Tag Archives: startups

It’s Not Failing. It’s Discovery.

15592632483_49d32bd11a_k (1)“Entrepreneurs think of learning the way most people think of failure.” Peter Sims

You’ve heard a lot about failure.

There must be at least one blog or article a day extolling the virtues of failure in an entrepreneurial business. Entrepreneurs saying they love failure.

Really?  No one loves failure. What entrepreneurs love is experimenting, tinkering, tweaking – discovering. If you are an entrepreneur, discovery is at the core of who you are.

From the outside world, it probably seems that people like you and I love failure, or even high- risk ventures, that we don’t get discouraged at products that flop or companies that fold. You and I know that’s not true.

Many entrepreneurs are high achievers and really hate failure – that is why they keep going. They’ll keep working and trying and iterating until they know the product is right, and they keep working. Don’t forget it took Thomas Edison 9000 experiments to discover a working light bulb.

Entrepreneurial researchers have long debated whether entrepreneurs are different than others in the way they perceive and respond to risks.1 I think entrepreneurs are just as risk adverse as the next person.  Great entrepreneurs do reframe problems and challenge the status quo. It is this mental process that enables you to discover new solutions to problems, that is new opportunities.  This is actually a risk reduction strategy.  This is hard work, so entrepreneurs don’t confuse failure with quitting – that is the key difference.

In an August 6, 2011 op-ed piece in the NY Times Peter Sims author of Little Bets: How Breakthrough Ideas Emerge From Small Discoveries, points out the difference between failure and discovery with Howard Schultz the founder of Starbucks. He talks about how Schultz’ early shops turned off customers with non-stop opera and menus in Italian. If Schultz had run out of money then and folded up his operation, that would have been a failure. But what he did was continue to experiment – with employee uniforms, menus, music, chairs – until the formula became successful. (How would I find a cup of coffee and connect my laptop in Manhattan if he gave up!)

There is a curiosity in an entrepreneur that makes him want to try a new way. Let’s do a little more this. Let’s try from a new perspective.  The problem, as Sims points out, is that this kind of experimentation isn’t encouraged in most workplaces. In fact, “mistakes” are usually punished. Who wants to try something new when the risk is punishment?

The workplace is as linear as the schools we grew up in, and yet the world, and the problems entrepreneurs want to solve are non-linear. From that linear point of view it looks like the startups of the world are foolish failure lovers instead of innovators.

Early in my career, I worked for AT&T and the company was critical to my professional success. The company had many product innovations. Nevertheless, the company often did not capitalize on those ideas.  I recall suggesting a new business model for a new product without my boss’s approval. In my annual review, I got “smacked” for not being a team player. Got the message, don’t experiment with new business ideas. I left AT&T and went to work for Silicon Valley start-up, Ascend Communications.

Experimentation leads to discovery and need to be used on all aspects of an entrepreneurial business.

How do you use this perspective to be a better entrepreneur?  Acknowledge no one actually likes failure.

Because failure is ego crushing we naturally want to avoid it, and this can keep us from pushing through a new idea. If you use the experiment and discovery model it helps you fake out your ego and keeps it out of the way freeing you up to discover the unmet need. That’s the first job of an entrepreneur.

You never have perfect information as an entrepreneur. I like how Simon et al  put it in the scholarly article on risk perception.  “Decision-making in entrepreneurial settings often leads to various degrees of error or misjudgments due to the simple fact that the information available is either incomplete or ambiguous.”

It’s then not a question of if a failure will occur, but when.

In fact, the act of failing can is a signal to take notice and adjust your approach. I learned this from Rita McGrath in her book The Entrepreneurial Mindset: Strategies for Continuously Creating Opportunity in an Age of Uncertainty.  “Seen in this light, failure is just a temporary phase in an ongoing entrepreneurial process, which can be used as a valuable source of learning and improved self-awareness.”[1]

The experiment and discovery model can help you not take failure personally.

Experiment and discovery reduces uncertainty and expands the search for new business opportunities. You can practice the model like this:

Continually test your goals and assumptions.

Look for inefficiencies and weaknesses in your product.

Continually incorporate negative discoveries into next steps

And tell yourself, this is one long experiment, the outcome of which will always lead to a discovery. And that is never a failure.


[2] McGrath, R.G., & I. MacMillan. (2000) The Entrepreneurial Mindset. Boston, MA: Harvard Business School Press.

Photo by The Open University

Your Customer Called. She Said You Forget Her Point of View.

sw_Listening_sa209430You’ve been working on your idea for months, years even. You know every in and out of your product’s features. You know every nook and cranny of your problem. You two are in love, and there is no separating you. If your love for your idea is anything like the love you’ve felt for a new girlfriend or boyfriend, you know it’s myopic and exclusive. When you fall hard for your idea you can easily forget the person for whom you are actually solving a problem.

Besides teaching entrepreneurs and counseling tech startups, I also run the Business Development Center in Asbury Park, NJ where I counsel product makers and small business entrepreneurs looking to launch their beloved ideas. I find that as much as these makers need encouragement to get started, they also need a reality check on who their market is – much like tech entrepreneurs.

A while back a woman came in with a homemade yogurt she had developed. It was delicious and expensive. I asked her who she was making it for. Everybody, she said.

I said is it for people who are lactose intolerant? No.

Is it for people who eat Dannon at half the cost? No.

Is it for people who only eat organic? Yes.

Then it’s not for everybody, I said.

My point with the yogurt maker was that she needed to define her customer and her customer’s point of view so she could modify her solution to align with her buyers’ needs and desires.

The same is true for your product. Do you know exactly whose problem you are solving?

In today’s post, I’ll outline specifically how you can figure out who your customers REALLY are, and why they make the buying decisions they do.

To help us along I’ll use the familiar analogy of a chef.

As good chef, you want to create a meal that will be enjoyable for your guests. An enjoyable meal increases the likelihood that your guests will either return for more or spread the word about your cooking.

To ensure they’ll like your creation, you’ll need to find out a few things beforehand:

  1. WHO are they?
  2. WHAT do they like?
  3. WHY do they like it? 
  4. HOW do they get it?

Likewise as entrepreneurs, we need to do some research. Don’t be intimated by what you’ve heard about expensive market research projects; for now, you simply need to get out there and talk to people. Study their habits. Understand their preferences. Use the below suggestions to help you find the answers those three critical questions

1) WHO are they?

Your first task is to identify your customer base. This depends on what you’re selling, but also depends on a number of additional characteristics.

How big is your potential customer base?

Study to the market to understand how many people you can reasonably expect to be interested in buying something from you.

What does your ideal customer look like?

Detail the type of person that will buy your product. Include age range, income level, where they live, where they work, where they shop, how they get around, and any other potentially applicable demographics that you can think of. The more specific you are, the greater the likelihood that you will be able to communicate your offering to them and that they will respond.

Are they one-time or potential repeat customers?

There are two different kinds of customers with respect to number of purchases, and they each need to be treated differently. Understand if your customers are coming in every week or if they are only using service once. For example, if you sell muffins, you’re going to rely on repeat customers. If, on the other hand, you sell wedding cakes, you’re going to see a customer once and only once. Or twice.

Who are the actual buyers?

Maybe your ideal user is not the purchaser. If you’re running a soccer camp, your users are the kids, while your purchaser will be the parents. You will undoubtedly want to create an outstanding experience for the kids, but ultimately, your marketing focus, will be on the folks who sign the check. You will need to “sell” to both of them, but it’s important to recognize the difference.

Why will they come to you in particular?

What makes your ideal customer unique to you? What conditions or limitations will make them interested in doing business with you? Try to determine the one or two most important reasons you should be selling to them. This will focus your marketing strategy and get you the most bang for your marketing buck!

2) WHAT do they like?

In order to create something enjoyable for your guests (customers), you need to know what appeals to them. As you will see when you review your competition, there are plenty of options for consumers to spend their money on. A true understanding of your customers will differentiate you from the competition.

Why will these people be interested in what you are offering?

Focus on specific guests. Walk in their shoes and think about why they’d be interested in your product.

What do your customers like in terms of style?

Dig into their personalities. Describe what they enjoy doing, eating, reading. Think about how your business could provide some value to their daily habits and general lifestyle.

What level of service do they enjoy? i.e. Do they seek high-quality services and basic products, or vice versa?

This is an important question. You won’t be able to reach every person, all the time. Narrow it down. Review your business model and think about what level service/quality you’re trying to achieve. Match that with the type of person who’d be willing to pay for it.

3) WHY do they like it?

You need to understand why people like what you are selling. It could be your convenient location, your superior quality, or your excellent service. It could be a variety of other reasons. But there has to be a reason they’re buying from you and not someone else. Figure out what that reason is and get good at explaining it.

4) HOW do they get it?

Understand the buying process so you can disrupt it or insert yourself in it.

How are they going to buy it? From a certain distributor, can you insert yourself in that process and disrupt it.

The yogurt maker didn’t like my line of questioning and she left before I could help her develop her ideal customer’s point of view. Had she stayed we would have talked about the ideal retailer for her, whether a gourmet grocery, a heath food store or an online shop. And that’s a shame because it was really good yogurt. It just needed the right market.

Photo by jppi

4 Tests To Vet Potential Business Advisors  

entrepreneurs Things at my company had taken a bad turn and I was alone at the helm with the bank on the phone. It wasn’t just my product or my reputation at stake anymore. There were people paying their mortgage with a company salary.

The terms the lender was trying force on the company were extremely onerous, even by venture debt standards, but I felt I had to accept those terms or the company would fold. The lender was advising me that this would be the best move for my company and my employees. Instead of agreeing immediately I called a guy I knew as knowledgeable about venture debt and what are called “workouts”. I didn’t know him well, but enough to know his advice would be solid, and enough to be intimidated by him.

This guy was hard to be around. The kind to say to you, “You’re being a stupid ass.”

I told them the terms and he said something like, “That’s totally outrageous. Why are you even considering a stupid offer like that?”

It was harsh but it worked. It gave me the confidence to go back to the lender, with some more of his advice, and negotiate a fair deal that would preserve the company and get the lender paid back, albeit under different terms.

I got very lucky that day that he picked up the phone because the worst time to look for a business advisor is during a crisis. You’ll be looking for any port in the storm and that could leave you open to receiving advice from someone who isn’t qualified and doesn’t have your best interest in mind. Don’t make yourself vulnerable to what could be business-ending advice in bad times.

Use these tests to vet potential business advisors before a crisis and find someone who can walk with you as your grow your company.

Look for an advisor who’s smart about your industry, not just smart 

Just because s/he is smart does not make the person qualified on a particular topic. You know your doctor is smart, but would you take his advice on your stock portfolio? If his advice on a medical stock is based on a related medicine he’s using, then fine, but not because he’s got a higher degree than you. You need an expert in your industry or the particular subject matter under discussion. What is the background or experience of this person that makes him or her suitable?  Always have a skeptic’s mind, that is, Is this person really qualified to opine on the topic in question?

Look for an advisor without a motive to manipulate

Have you ever received advice from someone and later found out that they benefited from you following through on it? That’s not advice in your best interest, that’s manipulation. Getting direction on your business is not supposed to be a consultative sales process. Fellow employees, co-founders, investors are not good candidates for advisors. Some disengagement gives perspective. A good test question, Does he or she profit by me taking this advice?

And what is this person’s motivation for helping me? Does this person need you to take their advice to satisfy their ego? That’s the worst kind of advisor.

Look for someone who isn’t a cheerleader (or a jerk)

You probably have enough people in your circle telling you how good your ideas are. The last thing you need is a validator. A true advisor can save you a bunch of money when you try to implement a poorly thought out plan. Someone who is always giving you good feedback is a warning sign. What you need is “reality adjustment therapy.” Not, Wow! Great idea! More useful feedback would be, That is the complete and total wrong market for this product. Did you research your customer? True advisors, like my guy on the phone, are not always pleasant to be around. They’re truth tellers. You want them to ask the questions you are trying to avoid, even though it’s uncomfortable.  That will keep you out of the reality distortion syndrome. If he or she can attack the idea, without attacking you, than this person has the right mix of honesty and humanity. Steer clear of “brilliant” business people and entrepreneurs who are condescending and cutting.

Look for someone who is self-reflecting

You know you need someone who can tell you if you have a bad idea. But what about someone who gives you straight up, solid direction? Good right? Not good enough. True advisors, like teachers, are good at equipping you for future situations by helping you learn how to think. Look for an experienced person who is self-reflecting on their own actions. This person can reveal their thinking behind their own pivotal business decisions so you have some context for approaching your own. Simply copying your advisor’s business moves won’t make you successful long term. It’s reflection (not specific repeatable steps) that gets you to the right answer for you.

Lastly, look at yourself and your motivation

Why are seeking help? Before you ask for a potential advisor’s time, vet yourself. You may not be ready for them. Ask yourself this series of questions to reveal your motives:

  1. Are you looking for approval?

Are you looking for someone to say, Good job, instead of, Do better? Then you want tea and sympathy, not advisement.

  1. Can you be honest?

Do you spin the facts or sugar coat things when you go for advice? Or are you going to keep the truth from your advisor to make yourself look better? Then you’re not ready to be taught.

  1. Do you have real commitment to use the advice?

Will you put into practice what you learn from your advisor? I once had an employee who regularly asked for feedback, because he thought that’s what he was supposed to say. But he had no intention in implementing it. It was a waste of time for both of us. If you seek advice it’s your obligation to accept it and not argue it. Later you can reflect and decide to implement the feedback or not.

  1. Are you looking for a counselor?

Is it business advice you need or help with your personal issues? Take your baggage to a therapist. Advisors help you maximize your performance, not fix your personal problems. If you need counseling (and we all may at some point) go to the right professional and come to this advisor/advisee relationship healthy.

Startup Culture: Think Less, Do More

time for action signI’ve seen many lists over the years about what makes a great company culture.  This one, from one of the founders of HubSpot on company culture, is worth reading. I like the author’s very first point on action orientation – all his other points too. Wish I made the action orientation point in my previous post regarding “Experimentation and Early Competitive Advantage”.

I’ve only written one business plan in my life. It was while I was in business school, and it was required. Generally, I think business plans are pretty useless (but the planning process can be quite useful).

The problem with business plans is that things change so quickly in the startup world. Before the ink is even dry on that 100+ page business plan as it shoots out the printer, things have already changed and “the plan” is already outdated. Stuff happens: Good stuff, bad stuff — and every now and then, amazing stuff.

Very few startups I know – or companies I’ve invested in – resemble their original business plan. (And that’s a good thing, because it means they’re shaping their businesses to meet the needs of their customers.)

Great startup employees are the same way. They think a little and then do a lot. And then they adapt and modify.

The best companies often don’t start with a brilliant idea, they iterate into one.

It’s hard to learn from thinking. It’s much easier to learn from doing.

Read the rest of the post here.

Experimentation an Early Competitive Advantage for Startups

I have a stack of articles that I plan to read, for a while I carry them around in my backpack. Then the article finds a resting place in my office.  Fortunately, the articles get re-discovered and read: eventually.

I found an article on Enlightened Experimentation that had been sitting unread for a while – published in HBR in 2001. But the advice is still fresh more than a decade later.

Large industrial companies such as BMW use “Enlightened Experimentation” for product innovation and experimentation is fundamental to innovation.  The essentials to Enlightened Experimentation are: 1) Organize for rapid experimentation 2) Fail early and often, but avoid mistakes 3) Anticipate and exploit early information 4) Combine new and traditional technologies. 1

Though the concept works both for large corporations and small start-ups can apply the principles of Enlightened Experimentation even more effectively.

Early Thinking:

Experiment your way to competitive advantage: Especially for smaller or start-up firms, quick experimentation can be your earliest, maybe only competitive advantage.  You would think experimentation is natural to young firms, and it is with the best, but certainly not all.  As a new firm or start-up, you cannot outspend a larger well-financed rival.  And non-domestic rivals have other advantages.

Experimenters win: In a globalized market place, your competition may have lower labor cost, less regulation and advanced technology.  Experimentation generates new property knowledge.  Experimentation must expand beyond the R&D teams.  Experiment with product and business model innovation simultaneously.  You have to discover new opportunities before your competition know they exist.

Blink Analysis:

The article entitled “Why Steve Jobs Couldn’t Find A Job”  sums it up.  “Today, value goes to those who know how to create, store, manipulate and use information.  And success in this economy has a lot more to do with innovation, and the creation of entirely new products, industries and very different kinds of jobs.” 2

  1. S. Thomke, “Enlightened Experimentation: A new Imperative for Innovation” Harvard Business Review, February 2001: 66-75.
  2. A. Hartung, “Why Steve Jobs Couldn’t Find A Job” blogs.forbes.com/adamhartung, Web. February 18, 2011.

Related Links:

Treating Innovation as an Experiment