The Only Thing To Fear….

On a scale of 1-10, how innovative would you say your organization is? Do you create new, inventive products that solve real issues? Have you entered any new markets in the last 24-36 months? Do you have a pipeline of new ideas? Have you fostered a culture that embraces risk-taking? Does the word “disruption” excite you or worry you? If you scored your organization pretty low, ask yourself another question: Why?

Often the biggest reason why organizations are not innovative is out of FEAR – fear that every idea will not be a winner, fear that your organization will take its focus off current business, fear of change, fear that employees won’t step up and embrace the uncertainty that comes with innovation. All those are real, rational fears. However, if handled right, you can make your organization more innovative while mitigating the possible challenges that lay ahead.

1. Create an ongoing pipeline of new ideas.

Think of it just like you think of your sales cycle. What if you looked at your sales funnel and realized that you didn’t have any new sales prospects. What would you do? Crank up the sales! Get on the phones! Make things happen! Well, if you don’t have a bunch of good ideas in the innovation funnel, you should be thinking the same thing.

2. Accept that most ideas will never make it past the idea stage.

That’s not a bad thing. You’ve got to explore a lot to find that treasure.

3. Accept that many ideas that DO make it to market will still fall short.

As Thomas Edison said: “I am not discouraged, because every wrong attempt discarded is another step forward.“

4. Encourage ALL employees to suggest new ideas.

It’s not uncommon for organizations to limit idea-generators to a select few. Why? When your receptionist or your customer service rep (who interacts with your customers EVERY day!) comes up with your next great idea you will be very happy you were open to their ideas. Pat them on the back. Reward them. Give them the freedom to investigate the idea further. Geeat ideas can come from anywhere.

5. Have a process by which ideas will be evaluated – and let everyone know.

Be very transparent. Every idea will get a preliminary hearing, but not every idea will get a thorough study. Have a process of scoring and rating, so the ideas most likely to be successful float to the top.

6. Assign an advocate team to each idea that makes it past the preliminary review stage.

If your preliminary review says that an idea has some potential, assign a team to study it further. Include the idea’s originator on the team (possibly even to lead the team). It’s important for someone to own an idea and have an interest in executing it.

7. At least once a year, let the craziness ensue.

Even the best processes for innovation can get stale. At least once a year let your employees let loose. Let them spend the day dreaming up crazy new ideas. Have plenty of white boards, wall space, flipcharts, recorders, comfortable chairs, pillows, and floor space, toys, food, coffee, etc. on hand. Give them very few parameters – maybe just remind them of the mission and vision of the organization. Then let them be crazy and have fun. If you aren’t hearing laughter, you aren’t doing it right!

Make your organization a fun and innovative place to work. Invest in creativity. Let your organization have the freedom to come up with that next awesome idea! So, don’t fear the unknown. Embrace the change and innovate. Go disrupt something, somewhere!

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Founders as Film Directors

The other day I was re-watching one of the most powerful films I have ever seen – Spike Lee’s “Do The Right Thing” starring Spike Lee and Danny Aiello. I got to thinking about how Spike Lee as the film’s director was able to convince his actors and his investors to participate in making the movie. The subject matter (race relations) is potentially volatile and many messages can (and have been) drawn from the movie. How did he get them to buy-in to what he wanted to create?

Then I got to thinking about how much that experience mirrors the startup and business growth experience. Consider the extent to which you as a founder/CEO must figure out how to get your business off the ground.

• You have to have a great idea. One that will interest customers (or viewers). One that solves a problem. Spike Lee had something to say and this was his vehicle for saying it. He had a purpose and a vision for what he wanted to create.
• You have to determine who you need to make your idea a reality; what pieces you need (actors/employees), financial backing, etc.
• You must be able to paint the vision of what you are trying to create to the different stakeholders in a convincing way. They must “get it”. They must believe in your vision. My guess is that Danny Aiello could choose from a number of different films to make. Why did he choose this one? Why would that top-notch developer or executive join your team when they could choose another? You must get them to share your vision.
• You have to make them work as a team. Think about the broad cast of characters Spike Lee brought together. He combined many big names (Danny Aiello, Ruby Dee, Ossie Davis and others) and had them work together to produce an enduring piece of work. You must do the same.
• It helps to surround yourself with a great team. Spike Lee didn’t scout every location. He didn’t run the cameras. He didn’t set up and adjust the lighting. He didn’t handle security on the set. But, he surrounded himself with the right team of producers, writers, set designers, etc.
• You have to bring in the tools to deliver on your vision. Spike Lee had to pull together the right equipment – cameras, lighting, etc. As an executive you have to pull together
• Then, of course, you must execute. You have to stand behind the camera (sometimes in front of the camera) and guide the action. Make sure what is being created is aligned with that mission and vision of what you are trying to create.

Think about your role as a CEO and/or a company founder. To create something meaningful and lasting – with a purpose and a message – you must think of yourself as the director of your own movie. A movie called your company.

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Playing the Game

In my opinion, one of the things that companies (both startups and more mature businesses) overlook when they are planning their market strategy is considering how competitors will react. And how the company will react to the competitor in return. Think of it as game theory in action.

Consciously or unconsciously, companies often assume that competitors will not change behaviors when someone new enters the market or shifts strategy. Let me tell you, that is a faulty assumption. To think that your competitors will not react in some fashion is either foolish or (worse) implies that you don’t matter enough for them to react to.

As you enter the market with your new product or service, your competition WILL notice. They WILL make adjustments. They WILL react in some fashion. It’s important to not ignore that fact and consider how they might react…and what move you would make next.

When thinking about your strategy, the key is to put yourself in your competitors’ shoes. What would you do if you were CEO of your competitor? What adjustments would you make? How would you fight back?

Go through 1-2 rounds of scenarios. What would happen if your competitors do this or that? And don’t assume all competitors are the same. We all know you cannot know exactly what your competitors will do. They each have their own motivations and business models.

Some things your competition might consider (and you should think about how you might react to them):

• Pricing changes: Will they lower their prices?
• Product/service changes: Will they add new features? Will they bundle products/services?
• Marketing campaigns: Will they target you in advertisements?

We all know your analysis won’t be exactly right. And I certainly don’t think you should spend inordinate amounts of time in analysis. But thinking through several possible reaction scenarios will serve to strengthen your own strategy and improve your thinking. And it will give your team the knowledge and confidence that they need to make decisions quickly when changes DO occur.

It’s important to out-maneuver and out-think your competition. One way to do this is to think your strategy through completely. Don’t stop at “here’s what we plan to do”. Continue through for a round or two of what-ifs and see if your confidence in your strategy is not strengthened.

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Set The Culture Early

A few years ago I had a client, a software development shop, that wanted to sell a piece of its company to help fun some growth initiatives it was planning. In helping them develop their investor approach we spent a lot of time talking about what made their company unique. One of the key things that kept coming up time after time was their focus on employee satisfaction and culture. One of the company’s core beliefs was that if they treated their employees well (NOT necessarily a core value of most Big 4-level consultancies, trust me!), they would have a much higher employee retention rate than their competitors. And longer-term, happier employees would lead to better client service, higher revenues, and higher profitability. All those assumptions had proven to be true. But, as they grew quickly, they also realized the importance of maintaining that culture and instilling it in new employees. One of the things we talked about was how happy the founders were that they spent time early on to define the culture that they wanted to create.

In my opinion, culture development is one of the most overlooked parts of launching a business. Entrepreneurs develop a business plan and a business model. They design a brand and marketing campaigns. They launch sales initiatives. They put the operational pieces into place. They spend little, if any, time making sure that their culture and core values are well-defined. An organization’s culture is just one of those things that I think most people assume will just happen. And some people just simply have more important, more pressing issues to deal with. A truly engaging and compelling corporate culture usually doesn’t just appear. It needs to be defined. It needs to be put into practice every day. It needs to be ingrained in new employees.

I try to stress upon entrepreneurs I come in contact with that setting your organization’s culture (those things that your company values, those behaviors and attitudes you want your employees to embrace) early will pay dividends as the business grows. This will be especially pronounced if it grows fast. And defining the culture is much easier to do with 5-10 people than it will be when you get to 200 or 500 or 1,000. Many times the desire to create an environment that they themselves want to work in is part of why they formed their new business in the first place.

So, my advice for your startup? Stop. Spend some time explicitly defining your core values, your culture. Someday you will be glad you took the time early in your business launch to do that.

Know Who Your Customers Are…NOT

I often come across entrepreneurs who are either starting new businesses or their businesses are still in their infancy. When we talk about their target market one thing I hear way too often is: “Anyone could be our customer. Anyone could use our products.” Really? Anyone?!?!?

Here’s how I sometimes probe from there:

Q. “OK, so Irish sheep herders could use your product?”

A. “Well, no, I guess not.”

Q. “So we can agree that Irish sheep herders are NOT your target customer.”

A. “OK, yes.”

Q. “Can we whittle that down a little more? Would any sheep herders likely be your customer?”

A. “No.” (often accompanied with a “you’re-a-jerk” look in the eyes)

Q. “Is anyone in Europe a target?”

A. “Well, they could buy and use our product.”

Q. “But are you targeting them? Are you going to send them marketing material? Do you see yourself calling them?”

A. “Well, no. We see the vast majority of our customers being here in the U.S.”

By now I assume you can see where this conversation is headed. Unless they are blessed with infinite resources, it’s critical to businesses that they focus on who their customers ARE – and who they ARE NOT. Yes, often many different and diverse groups can buy and use your products. (And, no, I’m not really suggesting you turn customers away.) The real question is how you are going to spend your limited resources. Where are you going to focus your attention? Which customer group will you get to know in depth?

The key is to not spread yourself too thin. Identify your target market – and get to know them intimately. Know what makes them tick. Know what problems they have that you can solve. Know what makes them profitable. Know who your target market is….and isn’t!

Never Underestimate The Team Factor

What is one of the key factors that potential investors and partners look at when they consider a relationship with an early-stage company? Is it your great new product? Is it the business model? In part, yes, of course. Perhaps the most overlooked and under-appreciated factor, however, is…you. It’s the leadership. It’s the quality of the team you build around you.

Anyone who is considering any type of important relationship is looking at many factors. Key to that analysis is this: Is this the person or team I trust? Is this team likely to win? Are these the people I want to bet on?

Some factors to look for:

• Experience – Do they know your market or their specific function (i.e. marketing, technology, finance, etc.) particularly well? Have they been part of a successful startup before?
• Passion – Do they have a passion for this marketplace – and for your idea?
• Relationships – Do they know people; relevant people? Do people know them?
• Personality – Are they even-tempered, coachable, engaging/personable, etc.? Are they willing to wear many hats?

Never forget, at the end of the day, business is still about people. We want to work with people we like, people we trust, people we respect, people we have confidence in. Consider that as you create your business and build your team.

The Art of Focus

Before I met with a startup client the other day, I reviewed their business plan draft. One thought that kept creeping into my head was “focus, focus, focus!”. While their technology could be useful to a whole slew of customers, I still kept thinking that trying to serve them all would be disastrous. They would try to serve the needs of many different types of customers and ultimately serve none of them very well. This happens to startups (and mature organizations too, frankly) all the time. When considering the size of the market you plan to address, bigger is better, right? Not always. I often find myself advising clients to focus, focus, focus. Focus on a specific market segment – and know it, live in it, build a reputation in it, dominate it.

Now, this doesn’t mean that you won’t allow others to buy your products or services. Of course not! But, it does make you focus your efforts on this targeted market – instead of spreading your time, your attention, and often your money too thin.

So, how do you decide which segment(s) to focus on?

• Where do you have deep experience? You know the market. You know the challenges your potential customers face. This gives you credibility.
• Where do you have contacts? This goes hand-in-hand with the point above. If you have many contacts in a specific industry segment, it could drive sales ramp-up faster. It can also give you the opportunity to have those important informal conversations that can help shape your product or service.
• Where is the pain deepest? Consider who is having the most problems that your product or service addresses. They will probably be the most open to helping you get off the ground – because YOU can help THEM solve a problem.

Here are some simple examples.

• If you plan to focus on universities, try focusing more in-depth, say small, private colleges. Or even more, small private colleges in the northeast United States.
• Grocers → Grocers focused on the Hispanic market → Grocers focused on the Hispanic market in 10 southern states
• Jobseekers  → Jobseekers in middle-income brackets → Middle-income jobseekers in the technology industry

Once you have made substantial progress in that primary target segment, then you can consider what type of expansion makes sense – geographically, new industry sectors, a different customer base in the same sector, etc.

Think about the power of targeting a much more targeted, more homogenous set of customers. Imagine if your company that became known as the one that provides unique services only to middle-income technical jobseekers vs. ALL jobseekers. Isn’t it easier to get your arms around the needs of grocers who serve Hispanic customers in Texas, Louisiana, New Mexico, and a few other states?

The key is to develop that reputation for being the best to a specific group of customers. That’s the true path to success!

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Measuring Innovation

If you are anything like me, if you don’t commit to something and measure it and find some way to hold yourself accountable to it; it may not get done (or done consistently). The same is true with innovation. Do you track progress? Do you measure results? Do you hold yourself accountable for progress?

Now, I know innovation is a creative process (and God forbid we strive to measure creative output!). I would argue that like a lot of other processes it could be helpful to measure results. Some things to consider measuring:

• How many ideas were generated?
• What were the sources of those ideas?
• How many progressed to the point of a formal evaluation/assessment?
• How many were implemented?
• How much profit did these new ideas generate?

Of course, you could get a lot more formal and a lot more in-depth about measuring the innovation process. For instance, you could measure the net present value of products/services generated by the innovation process. The level and intensity of measurement depends on what fits in your organization and its culture.

Look back over a year and see if you are satisfied with the results. Periodically, you should look at the entire innovation process to make sure all the pieces are in place and working well. Is the process for introducing and evaluating new ideas clear and well-understood by everyone in the organization? Is someone responsible for the innovation process? Does it get attention at the highest levels of your organization? What’s the expected net present value of initiatives (weighted by probabilities of implementation and success) in your pipeline?

The key is to get the most from your innovation process – to generate a solid pipeline of new ideas and to give your employees a clear way to share those ideas as they think of them. Please share with us any ideas that have worked for you and your organization. I’d love to hear them!

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5 Tips for Turning Returning Customers into Lifetime Customers

In our businesses, we seem to spend an overwhelming amount of our time and resources on attracting the next customer:

getting their attention, getting them to walk through our door or visit our website. What if we were just as focused (if not MORE) on our existing customers – recognizing them, welcoming them, appreciating them, awarding them, thanking them?

It’s a well -known fact that satisfied existing customers are among your most valuable. They tend to purchase more, are more profitable (lower selling costs), recommend you to others, etc. So, why do we reserve so much of our attention to NEW customers, new visitors?

Here are a few tips that can help turn your existing customers into lifetime customers – who bring in others:

1. Notice them. Teach your staff to recognize and greet returning customers. There’s almost nothing as valuable as this. People want to feel special. Teach them to chat with good customers. Learn about them
2. Reward them. This can be a formal customer reward program (“buy five, get one free” sort of thing). Or it can be informal – a little extra something added to their order. Give your employees some leeway to make these decisions themselves – empower them to impress customers. Make sure that they understand that you value customer happiness over that extra dollar.
3. Ask them to help. Ask your good customers to help you think of and design new products. After all, who knows better the needs of the marketplace than they do? We wrote about this a while back (“A Three Step Guide to Your Next Successful Product”). They will appreciate being asked…and listened to.
4. Ask them to recommend you. One thing that I have found is that satisfied customers are usually more than happy to give you a good recommendation. But, you often have to explicitly ask them – and make it easy for them by providing a link to Yelp, asking them to inviting them to “like” you and/or post about you on Facebook, etc.
5. Get a little closer. Ask them to get on your email list. Ask them to “like” you on Facebook and/or follow you on Twitter. And use that contact information. Post frequently on Facebook and Twitter. Give them “insider” information about special deals or coupons. Stay in front of them – and remind them how important they are to you.

Developing new business is hugely important, of course. But, too much emphasis on NEW vs. existing customers can lead to taking our existing customers for granted while we are out developing those new ones. I hope that following these tips will help your organization develop a closer, richer relationship with your customers.

LEAVE A COMMENT! Let me know what strategies have worked for YOU. I’m sure there are tons more tips that can be shared!

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What If?

So, you are launching your startup company. You have created a nice, well thought out business strategy, a great marketing plan, a financial model that shows you being wildly profitable in a reasonable amount of time. Ready to go!

But have you thought about what happens “if”? What if your revenues are much lower than you expected? What if you get tons more customer support calls than you expected – or each one takes much longer than planned? What if the sales cycle turns out to be much longer than anticipated? What if its much more difficult to hire the right talent than you expected? What if a new competitor quickly enters your market (with pockets of cash, of course!). What if a key partner isn’t living up to its obligations?

And don’t forget there are “positive” what-ifs that can still mean serious operational challenges. For instance, what if sales were much higher than you expected? What if you had more prospects (requiring follow-up and cultivation) than you anticipated?

What if the real world just doesn’t want to cooperate with your carefully laid out plans?

It’s really important for young companies (well, all companies really) to plan for different sets of circumstances. Some see this scenario planning as a sign of weakness – a lack of trust in your plan. They don’t want to consider the downside or show others that they might have doubts about their plan. The reality that the reverse is true. Your employees, your investors, your strategic partners, all your stakeholders will like to know that you have planned for a variety of different situations. Give them that assurance. Give yourself that confidence.

No one expects that the universe will adhere to your meticulously designed strategy. Don’t be a “deer in the headlights”. Be ready to adjust!

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