BizDevGuy: Strategy and Services for Start-ups

Innovative Strategy & Services for New Business, New Markets, New Products, and New Customers

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Useless Businesses and the Damage Done

November 5th, 2009 · Business Models, Opinion

Umair Haque, Director of Havas Media Lab, and one of my favorite troublemakers.  His recent article, titled Is Your Business Useless?, provides a great framework for thinking about the value of organizations and enterprises of all sizes. Good reading for people considering new ventures. As Guy Kawasaki says, “Tell me how you make meaning in the world?” It takes about as much effort, capital, life force, and other resources to start a business that has no social value as it does to start one that has piles of it. The ones that are imbued with real social benefit can operate on much less capital and return far more “value” to all concerned – investors, workers, and customers.  Too often, when we make economic calculations, we fail to recognize forms of value other than cash, but these other value measures tend to have a far greater impact on decisions than purely economic decisions.

Capitalism is a completely sustainable and efficient system if certain orders and rules are maintained. Specifically:

  1. The information to make informed economic decisions must be available to all decision makers. That means you and I can easily determine whether some transaction makes sense for us.
  2. Treasure must follow value. That means that the more value you create, the more resources you have.

Regulations have tried to safeguard these principles, but, as the banking crisis has illustrated, a global, complex economy makes policing much more difficult. But regulation shouldn’t be about puritanical right and wrong, but about applying the constraints that keep the economic engine growing at a sustainable rate – maintaining the bonds between value and money.

My family comes from Quakers, so I tend to seek out the simple truths. In the long run, nothing that anyone can do creates value at the rate that we saw the economy rise over the last decade.  If you look at the economic cycle from this perspective, all of the crashes were predictable. Regulation policy should really constantly be looking at the top ten places where money is being made and slow it down – not to punish success but to maintain an environment where success is sustainable and where there is some economic justice – where value and treasure move together. Ultimately, windfall profits always suggest an inefficiency in the economic feedback system and pure arbitrage should be minimized as it puts real value creation at risk.

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Who Suffers Most?

September 15th, 2009 · Opinion

There are many versions of the old adage, “When the economy catches a cold, the poor have pneumonia.”

Who's spending and who's hurting?

Who is spending and who is hurting?

A poll on LinkedIn asking about business spending patterns shows a wide range of responses to how much the economic downturn is effecting spending patterns (self-reported) of businesses.  At last look, 100% of those in large enterprises reported that the economy had no effect on their spending, while 76% of those in small businesses report that they are scaling back or operating on necessities.

I hate to be grumpy about this, but I have to make these two points:

  1. An awful lot of money was pumped into the economy – guess where it went. Large enterprise, though it is easy to write just one large check rather than thousands of small ones, do not represent either most of the spending or most of the jobs in the economy.
  2. The small businesses are the ones that innovate, create substantial new value, and are most at risk of failure.

Healthcare socialism would benefit small business substantially. Bail-out socialism helps only those at the top.

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Sales Training for Entrepreneurs

September 15th, 2009 · Entrepreneurial Culture, Publication

My father always told me that every job is a sales job. That’s at least a little bit true, but in my experience, most entrepreneurs are a little disconnected from their inner

Harvard Business Review offered a special issue on Sales in 2006 (Vol 84, Issue 7/8) that included a number of articles that offers a number of quick reads that should at least help you purge whatever negative image you might have of sales and begin replacing it with an appropriate understanding of where it fits operationally across the life-cycle of an enterprise and as am integral part of the Sales and Marketing continuum.

Psychologist and Anthropologist G. Clotaire Rapaille is interviewed in a piece that presents a concise discription of the sales person archetype as Happy Loser, someone as motivated by the hunt as the kill.  Usually entrepreneurs need to develop rejection coping skills, but they don’t enjoy rejection. Sales people love it…according to Clotaire anyway.

For entrepreneurs, I suggest you learn a few solid basics:

  1. Focus on zebras – Even though your business plan says you are targeting a huge market, chances are your initial offerings will only really appeal to a small portion of the market in a particular place in their life-cycle (there are lots of horses, but you only want the zebras). In marketing, we might develop a persona of the most likely customer so that the sales team can ask just a few qualifying questions to can help determine if they are talking to the right people at the right time.  Remember each sales activity has a cost and spend your budget wisely. You’ll still face rejection for reasons you may not understand, but you can optimize your closure rate and minimize your funnel by maintaining focus.
  2. Mostly listen – The shape of your products and services and the way they are priced should evolve with your understanding of the customer. Listening to the way customers think about your product, what their expectations are, and what created the situation where they are considering your offering are invaluable as market research, engaging as a business development practice, and a time-tested means of closing a sale.
  3. Respond – Remember that “time kills all sales.” Respond in a timely fashion – think about the service you expect in a restaurant, except the tips you’ll get as an entrepreneur will likely be in the form of a positive referral.

It would be helpful for you to have an objective sense of where you are on your sales skills. I love the very affordable assessments available from the managment psychologists at Pradco. For $50 you get an assessment of your skills and attitudes and a prescription for improvement.

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Growth in Hard Times – All the money is in play

July 16th, 2009 · B2B, Consumer Products, Entrepreneurial Culture

This is another handy chart form McKinsey. It is very easy to feel like all you can do is cut costs right now, but the truth is, this is a great time to go after new customers if you have some resources.

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Redesigning Product

June 9th, 2009 · B2B, Business Models, Consumer Products, Entrepreneurial Culture, Opinion

If things are still slow for you, it’s probably a good time to rethink how you define product.

I spend a lot of time with clients outlining the space between how they define their products and how their customers define their products.  Sometimes this has to do with real or perceived benefits. Sometimes this has to do with where the edges of the product are – the arc of the product experience. Sometimes this has to do with the transaction.

I recently gave away some advice to a potential client that is an excellent case study in this.

This client sells to a particularly downtrodden market (lots of those right now). They have a product offering that is very successful at driving efficiency – real, realizable savings – 150% ROI within the first 18 month. The problem is in initial purchase. There is a significant up-front cost.

No matter how good the ROI is on something right now, it is very difficult to find extra funds, either from funders or from cash flow.  I suggested  to this would-be client, let’s call them StartUpCo,  that, faced with no sales, they try to close some deals with a pseudo-lease deal that spreads out the risk. Real capital items might be able to be financed by a leasing company, the service costs and profits probably have to be financed by StartUpCo.

I’d probably start by trying to partner with a leasing company and setting up a payment schedule that gets your hard costs off your balance sheet within a quarter or two. I’ve done deals like this myself and included a reward for meeting certain performance criteria. If you can structure it as a percentage of realized savings, clients are usually happy to share the wealth.

For StartUpCo, the product was their software, hardware, and integration service. For the customer, the product was the improved work-flow and cost efficiencies. By including financing in the product, they bridge the gap between the two views, aligning value and cost for the customer.

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Farewell to a Great Entrepreneur: John Patrick ‘Packy’ Hyland, Sr.

May 30th, 2009 · Entrepreneurial Culture, Opinion

Entrepreneurship is the art form of organization development. All art forms are about synthesizing or transforming or juxtaposing objects from one realm and infusing them with the life forces of talent, vision, and craft to create something new and quite different from anything that has existed before – something with a life of it’s own beyond one’s self. Paint becomes Picture. Sounds becomes Symphony. Ideas become Industries.

Packy Hyland, Sr. was a great artist. He passed this week, but leaves behind a body of work that should distinguish him as a truly great entrepreneur. His most easily recognizable creation, Hyland Software, stands as one of very few unqualified success stories in Cleveland of recent.

While Mr. Hyland has achieved the success that most associate with great entrepreneurs – profit and growth – his greatest accomplishments are harder to recognize. I write this to honor those accomplishments so that they not be lost to the data that tends to define history.

Packy believed in his son and the power of his ideas, ingenuity, and diligence when no one else did. Even as many economies were being transformed by profit margins and efficiency gains that only software could bring, I know that Cleveland remained committed to more tangible industries. Aside from the struggles that all entrepreneurs face, Hyland had to operate within a culture that was not supportive. What’ s more, he was able to generate trust and enthusiasm, against the odds, and craft a uniquely winning culture in a community where it had few compatriots. In his quiet and friendly way, he was as much a revolutionary as an entrepreneur.

I remember the speech Packy Jr. gave to the entrepreneur’s club at John Carrol where he gave out copies of Rhinoceros Success. It was apparent to me by the dazed and confused expressions in the audience, that Hyland was an important revolution that needed to succeed if Cleveland was to survive, but Packy Jr.’s enthusiasm would have long ago been crushed under the weight of the predominant culture and the realities of company-building if not for the specific gifts of Packy Sr. and his ability to almost trick you into being inspired.

Add to this, that once he was successful, he held no grudges against those who doubted him or the city that made his path that much more difficult to tread. He continued to support and encourage Cleveland’s entrepreneurs in the most gracious and generous of ways long past the point where most of us, myself included, have turned away in frustration.

I will always remember my lunch with Packy, Jay Yoo, and Jay’s father at Larchmere Tavern. Jay and I represented an entrepreneurial dream in crisis of both spirit and cash flow. We were the younger generation and we had made some mistakes. The elders at the table bought lunch, imparted wisdom and wrote checks. I have worked in close proximity to dozens of good ideas and good people in search of that one break that will make all the difference when what is really called for is the calm, confident strides towards tomorrow, both cautious and quick. To date, I have never been in the presence of such honest and boundless love and compassion around a business deal as what Packy brought to the table that day. Everything was as it should be. Mentors providing support, guidance and knowledgeable, forthright encouragement that every dreamer needs to make something of real value. I remain in awe of his unique gifts.

It is a magical blend of passion, goodness, and community that always, always, always, sustains the just and their causes. There is no more powerful or beautiful force in the universe and Packy Hyland was one of it’s great practitioners.

Maestro, you will be missed. We will tell your story well and for as long as we live.

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How to hire a small staff

May 27th, 2009 · Entrepreneurial Culture, Free Resources

Jim Collins has offered me no end of simple ways to describe complex issues to my consulting clients.  His book are full of solid wisdom. I’m sure his next book will be no different, but for the moment I’m all about this article in the NYT about his methods.  Genius – especially his hiring protocol.

Spend more time finding and selecting people. Learn about what makes someone successful in your organization. Get to the point where you can write it down and revise as needed.

90% of management is in the hire.

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Great Venture Article

May 21st, 2009 · Business Models, Funding, Resources for New Business

USC has published a very handy article on Tech Transfer and venture.  It really applies to most entrepreneurs in many ways.

Some recommendations from the study include:

  • Understand how to fit into a venture capital fund’s business goals. Venture capital funds
    have a fixed life span in which to provide the venture and limited
    partners with a cash return on investment, typically in the form of an
    IPO or acquisition.
  • Package ideas in VC-friendly ways.
    Overwhelmingly, investors agreed that universities need to get better
    at gathering, filtering, translating, and packaging new ideas. This
    involves more than simply eliminating “academese” from business plans
    presented to VCs – it means coaching would-be entrepreneurs on how to
    discuss their ideas in compelling business terms, not technological
    jargon.
  • Do not consider venture capital funds ATMs. VCs
    are not an endless source of cash for unproven or infeasible
    inventions, nor are they in the business of writing blank checks – they
    expect to be highly involved in their portfolio companies. This is
    especially true of the early or “seed” stage investments that
    characterize the majority of ideas originating in university labs.
  • Be ready to make a deal.
    Technology transfer offices must strike a balance, maintaining an
    efficient business-like relationship without sacrificing legal
    protections for the university and its entrepreneurs. What investors
    would like to see from universities is a genuine effort to make the
    deal process as smooth and expedient as possible, including a standardized, transparent deal process.
  • Focus on the people: Although
    protectable intellectual property is important, investors are primarily
    interested in the inventors they expect to be involved in the start-up. However, faculty should be cautioned they should not expect to run the company as the CEO.

http://stevens.usc.edu/read_article.php?news_id=424
The difference between good technology, good ideas, and fundable ideas can’t be overstated.

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Sustainable Efforts

March 4th, 2009 · Free Resources

Conservatree offers calculations on how to convert paper saving into tree saving.

Carbonfund.org offers calculators and a means of purchasing carbon offsets for many common activities.

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My Letter in the New York Times 22 Feb 2009

February 23rd, 2009 · KOYONO, Opinion

I’m really not much of a fan. I don’t get all weak in the knees over much of anybody. I’ve worked with rock stars, movie stars, billionaires and geniuses and pretty much kept an even keel (I did stammer when I met Neil Young – I really wasn’t prepared to be as impressed as I was.). My adoration for the New York Times, however, is a bit out of control.

I’ve only had a few mentions in the NY Times but each one has felt like a life-changing event – for me anyway.

One of my clients, KOYONO, had a product reviewed by Michelle Slatalla in the Style section. I wrote a piece called, “How Michelle Slatalla Ruined MY Summer” that I have yet to publish anywhere, but the title tells it all.  I spent most of the summer trying to calm customers who were waiting for us to catch up with a week of sales that took four months to deliver on. Still, it was a proud moment – to be acknowledged in the most widely read newspaper in the US – and a lot of the world.

But my aspirations have always been to have my words, not my products, featured in those pages.

I’ve written a handful of letters to the editor as a way of dealing with this yearning.

My first letter that was published in the New York Times was penned in about 3 minutes. In 2005, I had developed the habit of thouroughly enjoying the snarky headiness of Maureen Dowd as an antidote to the output of the Bush administration.  I had a little ritual around Sunday morning coffee, a quiet spot, and the NYT Week in Review.  There was always a lot of erudite seriousness – which is great fun and restorative to my faith in humanity – and some more visceral joys from Laugh Lines and Ms. Dowd.  When I read that her column was moving from Sunday to Wednesday, I wrote a few lines about how I would miss the Sunday morning moral guidance from Reverand Dowd. This is what I wrote:

Re: “A Letter from the Editor:”
As you describe so aptly, I am one of those readers for whom the New York Times and it’s layout are personally important. This change in format will be painful. Although I spend most of my days encouraging friends, clients, and politicians to embrace change and consider possibilities outside their past experiences, I have become religious about my adherence to a Sunday morning routine that includes a well-honed playlist from my iPod, caffeinated coffee communion and a sermon from Pastor Maureen Dowd. I am now torn as to whether I should save Wednesday’s paper until Sunday, or move my sabbath.

Maureen, if you are listening, I seek your guidance.
James R Haviland
Durham, NC

I don’t think I even spell checked it. The letter was edited a bit to avoid the wrath of those easily offended by faux-religous references, but within a few days my note was in the paper.  I even got a nice note, a t-shirt, and a book from Ms. Dowd.

My most recent letter was published on a day of interesting historical intersections.  Februaury 22, 2009 was my father’s 69th birthday. My father was a banker and taught me a great deal about economics both directly and through the event that changed his life forever, the failure of Northern Ohio Bank on February 14th, 1975. As an officer of the bank, my father was investigated, though later proven innocent, in what turned out to be a scandal involving loans, the mob, lies and greed.  I was about to turn twelve at the time. I have always been very aware of the power and neccesity of banks in the processes of wealth creation, but also of their limitations.

Now that I have my own son who just turned 12 and a certain number of bank failures( from fraud, etc) have put my business and most businesses in a tenous spot, I am reminded of the need for all the players in the economy to contribute in a balanced way, constently reassessing the means and methods of investment, but with a knowledge that there are levels of investment that are required of any business or economy in the source and means of growth and in a balanced portfolio of short, medium, and long range return prospects.

So my note, (published Sunday 2/22) offers my support for the Stimulus Bill as a source of catch-up funds for infrastructure, research, and education. My broader thought is that we could calculate a minimum level of funding that the federal government should be spending on these categories – and that we’ve been far behind for a long time.

In same section where my note appears, Thomas Friedman (Krugman is my present cerebral crush, sorry Maureen) makes a passing case for funding venture funds instead of banks.  Not exactly in line with my recommendations, but closer.  I have an idea for a short research project that I’ll be working on around that idea.

What is the long run return rate of top venure firms or funds? What is the average of all the top quadrille?

How many investments are needed for portfolio effects to be in force?

Send me your notes!

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