Category: Strategy

A few days ago the NY Times had an article titled Even a Giant Can Learn to Run about the retiring CEO of IBM, Samuel J. Palmisano. Amazingly, the CEO admits that they sold their PC business to Lenovo to gain favor with the Chinese government, which is a big buyer of IBM stuff through their state-owned companies. People won’t be happy about that.

When asked how he helped IBM grow, Samuel said he got together with his top 300 managers to answer four simple questions:

• Why would someone spend their money with you — so what is unique about you?
• Why would somebody work for you?
• Why would society allow you to operate in their defined geography — their country?
• And why would somebody invest their money with you?

Four straightforward, simple questions that every startup and Fortune 500 company should answer.

What else? What are your thoughts on the four questions?

Six months ago I purchased the book Corporate Lifecycles: How and why corporation grow and die and what to do about it by Ichak Adizes and I’ve been slowly making my way through it. The book reads like a college textbook, so plan accordingly, but the author does hit on key insights that I’ve experienced first-hand, lending credibility to the other theories in it.

Here are the stages of a startup’s lifecycle according to the author:

• Courtship – excitement, reality tested, realistically committed founder, product orientation
• Infant – risk does not evaporate commitment, negative cash flow, hard work nourishes commitment, no managerial depth, no systems, no delegation
• Go-Go – arrogant founder, decisions based on intuition, centralized, too many priorities
• Adolescence – conflict between decision makers, temporary loss of vision, founder accepts organizational sovereignty, yo-yo delegation of authority, policies made but not followed
• Prime – firing on all cylinders, insufficient managerial training, limited in-fighting, cash is improving
• Stable – lower expectations for growth, focus on past achievements instead of future, reward “yes men”, more interested in interpersonal relationships than risks
• Aristocracy – money is spent on benefits and facilities, emphasis on how rather than what and why, formality in dress and tradition, low internal innovation, cash rich
• Early Bureaucracy – emphasis on who caused the problem rather than what, much conflict and infighting, paranoia freezes the organization, focus on internal turf wars and not customers
• Bureaucracy – many systems with little function, focused inwardly, no sense of control, customers must develop elaborate approaches to work effectively
• Death – no one is committed to the organization anymore

The early chapters though Aristocracy are useful for most entrepreneurs and the book is worth skimming for connoisseurs of corporate lifecycles.

What else? What are your thoughts on the proposed stages of a startup’s lifecycle?

Christmas 2011 is a great time to think about tech trends in 2012 what with all the gadgets found under the tree. Around our house, the Amazon.com Kindle Fire was a highlight as highly functional and relatively affordable. The Kindle book reader on the Fire was almost as good as the dedicated Kindle device. Reflecting on the Kindle Fire, there are a number of promising tech trends in 2012:

• Continued growth of cloud computing – Large networks of on demand computing resources continue getting cheaper and more approachable. Amazon Web Services leads the way by constantly lowering prices, expanding services, and adding locations.
• Continued growth of mobile devies and apps – “There’s an app for that” has become so pervasive that I’m no longer amazed when someone shows me an awesome app I haven’t encountered yet. With the debate between native apps and HTML5 apps, I believe HTML5 will win out for most apps.
• Continued growth of big data usage and awareness – Big data is the idea of using distributed computing to analyze large amounts of data in a more efficient and cost effective manner than what was previously possible. As an example, imagine crawling the internet and processing large numbers of web pages to automatically find compelling event sales reps need to know about (see SalesLoft Sales Intelligence).
• Continued growth of specialized sharing and social networks – One of the main topics at Christmas Eve dinner was Pinterest, the popular online pinboard to share content, pictures, etc. Several gifts under the tree came from Etsy, the specialized marketplace and social network for homemade goods (yes, it’s more than just a marketplace). The number of specialized sharing and social networks with a critical mass keeps growing.

We’re only scratching the surface of how the internet and mobile devices are fundamentally changing our lives. It’s a great time to be a technologist and I’m excited for 2012.

What else? What are some other tech trends for 2012?

World -class athletes, when training for an event like the Olympics, spend considerable time mentally preparing and visualizing their performance. Startup founders should do the same thing, only mentally thinking about their future success and documenting it via a painted picture. A painted picture is not a visual, photo-oriented representation of goals but rather a vivid written description of what things look like three years in the future.

Tony Robbins advocates writing your goals down on sticky notes and putting them on your bathroom mirror so that you see them first thing every morning. Cameron Herold advocates making your painted picture the autoresponder email text when someone applies for a job at your company so that they are either excited or repulsed by what you want to do.

Here are some tips for your startup’s painted picture:

• One or more founders should write it on their own
• Don’t make it group think with every word massaged by different team members
• Describe every aspect of the company, team, product, office, business model, etc so that the three year vision is completely clear
• Shoot for one to four pages in length
• Laminate the painted picture and hand it out to every employee, vendor, partner, etc

Painted pictures for startups are a powerful way to visualize the future and align expectations for everyone involved. Once the mind knows the future it automatically starts working backwards to get there.

What else? What are your thoughts on painted pictures for startups?

At the Flashpoint mentoring session today we helped with the six minute startup pitches for demo day. For an hour I worked one-on-one with an entrepreneur. I explained that the goal with the pitch isn’t to share everything you know about your startup but rather to get the investor excited enough to want to setup a meeting. The investor isn’t going to invest on the spot. When the entrepreneur asked what should go into the investor pitch I said it helps to have an offline analogy as well as answer who, what, where, why, when, and how:

• Who – who are the entrepreneurs behind the startup
• What – what does the startup do
• Where – where in the market does the startup operate
• Why – why did the founders start the company
• When – when will the next milestones be met
• How – how much money are the founders looking for

There are other topics like competition and market size that should also be addressed. Answering who, what, where, why, when, and how for startup investor pitches gets you most of the way there.

What else? What do you think of this approach to startup investor pitches?

A month ago someone mentioned to me that Citrix’s acquisition of seemingly random Software-as-a-Service (SaaS) was their “string of pearls” strategy. The idea is that it’s a collection of fast growing businesses that operate on their own. Citrix has acquired GoToMeeting (it has grown into one of the largest SaaS businesses in the world), ShareFile (founded by a Duke ’99 grad), and Cloud.com, among others. VMWare, in a similar fashion, has acquired seemingly unrelated SaaS companies like SlideRocket, SocialCast, and more. A string of SaaS pearls.

While driving home tonight there was a commercial on the radio for South Walton beaches in Northwest Florida. The area, known as 30A for the highway it’s on, has a number of cute little communities with Seaside being the most famous. In a similar fashion, the voice on the commercial used the same phrase “string of pearls” to describe the adjacent communities.

SaaS represents such a great business model with strong recurring revenue, high gross margins, and an efficient delivery method. The string of pearls approach makes perfect sense precisely because of the business model and value brought to the customer. Next time you see a series of seemingly unrelated acquisitions, ask yourself if it is a string of pearls.

What else? What are your thoughts on the string of SaaS pearls approach?

Startups in a competitive market should develop frenemies. Frenemies are companies that you compete with but respect and share market intelligence. Now, you can’t collude on price, as that’s against the law, but you can compete against each other on Monday and share information about a different competitor on Tuesday.

If you haven’t done it before it might seem strange. Once you start doing it it becomes invaluable. Startups are always looking for an edge, something to be more effective in the market. Frenemies provide a mechanism to do just that against joint enemies.

The next time you pick up a great piece of competitive intelligence, and suspect your frenemy has value to add, consider sharing information in a way that doesn’t reveal your whole hand, but does help your organization become more effective.

What else? What other thoughts do you have about frenemies?

Recently I met with a startup that has decided to pivot their business model. After six weeks of talking to prospects and potential business partners they realized it wasn’t going to work. Yes, a prototype was built, something even less than a minimum viable product, and the appetite for it was negligible.

With a decision made to pivot, the initial thought was to do something around the original idea but in a different manner — something between a pivot (hard change) and an iteration (soft change). Once I heard this from them I pushed back. They have a clean slate, there’s no reason to stick with the original area, and they should spend some time doing unfettered brainstorming.

My recomendation: come up with 100 blue sky opportunities on a white board, whittle them down to 10, and marinate on those for a few days. After that, compare the 10 with the initial idea, pick one, and move forward with customer development.

What else? What other things should be done when pivoting in a startup?

Recently I rented a car from one of the major rental car companies, and just like every other time, they had their shady consumer tactics. Here are two of the most common shady tactics used:

• They ask if you would like basic or premium insurance without letting you that ‘none’ is an option and most major credit cards provide rental car insurance at no charge (I know about this credit card coverage first hand as my wife got into an accident with our rental car a couple years ago and the credit card company took care of everything).
• They offer for you to pre-pay for gas at a reduced rate and casually say to bring back the tank empty if you do. They mention this because they’ll charge you for an entire tank even if you have gas in it. Unfortunately, they aren’t straightforward that you’re pre-paying for an entire tank regardless of usage if you go with this option.

As a startup, it’s important to articulate your values and outline it for everyone to see. If you want trust and respect, tactics found at this rental car company wouldn’t be part of your organization.

What else? Have you seen other shady tactics used at rental car companies?