Entrepreneurs Who Don’t Pass the Grade

Can an entrepreneur be graded? What would the assessment look like? Jason Nazar, the founder of Docstoc, created a 55 question assessment to do just that. He posted it on Forbes yesterday and invited the reader to begin with the end in mind. The questions are listed below:

Checklist man

1. See opportunity where others see issues 

2. Have a discipline for making decisions among various opportunity costs

3. Rapidly double down on something when it starts to work and blow it out to its full potential 

4. Balance “gut decisions” with of a love of data-driven decisions

5. Focus on 

6. Stay attached to the problem they are trying to solve, but be flexible in the solutions to solve it 

7. Know when to apply a 

8. Protect their downside and prevent the organization from being put at risk

9. Communicate expectations clearly, build buy-in and hold everyone accountable (most of all themselves)

10. Encourage open feedback on what they can improve

11. Put others in positions to make critical decisions and drive key initiatives forward 

12. Prefer to give credit than to take credit

13. Do, or have done, what they ask others to do

14. Remain organized and disciplined in any work habits that affect others

15. Seek out and follow the council of advisors in and outside of the business 

16. Balance “Coaching and Cheerleading” vs. “Doing and Directing” 

17. Know when to set unrealistic goals

18. Regularly thank and appreciate others for a job well done (thanks to my co-founder Alon Shwartz for reminding me)

19. Make themselves consistently accessible to their team

20. Are honest and ethical in all their dealings

21. At least 20% of their time goes towards recruiting top talent (tip: some say 50% via Vinod Khosla)

22. Build a team of A vs. B players

23. Define the most important qualities for hiring 

24. Counter-balance their weaknesses by hiring people better than them

25. Hire Fast & Fire Fast 

26. Define what the culture should be

27. Create an ingrained culture, not one of platitudes 

28. Make the culture about something bigger than business 

29. Build ownership and accountability across the entire organization

30. Put in their own capital before they ask others to put in theirs

31. They sell ether, sell the dream

32. Have mastered the investor pitch process

33. They first sell themself

34. Understand “People, Product, Progress, Passion, Persistence” 

35. Always ensure the business is properly capitalized 

36. Treat investor’s capital like a borrowed treasure to be protected and returned

37. Know their product better than anyone else

38. Regularly talk with customers to see what can be improved

39. Have a vision for the product that gets translated across the organization

40. Make their product different and better than the competition

41. Build lean products iteratively and ship expeditiously

42. Genuinely care about the interests of the customer more than their personal financial gain

43. Focus on execution over ideas

44. Participate in key sales functions and deals 

45. Spend enough time courting key relationships that move the business forward

46. Great at generating PR and buzz for the company 

47. Listen more than they talk 

48. Stay scrappy as they grow 

49. Have a strong sense of demand and how to extract it 

50. Self aware, willing to admit mistakes and take responsibility

51. Fierce competitiveness, hate to lose

52. Extreme sense of urgency and intense work ethic

53. Have a big WHY 

54. Can sell the dream

 

55.) Do they get results with integrity?  That is the only standard by which entrepreneurs are eventually judged.  Everything else is just a test; grades don’t matter, but results do.

 

What a great and wise summary of what’s most important! When Nazar sums it all up in the phrase “results with integrity,” he eliminates all doubt as to what is really the key driver in successful leaders–be they entrepreneurial, intrapreneurial, or otherwise! 

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Build Human Capital With Interpersonal Savvy

Relationships in business are super important. When tasks and goals are pursued without regard to the interpersonal collateral, it is tragic. Leaders who see human capital as their greatest asset are revered by those who serve alongside them. Those who run roughshod over others are despised–though they may see results from a Machiavellian style in the short run, they never get the voluntary commitment of others and, therefore, cannot take an organization as far.

Three person relationshipJeff Haden recommends the following best (business) relationship practices in an Inc article today:

1. Take the hit.

A customer gets mad. A vendor complains about poor service. Sometimes, whatever the issue and regardless of who is actually at fault, some people step in and take the hit. They’re willing to accept the criticism or abuse because they know they can handle it–and they know that maybe, just maybe, the other person can’t.

2. Step in without being asked.

It’s easy to help when you’re asked. Very few people offer help before they have been asked, even though most of the time that is when a little help will make the greatest impact. People who build extraordinary relationships pay close attention so they can tell when others are struggling. . .they come up with specific ways they can help. 

3. Answer the question that is not asked.

Where relationships are concerned, face value is usually without value. Often people will ask a different question than the one they really want answered. Behind many simple questions is often a larger question that goes unasked. People who build great relationships think about what lies underneath so they can answer that question, too.

4. Know when to dial it back.

Outgoing and charismatic people are usually a lot of fun… until they aren’t. People who build great relationships know when to have fun and when to be serious, when to be over the top and when to be invisible, and when to take charge and when to follow.

5. Prove they think of others.

People who build great relationships don’t just think about other people. They act on those thoughts. One easy way is to give unexpected praise. Take a little time every day to do something nice for someone you know, not because you’re expected to but simply because you can. 

6. Realize when they have acted poorly.

Very few people apologize before they are asked to–or even before anyone notices they should. People who take the blame, who say they are sorry and explain why they are sorry, who don’t try to push any of the blame back on the other person–those are people everyone wants in their lives, because they instantly turn a mistake into a bump in the road rather than a permanent roadblock.

7. Give consistently, receive occasionally.

In business terms that means connecting with people who can be mentors, who can share information, who can help create other connections. . .(also) The person who builds great relationships doesn’t think about what she wants; she starts by thinking about what she can give. 

8. Value the message by always valuing the messenger.

When someone speaks from a position of position of power or authority or fame it’s tempting to place greater emphasis on their input, advice, and ideas. People who build great relationships never automatically discount the message simply because they discount the messenger. They know good advice is good advice, regardless of where it comes from.

In short, taking the time to make much of relationships should be a priority. Doing so builds credibility with others that is huge when it comes time to pursue goals together. 

 

Picking a Small Business Niche That Will Grow in 2013

Some business owners just started their enterprises since the 21st century “great recession.” Others have been in business considerably longer. Whether new or “seasoned,” most want to know what trends their businesses face. Knowing growth rates of a market sector can be very helpful–if for no other reason than benchmarking one’s own performance against the average of one’s peers. A company that compiles a lot of research data on small businesses in my own back yard of Raleigh, North Carolina is Sageworks. In an interview with Catherine Clifford of Entrepreneur.com, Libby Bierman of Sageworks said that a recent study by her company showed the average growth rate of small businesses across all industries was 8% in 2012.

While growth is a very good sign, there are winners and losers in every statistical average. Certain sectors, however, performed poorer than others. According to the research, the slowest growth industries for U.S. small businesses in 2012 were:

  1. Skilled nursing care facilities: -3.29 percent
  2. Printing and related support activities: 1.86 percent
  3. Automotive repair and maintenance: 2.81 percent
  4. Offices of physicians: 3.00 percent
  5. Highway, street, and bridge construction: 4.24 percent
  6. Insurance agencies, brokerages, and other insurance-related activities: 4.32 percent
  7. Lessors of real estate: 5.07 percent
  8. Other miscellaneous manufacturing including jewelry and silverware, sporting and athletic goods, dolls, toys, and games, office supplies other than paper, and signs: 5.55 percent
  9. Offices of health practitioners other than physicians and dentists, including chiropractors, optometrists, mental health practitioners, speech and occupational therapists: 5.98 percent
  10. Other amusement and recreation services including bowling centers, golf courses, and recreational centers: 6.03 percent

As I reviewed the list above earlier today, it occurs that personal services, low technology manufacturing and discretionary spending-based businesses have been it hard. Why would this be the case? In terms of  the personal services businesses, many of them are healthcare related. The Affordable Care Act may have a lot to do with this poorer performing sector, as many have shunned making decisions to invest capital in an arena that is in extreme flux. Many before me have written about the loss of manufacturing jobs to overseas competitors. In the United States, we have become less competitive in manufacturing that is not highly customized or based on a technology. Whether infrastructure projects or amusement, spending is down on items that don’t seem necessary. Take note if you have a business in any of the above sectors. While you may be able to outperform your sector, you may consider how your sector as a whole is not growing as quickly as others. How should you respond? This question should drive your strategic planning.

Professional officeHowever, the list of fastest growing sectors (below) identified by this research highlights some additional trends and opportunities. Many who have the flexibility to diversify or move their efforts to one of these sectors should seriously consider doing so.

Fastest-Growth Industries for U.S. Small Businesses in 2012

  1. Residential building construction: 14.77 percent

  2. Building custom software and servers for businesses: 14.29 percent

  3. Machinery, equipment, and supplies merchant wholesalers: 13.75 percent

  4. Management, scientific, and technical consulting services: 12.31 percent

  5. Architectural, engineering, and related services: 11.40 percent

  6. Foundation, structure, and building exterior contractors: 11.37 percent

  7. Building finishing contractors who make additions, alterations, maintenance and repairs: 11.32 percent

  8. General freight trucking: 10.41 percent

  9. Services to buildings and dwellings, including pest exterminators, janitorial services, and landscaping: 10.11 percent

  10. Other specialty trade contractors, including site preparation activities and other specialized trades: 10.04 percent

Most of these businesses, as Bierman mentions in her interview, require very little capital to get going. They do not require the purchase of expensive assets and can be successful based on the strength of human capital. As a result, business services firms are performing strongly and should continue to do well.

 

 

 

 

Help! Innovators Needed

One of the challenges of intrapreneurship is identifying key innovators within an organization. Despite efforts to instill a culture that champions everyone as an innovative thinker, we often find in consulting that executives want someone to whom they can look for innovation pace setting. The question often becomes how to determine who has the strongest innovation DNA. When I was enrolled in an MBA program at Elon, my instructor invited us to take a Creax assessment to analyze out ability to be creative in problem solving and idea commercialization. Last week, I ran across a blog post from my friend Jeffrey Phillips that discussed this very issue and how his firm, Ovo Innovation, approaches the challenge.

creative wordleJeffrey points out that many good innovators aren’t “mainstream” corporate types.  In fact, he argues that “they may occupy positions that aren’t exciting, or may be people who are interested in change and uncertainty, while the rest of the organization is fixated on efficiency.  In other words, some of your best innovators may be shunted to secondary positions because their insights and feedback seem like complaining about the status quo.” He then makes a series of observations about common misconceptions:

Good innovators aren’t necessarily:

  • The “Experts” – too often organizations assign innovation activities to the people who know the issue or problem exceptionally well.  But these individuals often rule out ideas and narrow the scope too quickly based on past experience.  Thecurse of knowledgeblinds many experts to opportunities, or the fact that knowledge of the past or expertise today doesn’t guarantee success tomorrow.
  • Prominent leaders.  Many good leaders achieved their roles through excellent financial prowess and are good at asking tough questions about profitability and cost.  Frequently these individuals struggle in innovation activities because the ROI is so uncertain, and they reduce the scope and possibilities to conform to their own financial models or expectations.
  • “Idea People”.  In any organization there are people who have ideas or who are very creative, but they may not be your best innovators.  Like Michael Keaton’s character in Night Shift they may record ideas (“feed the tuna fish mayonnaise”) but those ideas may not be valuable or practical or solve customer needs.

These observations are significant, because they demonstrate that there are number of desirable competencies that innovators have in common:

  • Deeply curious about how and why things work and how they can be better
  • Experimentive, willing to try things, make small tests
  • Comfortable with risk and ambiguity
  • Eager for change
  • Very empathetic to customer needs and market conditions
  • Not locked into the “way we do things”
  • Can look at problems from a new perspective or a “naive” viewpoint

In order to identify those key innovators, he recommends some different assessments:

The first we use is The Innovator’s DNA, an excellent book that calls out five characteristics of successful innovation leaders:  associating, questioning, experimenting, observing and networking.  

Next we use assessments like Foursight, which suggests that individuals have specific skills that are applicable at different phases in an innovation activity, from clarifying to ideating to developing and implementing.  This helps place the right people in the right task at the right time.

Next we assess the individual and their tolerance for risk, change and ambiguity.  Good innovators are comfortable with extending scope, doing new things, cannibalizing existing products, entering new markets. They are comfortable with ambiguity – not everything has to be perfectly understood or “black and white”.  They are often entrepreneurial, interested in new products or opportunities as opposed to supporting and sustaining the existing processes or products.

Hopefully, you can use these tools to help identify innovation talent in your organization!

 

You Can’t Handle A Business Plan!

In preparing for battle I have always found that plans are useless, but planning is indispensable.

-Dwight D. Eisenhower (Thirty-fourth President of the USA)

 

Eisenhower was a military leader of renown prior to becoming president.  His comment on the value of planning illustrates a key point that many who disdain planning would do well to heed: a plan is not the goal, but rather the exercise of thinking strategically through one’s options given a defined situation and set of resources at one’s disposal.

Serving entrepreneurs and existing business owners, I have seen the outcome of both lack of planning and belief that planning unto itself is a cure-all for potential challenges that may come the way of the enterprise. Tim Berry, author of Three Weeks to Startup, writes that, “If you’re serious about starting your business — even if you don’t have anything down in writing — you’ve already started to plan.” Yet, starting to plan is not the same as writing a business plan.

There are several planning steps that I would recommend prior to writing a business plan:

  1. Refine your idea. Think through how your business model would affect potential customers. Have a preliminary strategy in mind for each segment of your target audience.
  2. Conceptualize a winning strategy. Think through what is already available in terms of direct and indirect competition. Adjust your approach to the market based on what can win consistently.
  3. Create value before your first sale. Test your hypothetical product features and benefits, along with pricing model and go-to-market system. Secure feedback and revise your offering accordingly.

Once you have thought through these three main ideas, you are then ready to evaluate how best to launch a business. Evaluation is the point at which your first business plan should be written. Berry recommends “Your plan is for you first. Don’t make it for anybody else. Do it because it helps you divide and manage big goals into practical steps. Instead of looking at it as a document, think of your business plan as a place on your computer where you collect ideas, useful stories, lists and numbers. It’s a place where you keep track of the market, your milestones, goals and projections.”

Business planI could not agree more wholeheartedly! A plan is not a monument; it is a living, flexible document that needs to be modified on a recurring basis as long as you are in business. Early on, Berry recommends the following key components of planning:

  • Milestones: What’s supposed to happen, when, and who’s responsible.
  • Basic numbers: Simple spreadsheet projections for sales, costs and expenses.
  • Strategy: Strategy is about deciding how to focus a business offering on a key target market. It can start with just bullet points. I’ve seen it done well with pictures. It’s mostly a reminder for you and your team.
  • Cash flow: Because profits don’t guarantee enough cash to pay your bills, you need to manage cash from the beginning. Month by month, account for what you spend and what you deposit — not profit as it appears on the books, but money as it shows in the bank.
  • Review schedule: Set aside time for a plan verses actual review once a month to compare what you planned would happen in your business to what really happened. Be brief and practical.

Regardless of your market niche, whether you have attended a “hack-a-thon,” or who is on your start-up team, take the time to consider each of these components thoughtfully. Incorporating them into a plan that you are committed to revisiting and continuously improving will enhance your chances of launching a successful new business!