toward satisfying its strategic objectiveand
your primary aim.
To manage your employees, don’t rely on great people –
rely on a great people-management system.

Do you think the secret to a successful management strategy


is finding as many incredibly talented people as possible?
Then you’re wrong!

The secret to a great management strategy is implementing


a management systemthat approaches your management of
people as a marketing tool.

Why a marketing tool? Well, the way you treat your


employees and the way you push them to do satisfactory
work will end up having the biggest impact on the product
your customer receives.

For example, one way the barista could manage her baker
would be by telling him that he must stay in the kitchen and
bake a certain amount of cookies and cakes every day. Or,
alternatively, she could put him on display in the shop, front
and center, and even let him choose his own ingredients. The
latter option would probably result in the baker being more
enthusiastic about his job and customers consequently
enjoying better cookies.

But the most important part of your management system is


a people strategy, where you ensure your people understand
the idea behind the work they’re doing.

If your employees understand the meaning of the work


they’re doing, they’re more likely to want to work to help the
business reach its goals.
A third important component is that employees should
always be tested against the standards you set for each
position.

Let’s say that one of the barista’s business objectives is to


prioritize creativity. When the barista hires a baker, she
makes sure to connect the objective of creativity with his
work. She tells him that personal creativity is a cornerstone
of her cafes, so he has to push his own creative limits by
designing each week’s cake schedule. He will be held up
against the standard of creativity: no two weeks’ cake
schedules should be the same.

The result? The baker will be pushed to reach his baking


potential, while your customers will have more choice of
cakes!

Next, forget everything and think only about the customer.

What about marketing? What’s the best way to approach


your marketing strategy?

It’s simple. Focusing on the customer is so vital that you


should forget about everything else and only think about the
customer.

First, consider your customer demographics. How old are


your customers? Where do they live?

Then think about why your customer makes purchases.


These are your psychographics. Why should your
demographic group buy from you and not from somebody
else?
For example, while the barista might not have enough money
to compile a huge customer research report, she could ask
each of her customers to fill out a small survey, rewarded
with a free cookie at the cafe. To know her customer better,
she could ask demographic questions such as age and
address, and psychographic questions, such as which leisure-
time activities a customer enjoys.

With this information, the barista can present her products


according to her customers’ profiles, and they’ll be more
likely to buy.

Once you understand your customers as best as you can,


make your marketing as appealing as possible to them.

For example, research done by technology company IBM


found that a particular shade of blue implied dependability to
its customers. It then ensured that all its products were
packaged or highlighted somehow by what is now known as
“IBM Blue.”

For your franchise prototype to be predictable to a potential


franchisee, you have to consistently market to your
customers as scientifically as possible. Scientifically, in this
case, means according to data and tests that you run.

That means that once your research shows your customers


have become younger, or that your marketing approach by
advertising in newspapers isn’t as effective anymore, you
must change it. For example, you can consider buying online
ads to reach younger customers.
In the end, you’ll have a business made up of fully
functional systems.

What will your business look like after plotting out your
entire franchise prototype? It will be a complex, yet easy to
run, interdependent series of all the systems and processes
that make up the business, from marketing to management
to organizational structure, all the way back to
your primary aim.

That’s because you’ll have a systems strategy in which


everything interacts with each other, and through those
interactions, everything will develop and change. Generally,
your systems strategy will be divided into a few categories:

You’ll have hard systems, the inanimate objects that make up


your business, such as computers and colors.

You’ll have soft systems, the ideas and the living things in
your business, like yourself!

And you’ll have information systems, which will tell you all
the data on your business so you know what’s working,
what’s not and when it’s time to change.

For example, in the barista’s cafe, hard systems will include


her espresso machine; soft systems will include employee
attitudes; and information systems will include data on what
exactly customers purchase.

To succeed, all these systems have to work together.


You can’t work on any one part of the business without
considering all the other parts.

At the barista’s cafe, she might want to exchange the


espresso machine for a newer model, a change to the hard
system. To make that decision, she’ll have to consider how
the other systems will be affected. The soft system could be
compromised if employees absolutely adore the current
machine and don’t want to learn how to operate a new one.
Then the information system will have to monitor customer
behavior to ensure the new machine isn’t making subpar
lattes and hurting sales.

If the systems can’t run smoothly together, the business


doesn’t have a chance!

This process of planning and implementing never stops.

If you want to ensure your business is successful, you can


never rest on your laurels. You have to constantly be working
on your prototype, tweaking its systems and confirming that
it’s running as best as it can. That continual tweaking, testing
and energy is called the business development process.

The first step in


the business development process is innovation.

Innovation is simply doing new things. The key to successful


business innovation, though, isn’t innovating your product so
much as it is innovating your business.

Ask yourself the question, “What’s the best way to do this?”


Remember, Ray Kroc didn’t innovate hamburgers – he
innovated how hamburgers were made and sold.

The second step in


the business development process is quantification.

Quantification is simply measuring everything. Every single


thing.

How can you know what’s working or what’s not without


measuring your innovation’s impact?

For example, how will the barista know that


her management system of fostering creativity in the baker is
working unless she tracks how many pieces of cake she sells?

The final step of


the business development process is orchestration.

Orchestration is putting innovation into practice. It’s taking


your idea of how your business should work and having it
play out between employees and customers, then watching
what happens.

It’s a constant process, based on your efforts


of innovation and quantification.

That means, if wearing a blue suit increases your sales, keep


wearing a blue suit! But if quantification finds that losing the
suit and wearing shirtsleeves helps performance, then switch
to shirtsleeves.
The key point is that innovation, quantification,
and orchestration aren't necessarily chronological. They don't
happen one after the other, but rather all together, all the
time.

The business development process never ends, because your


business will constantly be creating new innovations,
orchestrating them into real life and measuring the results.
It’s a process that will drive your small business to success.

The Economy of You


Discover Your Inner Entrepreneur and
Recession-Proof Your Life
Awaken your inner entrepreneur and earn some extra
money.

The 2007-2008 financial crisis had a huge impact on the US


economy, leaving many Americans in dire straits and
struggling to make ends meet. Although the worst part of the
crisis might have passed, the economy is still shaky.
Luckily, there are measures you can take to protect yourself
and secure an income if the going gets tough. With a little
creativity, you can raise your chances of finding a second job
or turn your skills into a thriving side-gig. There’s nothing
wrong with a little moonlighting – it may even change your
life for the better.

Going through financial struggles isn’t the only incentive for


finding a second job.

It seems like all we ever hear about is how volatile the global
economy is. Since the 2007 financial crisis, many individuals
have taken extra steps to protect themselves. Once thought
of as a last resort, working two jobs is becoming a norm
today.

A 2012 study conducted by the University of Michigan


revealed that as many as 50 percent of participants described
themselves as financially worse off compared to their
situation five years ago. According to the US Bureau of Labor
Statistics, 5 percent of the working population in the United
States already has at least two jobs. What’s the relationship
between these two pieces of information?

Well, it’s easy enough to assume that people get a second


job because of financial struggles, be it a growing debt,
increasing rent prices or mounting medical bills. But while
this is logical, it’s not the whole story.

Take Joe Cain, for instance. A former cop, Cain built the
website sidegig.com, a platform where police officers and
firefighters could offer additional services, such as home
repair work or legal consultation. He didn’t take on his
website project out of financial desperation. Rather, Cain was
determined to gain new skills and opportunities.

Cain was able to become a certified tax specialist by taking


classes while still working on the police force. He had success
offering his accounting services to other people, and decided
to continue focusing on tax consultation. Not only did this job
pay better, it also afforded Cain more time with his two
children. But not wanting to stop there, Cain also invested
time into sidegig.com to secure yet another stream of
income.

Cain’s story shows how motivations for finding additional


streams of income can be manifold. A need to earn more
money often goes alongside a desire for changes in your
professional and personal life.

Start by gathering inspiration for your new job and a new


weekly schedule.

If you remember how tough it was starting your current job,


finding a new one might seem pretty daunting! That’s
because we often have no clue where to start. So at this
stage, it’s best to keep things simple and ask yourself what
you’re good at.

Take the time to reflect on yourself as an employee by listing


the skills you’ve gained in your current job and how they
might be useful in other professions. For example, if you’ve
learned great management skills at your hospitality job, you
might enjoy taking on coaching as a second job, where you
assist clients in organization and planning.

With this list nearby, it’s time to hit the web. The internet is
full of creative, resourceful individuals selling goods and
services independently with the aid of online platforms. Take
Etsy.com, which allows crafters to buy and sell their
handmade items. If you can see yourself designing your own
jewelry, Etsy should be your first stop.

Elance.com is another site where you can put your graphic


design, marketing or copywriting skills up for offer. If you’ve
got an eye for detail or a way with words, this platform might
suit you best. No matter which route you take, there’s one
thing you have to keep in mind: time management!

Because time is money. And if you’re already working full-


time, you have don’t have much of it to spend generating
additional income. So you’ve got to make the time. But how?

Early mornings are a great window of time to get stuff done


before your workday begins. If you have downtime, such as
waiting for a bus, prepare yourself so that you can use it
productively. Smartphones make this very easy: you can, e.g.,
read through job ads the next time you’ve got some waiting
to do.

We can also find time for our second job by cutting back on
unnecessary things. By reducing time you spend on Facebook
or watching TV, you’ll free up whole hours in your week. If
you’re feeling inspired about potential second jobs and
motivated to start using your week more productively, it’s
time to progress to the next step.

Seek out a strong network of friends online to help grow


your business.

A great network of friends is something we should all aspire


to have. Their support often comes in handy when facing
challenges, such as relationship and family troubles. It’s also
great for starting new business endeavors.

As you start to find your footing in your second job, you’ll


need a network to show you the ropes, and connect you with
customers and other businesses. So if you don’t have any
friends in your new field, it’s time to make some!

The internet is a great place to find like-minded people doing


the work you’d like to do to. Start by seeking out individuals
blogging on topics that interest you. If you’re planning on
developing a side job as a writer, you could seek out people
blogging about creative writing. Then, start actively engaging
with their content: share your thoughts in the comments
section and respond to their Facebook and Twitter posts.

After doing this for a while, get in touch with the author.
Don’t just think about what their friendship could offer you;
consider how your skills could benefit him or her, too, and
you’ll be off to a great start. At the same time, think about
how you can make it possible for other people to find you.
Having an online presence, such as a blog or an online shop,
is a great way to put yourself out there for others to find.
With a network established, it’s time to win the attention of
your target audience. Making guest appearances on different
blogs is one great way to reach out to new potential clients. If
you want to start selling your handcrafted jewelry on Etsy,
you could contact bloggers writing about design and art,
sure, but you could also get in touch with bloggers writing
about the materials you use or even about entrepreneurship
in general! Don’t be afraid to ask.

Failure is natural, so focus on bouncing back well.

Whether it’s a disappointed customer, a disastrous workshop


or a declined application, failure can make you question your
ability to maintain additional streams of income. Failure is a
perfectly normal part of life – it happens to the best of us! If
you find yourself at a dead end, don’t despair. What matters
most is how you bounce back.

There are three steps to making the most out of failure.


First, learn from your mistakes. The internet is your friend
here. Seek out stories of failure similar to yours and see how
other people have grown from them. This will console you
and remind you that you’re not the only one who’s gotten
lost along the way!

Next, put your plan B into action. If your current project


doesn’t seem to be working out, what else could you do? Get
your creative juices going and start brainstorming alternative
endeavors. This will reassure you that your project isn’t the
be-all and end-all. If you came up with one great idea, you
can definitely think of another.
Finally, keep your failure in perspective. We tend to
overestimate the impact of our negative experiences. But, in
reality, we often forget about traumatic experiences before
we know it.

Find fulfillment in your second job by keeping karma in


mind and avoiding too much pressure.

Do you believe that “what goes around, comes around”?


While ideas of karma may seem a little superstitious, any
successful businessperson can tell you that they do apply.

In previous blinks, we found out that having a network of


supportive friends can be great for getting your second job
up and running. If you want to maintain these friendships,
you’ll need to be a good friend. Sounds obvious enough, but
it’s easy to forget in the early stages of your business when
you have a lot to lose. That’s why you should be willing to
make sacrifices and help others out when they ask. It’s worth
it, because they’ll be more likely to get your back in the
future.

Say you’re crowdfunding for a new project. You can’t hope to


promote the project alone: you need people to share it with
their friends. The people who are going to help you out here
will without a doubt be those you’ve shown kindness to in
the past.

Aside from karma, there’s one last thing to keep in


mind: there’s no pressure. Most of us aren’t planning to leave
our full-time jobs to dedicate our lives to our second source
of income. You don’t have to turn your second job into your
dream career. Thinking this way will just turn your second
jobs into sources of stress.

Placing too much emphasis on earning money will also suck


the fun out of your second job. Financial security is
important, of course. But so is making a difference in the
lives of others, and doing something that you find fulfilling.

Businesswoman Febe Hernandez started a jewelry brand to


create a second source of income. Her products were a hit,
so she decided to hire young people from the Bronx to help
her expand. Though she could have scaled up her business
more effectively with skilled workers, giving this opportunity
to young people in need was motivating and fulfilling for
Hernandez.

By being kind to others and to yourself, you’ll find it far easier


to maintain your additional sources of income, and they’ll
become sources of meaning and happiness in your life, too.
The Entrepreneur Roller Coaster
Why Now Is the Time to #JoinTheRide
What’s in it for me? Discover how to be a great
entrepreneur through the good times and the bad.

Whatever we do in life, there will be ups and downs, times


when we are on top and times when we simply want to give
up; this is especially the case for entrepreneurs.

When trying to start a business from scratch, there might be


times when you will win big, and others when you will be
close to bankruptcy.

When these bad times hit, many people give up – but not
those with the right mind-set. They ride the entrepreneurial
roller coaster right to the end, until they have made their
company a success. So what is the right mind-set? Read on
and you will find out!

Ignite your passion, the key to business success.

Plenty of people go into business for the money. But the


truth is, people who become entrepreneurs just to get rich
rarely end up with the fortunes they seek.

Want a better motivator than money? Try following your


passion, and here’s why: 95 percent of your job will be
repetitive and boring, and only 5 percent will be fun and
engaging. So you had better love that 5 percent.
Take Bono, for example, the lead singer of the Irish band U2.
His life may seem amazing, but he’s actually only performing
and doing what he loves about 5 percent of the time. He
spends the other 95 percent taking care of business:
rehearsing, traveling and reviewing contracts. But the 5
percent he loves gets him through the 95 percent he doesn’t.

Passion is the key to getting through the hard parts, but how
do you find what you’repassionate about?

Actually, your passion is already inside you – you just need to


stir it up. You can start by thinking about things you want to
change or fight against. Some of the world’s most
revolutionary ideas originated with people confronting what
made them angry.

Just think where we’d be if India’s Mahatma Gandhi, South


Africa’s Nelson Mandela or US civil rights activist Martin
Luther King, Jr. didn’t say “enough” and stand up to injustice.

Try using your enemies to ignite your inner passion! But


remember, your passion resides within your strengths, and
you can’t get anything done without the right knowledge.

Take the example of business magnate Warren Buffet. In the


1990s, when the worldwide trend was to invest in internet-
based companies, Buffet refrained. When the dot-com
bubble burst, he was applauded and was asked why he
stayed away from these companies. He explained that he
only invests in his areas of expertise; he simply didn’t know
enough about the internet.
Follow Buffet’s example and find your passion by knowing
your strengths and sticking to them. Passion is important
because people aren’t born successful. Rather, success takes
hard work, determination and a commitment to improving.
Your passion will get you through the difficult times you’ll
experience on the road to success.

Overcome the self-conscious naysayers to follow your


dreams.

Have you ever been fired up by a stellar idea, only to have


people throw cold water on your passion instead of offering
their encouragement and support?

It’s a common response from insecure people to great ideas,


especially when you distinguish yourself from everyone else.
Your colleagues will respond by trying to shoot down your
ideas and drag you down to their level. The best way to
handle these reactions is to just ignore them and stay
focused on your own project.

When following your passion it’s important not to worry


about everyone liking you. There will always be people
putting you down; the more success you experience, the
more they’ll dislike you.

Just consider Barack Obama. The second time he was elected


president of the United States, he won with only 51 percent
of the popular vote. So even though 49 percent of voters
voted against him, he’s still one of the most powerful people
in the world.
It’s unfortunate that the more successful you are, the more
disapproval you’ll receive. But you can overcome it by
redefining what disapproval means to you, and taking it as a
sign that you’re doing well!

People won’t just respond to your success with anger,


however; they’ll respond with ridicule as well. As such, it’s
also important not to worry about being laughed at. Just
remember who’ll be laughing when you’re a success.

We wouldn’t believe it now, but when a young Arnold


Schwarzenegger declared he would be the world’s biggest
movie star, he was laughed at. As Schwarzenegger’s success
with The Terminator launched him to become the highest-
paid actor of his day, he laughed back plenty.

When Schwarzenegger entered the California gubernatorial


race, people said he was crazy. But he rose to the challenge
again and, following his dream, won the election.

It just goes to show that you can accomplish anything you


choose as long as you disregard the approval of others and
step beyond their mockery to follow your dreams.

Make sales your number one job.

As a first-time entrepreneur, it’s easy to feel overwhelmed by


your innumerable duties. You’re faced with a mountain of
tasks – from picking the best vendors to ensuring quality to
staying on top of finances – and every job can seem urgent.
Faced with this situation, it’s essential to prioritize; if you
have to concentrate on one thing only, that thing should
be sales.

Sales should be your number one priority, because the


popularity of a product is based 10 percent on its quality and
90 percent on how it’s marketed and sold.

Just think of the best-selling products in any industry – rarely


are they the ones of the best quality. For instance, the most
frequented restaurant in the world is not a five-star Michelin-
rated one. It’s McDonald’s.

It’s clear that the quality of its food isn’t what took
McDonald’s to the top. Rather, it’s the company’s constant
attention to marketing and sales.

But maybe you’re uncomfortable using the word “sell.” Not a


problem. Try replacing it with the word “help” and consider
how your product aids people and addresses their needs.
Knowing how your product helps customers is key, because a
salesman’s most important quality is empathy.

Just consider the great Miami real estate agent John Lennon,
who once sold more than $3 billion of real estate within six
identical buildings. What was Lennon’s key to success? Even
though all his units were the same, he never sold the same
thing twice.

What this means is that Lennon personalizes his sales pitch


for every prospective buyer. If the client is a vintage car
collector, Lennon talks up how amazing and safe the
building’s garage is, thereby showing his client how the
property addresses his needs.

However you do it, you’ll need to start selling to be in


business. The success of your company depends on sales, so
get out there and start making them!

Your employees are the key to your business – so hire the


best, even if they’re better than you.

What’s the biggest cost of doing business? The average


company spends 65 to 80 percent of its operating budget on
salaries and wages.

With numbers like that, it’s no secret that hiring the wrong
people can cost you a fortune. But saving money isn’t the
only reason to prioritize finding the right people for the job.

People make a company what it is, and to build a high-


performing business, you need high-performing employees.
Even among companies that sell a generic product, there are
average brands and excellent ones.

Airlines are a great example. Say you buy a transatlantic flight


with United Airlines. You’re sitting in a plane that’s nearly
identical to the one you’d be sitting in if you had instead
purchased a ticket with British Airways or Air Canada. The
difference, however, is the people working on the ground
and in the air to make your flight the best.

Employees can make or break a company, so when building


your business, make sure to select the right people for the
right jobs.
But wait a second – as leader of the company, you should be
the smartest person around, right?

Actually, your team should always be better than you. Take


the advice of the CEO of a multibillion-dollar
telecommunications company: make it your goal to be the
dumbest person in the room.

Why? Because becoming successful doesn’t require you to


have extraordinary intelligence or ability, as long as you have
the discipline to hire people who do.

If you’re thinking of better marketing ideas than your


marketing director, or better financial solutions than your
CFO, you know it’s time to make a change.

Building a business with a sound future depends on the


ability of the team you recruit, as well as your ability to
recruit them. Make your business a success by hiring the best
of the best.

As leader you set the standards, so take responsibility and


be a good example.

Say you’re the founder of a successful business. One of your


employees, in an office across the country, snaps at a
customer.

You should discipline the employee and his manager for their
mistakes, right? Wrong!

As head of the company, you’re responsible for everything,


even the mistakes of your employees.
It’s essential to take responsibility for your company because
you’re setting an example for everyone else. Your employees
take cues from you, and you can’t expect them to be any
more disciplined, dedicated and focused than you are.

For instance, if the CEO of a company wears a suit every day,


his employees will adopt his habit and wear suits too.
Likewise, if the CEO is late to meetings, employees won’t
bother being on time either.

As the boss, you define the standards, so make sure the


example you set is the correct one.

However, being responsible for the actions of an entire


company can be difficult; sometimes you’ll need to make
decisions that aren’t popular. To do what’s right for your
business, you’ll need to be comfortable making decisions that
your employees don’t like.

Take Howard Schultz, CEO of Starbucks. In 2008, the


company hit hard times and Schultz decided to close 600
locations, resulting in thousands of layoffs. He says that day
was one of the most trying in his life. After all, he had worked
with some of those people for over 15 years!

As leader of a company, you’ll face emotionally challenging


decisions. Success means doing what’s right for the business,
even if it’s unpopular. Imagine if Schultz hadn’t made the
cutbacks he did. The company would have gone under
and everyone would have lost their jobs!
Even though it may seem like your employees aren’t always
listening to you, they arealways watching you. Make sure the
example they see is a good one.

Productivity means prioritization. Get the most done by


finding what’s important to you.

Have you ever wondered how hyper-successful people do it?


After all, everyone gets the same 24 hours each day and
starts with about the same opportunities.

Yet there are entrepreneurs working harder and longer than


even US business magnate Donald Trump without any great
success. Why?

Being busy and working long, hard hours doesn’t necessarily


equal success. The missing pieces are clarity and focus.

To boost your productivity, you’ll need to clarify your


priorities. Start by concentrating your time, energy and
resources on the things most important to you and avoiding
the distraction of trivial matters.

After all, stopping ourselves from doing what we shouldn’t is


as essential to productivity as doing the things we should.

Take Warren Buffet again as an example. When posed the


question, “What’s the single greatest key to your success?”
his response was simple. He said that the key to success is
the ability to say “no.” For every hundred amazing
opportunities he’s presented, he has to say “no” to 99 and
carefully pick the one and only “yes.”
Priorities are clearly essential, but how many is too many? A
good rule of thumb is that if you have more than three
priorities, you have no priorities. Luckily, naming your
priorities is simple using Buffet’s technique: Start by writing
down all your priorities, narrow the list to three and throw
the rest away.

Everyone’s priorities are different. Although there are


no right priorities, using this technique allows you to decide
which ones are right for you.

On the road to success, your resources are precious and it’s


vital to only spend them on the things that really matter.

So to make the most of your time, avoid getting distracted by


things that could be important. Instead, name your priorities
and focus on the things you know are important. Just
delegate the rest to other people with the proper expertise!

Achieve your full potential by conquering your fear.

As an entrepreneur, two things you’ll experience every day


are fear of the unknown and uncertainty. To run a successful
business, you’ll need to face these fears head-on.

Too many promising entrepreneurs have let fear prevent


them from living up to their potential. Avoid their fate by
learning how to overcome your fears.

Start by understanding your fear. For instance, the things


we’re afraid of usually aren’t that bad. It’s the anticipation of
our fear that really hurts, because it’s what makes us blow
our fears out of proportion.
This anticipation is a vestige of our native instincts to be on
the defensive against predators. The problem is, even though
no such literal threats exist today, our brains still tell us they
do. Instead of fearing an encounter with a hungry lion, we
fear giving presentations or making unpleasant phone calls.

Luckily, overcoming these fears is easy once you understand


them. Just remember, when facing a customer or speaking to
a large group, there’s no mortal threat. The only danger is
letting your fear get the best of you.

But sometimes conquering your fear is easier said than done.


Give yourself an advantage by focusing on the task at hand
and not the outcome it will produce.

Think of US basketball legend Michael Jordan. When the


score is tied and he’s taking the game’s deciding shot, he’s
focused on that shot and nothing else. He’s not thinking
about the effect it will have on his career or the impact on
the game. He’s focused on doing the thing he’s done a million
times before: shooting a basket.

You can do the same. By focusing on one task and putting


everything else out of your mind, you can conquer your fear
and excel at your work. Overcoming fear is key to making it
as an entrepreneur because it enables you to take bigger
risks – and bigger risks mean bigger returns!

Become the person you want to be by following your


dreams and trusting your judgment.
Say you followed your dream and opened a business. You
made the rules and did things your way. But as time passed,
you drifted from your path; you saw other people’s success
and, doubting your own methods, started copying theirs.

Before you knew it, your business was struggling and your
passion was gone. Put simply, you can’t live somebody else’s
dream.

Consider Olympic gold medalist and Grand Slam-winning


tennis player, Andre Agassi. Despite being one of the best
tennis players of all time and ranking number one in the
world, Agassi wasn’t happy. When he got to the top, he
realized he never wanted to be there. As his unhappiness
continued, his ranking steadily fell to 141, and he tested
positive for drugs.

The problem was that he wasn’t the best because he wanted


to be, but because other people wanted him to be the best.
He was living their dreams, not his. He turned his life and
game around by finding a new motivation – founding a
school for disadvantaged children. And soon he climbed his
way back up to first place again.

The trick? Agassi was doing it for himself and nobody else.
You too can start living your own dreams today, beginning by
trusting your own judgment.

Take Jeff Bezos, who years ago was a successful New Yorker
with a high-paying Wall Street job. One day Bezos had the
idea to open an online bookstore. He took the idea to his
boss, who shot it down, deeming it too risky. But Bezos
followed his own judgment. He quit his job and started the
bookstore, which became a company you may have heard of:
Amazon.

When faced with a difficult call, like whether to open your


own business, ask yourself if you will regret not taking the
plunge 30 years down the road.

By following your dreams and trusting your judgment, you


put your future in your own hands and can become, today,
the person you always thought you could have been.

The Founder’s Dilemmas


Anticipating and Avoiding the Pitfalls that
Can Sink a Start-Up
Discover the most challenging dilemmas a start-up founder
faces and how you can tackle those problems head on.
Are entrepreneurs and business leaders really so different
from regular employees at a large corporation? If so, what
exactly makes them different?
With insight based on more than 10 years of research and
some 10,000 interviews with business founders in technology
and life sciences, these blinks outline just what it is that sets
today’s entrepreneurs apart from the pack.

While founders may have particular characteristics that make


them tick, they too face a daily set of unique dilemmas,
conflicts and decisions that threaten their business’s success.

In these blinks, you’ll learn how you can deal with challenges
just like the pros so when you’re ready to launch your start-
up, you’ll handle the worst without breaking a sweat.

Entrepreneurs are motivated to strike out on their own to


achieve power, influence and autonomy.

Different things motivate different people. For some it’s


prestige, while for others, it’s financial gain or autonomy.

So what’s the difference between someone who wants a


career and someone who wants to be an entrepreneur?
While employees or career-oriented people find it
challenging to give up a steady job and start a business,
entrepreneurs find it hard to conform to desk life, and thrive
on the risk and challenge of doing their own thing.

A difference of motivation is really what separates these two


worlds. For career people, security, prestige, financial gain
and affiliation are the top four motivations. For male
entrepreneurs, financial gain and control – in the form of
power, influence, autonomy and managing people – are what
moves them.
Such motivations are expressed in interesting ways. The male
founder of Blogger, Evan Williams, knew that his main
motivations were power and autonomy. So much so that he
turned down a buy-out offer worth millions of dollars, just so
he could retain control of his company.

Similarly, the female founder of Sittercity, Genevieve Thiers,


was working at IBM in her 20s when she realized she felt
stifled, like a cog in a machine. Realizing that autonomy and
influence were what she craved, she quit her job to start her
own company.

Interestingly, the top motivations for female entrepreneurs


are mostly the same as they are for male entrepreneurs:
autonomy, power, influence, managing people and altruism.
Note, though, the addition of altruism and the fact that
financial gain has left the list. For female career people, in
contrast, the top four motivations are recognition, affiliation,
security and lifestyle.

The first step toward becoming a successful entrepreneur is


looking at yourself and defining your motivations. Have you
figured out whether you have an entrepreneurial character?
If so, read on.

Entrepreneurs need human capital to start a company. Find


talent to shore up your weak spots.

So you think you’re an entrepreneur? Does this mean you


should drop everything and start your own business?
Hold up for just a moment. Here’s one question to consider.
Do you know how the product you want to make is
manufactured? If you don’t, then maybe you need
more human capital before you start.

Human capital refers to the skills, knowledge and expertise in


your business and in your intended industry. Barry Nalls, the
founder of telecom service provider Masergy, was an
employee at GTE, a large telecommunications company, for
over 25 years, giving him plenty of relevant experience!

The skills that Nalls gained at GTE guided him through several
other small companies before he started Masergy on the
strong foundation of his acquired knowledge.

Understanding your product’s industry will help you avoid


potentially fatal problems. It’s no surprise that founders who
launch start-ups without applicable human capital have
higher failure rates than founders who have previous
experience in their start-up industry.

When baseball star Curt Schilling launched his massively


multiplayer online gaming (MMOG) start-up 38 Studios, he
relied on skills gained from his sports career, such as a strong
work ethic and the ability to lead. But he lacked experience in
one key area: managing people.

Schilling didn’t understand why employees needed or even


wanted to take weekends off. Coming from a completely
different industry, he needed to learn instead how people
were motivated in the business world. So to save his start-up
from failure, he had to learn fast.
New companies need social capital. Make your connections,
but don’t linger too long at that old job.

Human capital is vital, but it won’t be enough unless you’ve


got another kind of capital up your sleeve: social capital.

Your social capital is the social and professional network you


bring to your company as a founder. It should allow you to
access established resources, as well as discover new ones.

The more connections you have before starting your


business, the less time needed to build your business!

Before starting Masergy, Barry Nalls had established


professional connections with potential employees,
customers, advisors and investors. That’s how he was able to
make Masergy viable six months from launching the
company.

You have to find a balance, however. While it’s true that the
more time you spend as an employee, the more social capital
you can build, be careful not to find yourself handcuffed to a
career while your dreams of becoming a start-up founder slip
away.

Potential founders that linger too long at companies spend


too much time working on specific things and become too
specialized in their knowledge. This makes them less likely to
be successful founders, as founders need diverse skills to be
truly effective.
Nalls avoided getting stuck in a certain field while at GTE by
making sure he spent less than two years in any one position
before moving on to the next.

Having sufficient human, social and financial capital is vital.


If all else fails, seek out co-founders.

Do you have enough cash to start and run your company?


Similar to social and human capital, you will need financial
capital to succeed.

Barry Nalls founded Masergy on his own, as in addition to his


experience and professional connections, he also had enough
cash to start the business and cover living expenses until he
made a profit.

But many of us aren’t as fortunate as Nalls. So what should


you do?

Two heads, the old saying goes, are better than one. If you’re
struggling to make ends meet while going solo, consider
finding a co-founder.

Before you do, take stock of your capital: social, human and
financial. Do you have enough of each? In which area are you
lacking? Identifying these holes will help you decide what
your potential co-founder should bring to the table.

Pandora Radio founder Tim Westergren came up with his


idea for the business in 1999. Tim had knowledge about the
music industry, had the appropriate connections and had
sufficient funds to start.
The trouble was, he had never worked in a business before.
What’s more, his idea for an advanced music database would
require highly technical skills that he didn’t have. He decided
to wait until he could identify appropriate co-founders to
help him realize his idea – a decision that was crucial to
Pandora’s eventual success.

Even if you have all the right capital, you may still want a co-
founder, as the tasks of your new business might be too
much or too many to handle alone. Or perhaps you’d rather
focus on raising money and not human resources, for
example.

Whatever your reason, when you bring on a co-founder, it’s


essential that you balance your company’s roles – the
reasons for which you’ll discover in the next blink.

Don’t be arbitrary about handing out titles. Co-founder


roles should be crystal clear from the start.

There’s no question that the coveted title of chief executive


officer is one every entrepreneur wants. Who gets to be a
CEO when there’s more than one start-up founder, however,
is less clear-cut.

The title of CEO usually goes to either the “most committed”


co-founder or the person who came up with the idea for the
company in the first place.

So if you’re the person who has quit your day job to work
full-time on your start-up, or the person who has invested
the most seed capital, or the brainchild behind the original
idea – then you’re usually CEO, regardless of your actual
strategic or leadership abilities.

But does this actually work? A better strategy for the long-
term health of your company is to delegate roles according
to your co-founders’s actual skills.

Take Apple, for example. The technology company’s success


was in part based on the early interplay between Steve Jobs’s
sales skills and Steve Wozniak’s technical skills. In this
situation, Jobs was the natural CEO while Wozniak headed up
research and development.

Of course, if you and your co-founders share similar skills,


roles may overlap. At electronic ticketing start-up Smartix,
the skills of its three founders overlapped, thus giving each
the flexibility to delegate and better manage daily tasks.

Preferable to this situation, however, is when you and your


co-founders bring different skills to the table and thus can
assume clearly separated roles. Why is this ideal? A proper
division of labor lets you create greater accountability within
your organization.

At Pandora Radio, for example, one co-founder assumed


responsibility for technical issues, another for administration
and business development, and a third managed contacts
with the music industry.

This division of labor helped the founders to develop their


own distinct roles and responsibilities. Each success or failure
could be traced to its source, and no one could be blamed for
someone else’s mistake. And most importantly, all tasks were
completed when they needed to be.

Tread lightly when distributing equity. What seems fair


today may not be the case tomorrow.

If you have two co-founders in your start-up, how should you


distribute company equity? You may think that a 50/50 split
is the best, if not fairest, option. But rarely is this so
straightforward.

The experiences of entrepreneur Evan Williams offer an


interesting lesson in equity distribution.

When building podcast publishing start-up Odeo, Williams


decided to offer co-founder Noah Glass a 70-percent share in
the company. Williams’s reasoning was that while Glass was
working full-time on the project, he was working just part-
time.

Yet as the company grew and Williams started working full-


time for Odeo himself, tension between the two co-founders
over who should be CEO started to affect their working
relationship. The dilemma was resolved, however, when
Glass decided to leave the start-up.

The moral of all this? Distributing equity early in the life of a


start-up is not easy, as you just can’t predict what your co-
founders will do down the road.

The founders of technology start-up UpDown distributed


company equity among themselves before they really knew
each other’s abilities well. After a few months, it was clear
that the division had underestimated the contributions of
one founder and overestimated those of another. Attempts
to redistribute, however, caused a lot of tension within the
team.

To avoid conflict, remember that it’s often better to


postpone splitting equity until co-founders know each others’
skills and abilities, and most importantly, their actual
commitment to the start-up.

Hiring from your own personal network is easy but also


risky. Could you lay off your best friend?

Who wouldn’t want to make it big with their best buddy?


Working with people you know well can be easy from the
outset, but potentially heartbreaking too.

Founders often find that by hiring friends or relatives, they


can build a more dedicated, driven organization. For
example, Pandora Radio’s founders chose to hire people they
already knew with the idea that friends and family would be
willing to make more sacrifices and be more productive.

Curiously, investors seem to agree with this strategy as well.


Research has shown that companies that hire employees
from their own personal networks received valuations that
were 37 percent higher than companies that didn’t.

Yet hiring friends has its disadvantages, too. It might be


tough to talk about salary raises with a cousin or best friend;
performance reviews too can become sensitive issues.
Additionally, making tough decisions about team members is
even tougher when a friendship is at stake. Pandora Radio
founders had to juggle the well-being of the company with
the feelings of friends and family when it came to company
layoffs.

The key thing to remember is that your hiring decisions


should be based on your objectives for your start-up. Though
Blogger’s Evan Williams hired from his own network to create
a loyal, passion-driven environment, when he decided to hire
for Odeo, he changed his tack.

With Odeo, Williams was focused on gaining the maximum


value for his start-up as quickly as possible, and so decided to
hire employees based on their professional experience.

Generalists are comfortable wearing many hats, and can


adapt easily to early start-up challenges.

Just as not everyone has what it takes to be an entrepreneur,


not everyone is fit to be a start-up employee. Which sort of
person then will make the cut?

Surprisingly, it’s the generalists, not the specialists, who are


worth your while. Start-ups in the early stages require a fluid
strategy to cope with the ups and downs of a new business,
thus employee roles should be fluid enough to manage these
rises and falls.

In fact, your very first employees may move quickly through


radically different positions at the start. With that in mind,
think how a specialist may struggle with this constant
shifting. Imagine asking a life-long accountant to start
handling Facebook posts, for instance!

Your ideal start-up employee should also come with


experience working in small companies as opposed to large
corporations. Frank Addante of StrongMail learned this
lesson the hard way.

He hired a qualified vice president of sales who had


previously worked for IBM and Oracle. Though the candidate
looked great on paper, he was near useless for the first three
months. The reason? He wasn’t comfortable with the
responsibility of building a system from scratch.

Being able to start small and work from the ground up


requires a whole host of skills that a person often doesn’t
gain from working in established systems. This also applies to
managing people.

Masergy’s Barry Nalls experienced this firsthand when he


hired a sales manager who had a background working with
larger corporations. Though the manager was capable when
leading large teams, he was simply unable to work on his
own.

Teamwork is crucial in start-ups, as everybody has to


contribute! You might find that you just need people who can
work independently, and can do without managers at the
start.

Raising money might get your product built faster, but then
you’re on the hook to your investors.
Spend or save? This seemingly simple decision becomes a
crucial one as start-up founders begin to grow their ventures.

Should you look for outside support for your start-up, or


tighten your belt and try and make as much as you can from
what little money you have?

The decision between bootstrapping – starting a company


with little money – and raising capital depends ultimately on
a founder’s overall goals and market competition.

Some founders, however, choose to go it alone, based simply


on gut feeling.

When Jim Triandiflou and Mike Meisenheimer founded


Ockham Technologies, they attracted investors who offered
them some $2 million to get their project off the ground. The
founders, however, turned the money down, seeding their
start-up instead with $150,000 from their own pockets.

Why did they do this? “We just felt that we should go sell
something [first],” Jim said at the time.

Evan Williams felt the same when he founded Blogger,


having friends and family fund his start-up in exchange for
equity. However, when he began working on Odeo,
Williams’s approach changed.

Realizing that the market was highly competitive and that


other start-ups were edging in, Williams knew he needed to
raise money quickly to enter the market first. So he courted
top-tier venture capitalists to raise $5 million in return for 30
percent of the company.
Venture capitalists, or VCs, raise capital from institutions and
invest in high-potential start-ups. They often seek to protect
their investments by improving a company’s organization and
discipline.

However, VCs are also known to introduce irksome


bureaucracy and reporting into the mix, putting additional
pressure on founders. Masergy’s Barry Nalls calculated the
time he spends preparing for board meetings, and discovered
that it totalled as much as a quarter of his time each month!