From Idea to Commercialization in 4 Days

When not consulting with small businesses who have revenues, I often volunteer time with a start-up nonprofit named EntreDot. The entrepreneurs with whom I have the pleasure of interacting through this connection are amazing. Within the innovation centers that the organization operates, there are many second career entrepreneurs. However, a different demographic intrigues even more: high school students. This past week, I had the opportunity to advise students at Wake Forest Rolesville High School in how to launch a business. What a blast!

While adults often underestimate what a young entrepreneur can do, this group has been a very pleasant surprise. The students were allocated into teams to prepare a business pitch in five days. Coming into the week, they had not previously been working together. One of the student teams did not even begin their business until Tuesday and only then as a result of teachers requesting they form a separate team because their original team had grown to too many participants. Faced with a four day deadline, this group of young entrepreneurs launched Bands For Boston. Bands For Boston is a social cause enterprise that is selling wristbands to support the Boston community in the aftermath of this week’s tragic bombings at the Boston Marathon. 

Bands For Boston

The student team used the debit card of one of their own to order the first 250 bands on Tuesday. By Wednesday, they had enough pre-orders that they went ahead and ordered an additional 250 bands. Through networking, social media, and some joint promotions, the team looks to sell over 1,000 bands in their first 10 days in business at a price of $5 each. Initially, they plan to contribute 60% of the proceeds to the American Red Cross to support relief efforts. They are hoping that, as volume grows, they will be able to raise the percentage contributed to 80%.

A process was followed by these young entrepreneurs that is significant for new small business founders of any age.

  • Ideation – The team first thought about doing lanyards for key chains, but thought that they couldn’t get enough traction. Once they decided to do the wrist bands, their thoughts gelled and they were able to unite around an idea that evoked passion. Quick math showed the team that, if they would put forth the effort, there was enough demand for what the proposed to create sales substantive enough to reward their efforts.
  • Conceptualization – The next effort the team went through was to identify target buyers. The first concentric circle they considered were student peers, followed by neighbors and Twitter followers. At each level, they were able to verify demand. They they put together a business model to order from an online source and deliver the bands to those who purchased on a pre-sale basis.
  • Creation – The proof of concept for the idea came into focus as the first set of bands arrived, were distributed after school, and new customers were identified as those who saw others wearing the bands. They had established some name recognition and were on their way to a business.
  • Evaluation – At the three day mark, they began dealing with inventory, marketing, and finance issues relative to reorders, expanding their reach to other geographic markets, and planning how to scale the business.
  • Preparation – The team was now confronted with the challenge of how to launch on a broader basis and put into place the team responsibilities that would facilitate growth. They are pursuing relationships with sports teams in the Boston area to have promotions at games whereby the bands could be given away to early attendees and sold to subsequent ones.

Commercialization is now the challenge of the team. They are trying to figure out how long these bands will be popular and what they may do for an encore. In the meantime, they have tapped a latent demand while helping a community and earning some income. Kudos!

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Wannabe Entrepreneur – Or Real Deal?

 

What’s the difference between an entrepreneur and a “wannabe?” In many settings, there are people who talk a good game, but don’t really have the follow through to launch a business. Erica Douglass, a 20s something entrepreneur who already sold a a business for over $1 million, has identified 5 traits that differentiate earnest entrepreneurs from what she terms “wantrepreneurs:” 

Wannabe

1. A willingness to learn anything.

You’re never going to be successful if you externalize what’s wrong (I can’t hire a developer because I don’t have any money/no one will give me money, and therefore I can’t start or build my product.) It’s a poor attitude.

Isn’t it better to hire someone who knows what they’re doing? In the future, yes. Right now, though, you don’t even know how to tell whether someone knows what they’re doing or not. Plus, without a spec or prototype, you’re going to spend a whole lot of extra money and time having someone else do it wrong over and over again (because again, even the best developer can’t read your mind.)

Once you understand how building a website works, you can dip your toes into code. Read up on the differences between Python, Ruby on Rails, and PHP. Pick one to learn. Spend a week learning the basics. Then spend the next couple of months hacking on weekends. This will help you figure out whether that developer you’re about to pay a fortune to actually knows what he or she is doing.

The point of this exercise is three-fold. One, it gets you familiar with how to articulate your vision to a developer. Two, since you have more time than money, it shows everyone (including prospective developers) that you’re serious and committed to this project. And finally, if you can get something up there, even if it’s just a sketch with buttons that don’t work, you can start showing it to prospective customers and asking them to commit to paying for it. (Note that I didn’t say “Asking them how much they would pay for it.” I said “Asking them to commit to paying for it.” There’s a huge difference. Only one path will show you whether your idea will actually be successful.)

2. Going above and beyond to build something that people want.

If you haven’t been in your market for years, and you have an idea for a product that requires the market–your potential customers–to think about things in a totally different way, that’s the most likely path to failure. So what’s the better option? Finding out what’s in the market and what people hate about what’s out there. Then, instead of trying to “shock” them with something totally new, just incrementally improve on what’s out there.

3. Not knowing where your next dollar is coming from, but going forward anyway.

Startup founders and entrepreneurs are inherently scrappy folks. The people I hear who “pooh-pooh” consulting and “trading dollars for hours” are the ones most likely to fail on a project. If money gets tight, scrape together as much consulting work as you can and live as frugally as you can. Yeah, it’s not ideal to do consulting and try to run your own business, but you do what you have to do.

Ask yourself this: Do you believe in your startup idea so much that you’d be willing to sell your car and drive a beater for the next year in order to fund yourself for another month? If the answer is no, you need to decide: How committed are you to running your own business?

4. Being willing to launch and ship even when it’s not perfect.

This has been the hardest one for me. There’s always one more feature to build, or something that customers expect that you don’t have. Customers (or potential customers!) can even get emotional and/or upset that you don’t offer something they expect. And if what they’re asking for is completely unrealistic and/or it would take your product in a direction you’re not interested in going, cut them loose. Part of the answer is about setting expectations. The other part of the answer is being willing to let go. 

5. Clearly articulating your vision of the future…and getting people to believe it.

The best entrepreneurs and business owners are evangelists. They are passionate about their market. If you have the presence to get other people excited, and sharing in your vision, you can do anything. Great employees will turn down other, more lucrative jobs to work with you. Customers will show up, because your passion will come through.

 

Overcoming Price Objections in Small Business

Many the small business entrepreneur complains about not being able to charge enough to make good profits. Yet, in the business world around us, we all see businesses who seem to be doing very well and who charge the proverbial “arm and a leg” for what they do. Why is it that some niches seem more capable of avoiding price sensitivity than others? For instance, goods that carry with them a great customer experience command a luxury price. Mark Stiving took note of how the healthcare industry is a conundrum when it comes to pricing. In an article for All Business, he made the following observations:

“It’s something we all need. It’s an industry where there is huge pressure from major insurance companies, the media, governmental agencies, and even consumer groups to cut costs and prices. However, even with these factors prices have never been driven down to commodity levels or even to parity.”

Pricing

This is in sharp contrast with the experience of many small business owners. I hear all the time about being beat up on price, having to price services in competitive bid situations near the bottom, and many other such war stories. As you can imagine, I often am advising clients to compete on value versus price. Just how does one go about this?

Stiving continues in his piece, noting the following consumer behavior in healthcare:

“How is this possible? Like almost everything in pricing, human psychology is at the root. For example, when was the last time you used price to decide where you were going to have a medical procedure done? When was the last time you even knew the price of the service before going in?

Most people don’t pay attention to prices because their insurance company pays. Yet virtually everyone has co-pays, and therefore knows the general cost and has an incentive to ‘price shop’. Think about it. Even a 10% co-pay on $1,000 is $100. Isn’t it worth $100 to find the best deal for a procedure? So most people have financial incentives to shop for price, but don’t.”
Let’s focus on several key words and phrases from the quote.
  1. Human psychology. If you are sharp enough to have built a target market strategy, you have surely thought through who you want to serve. What is often overlooked, however, is how and why people buy. As is pointed out, consumers have habits. Observe the habits and then customize your approach to what you see.
  2. Insurance company pays. This fact is significant because it illustrates that many buying decisions are facilitated by removing the consumer from having to make a painful (excuse the pun) choice. Think of software as a service as another type of business wherein the monthly $9.99 or whatever you allow to be charged to your card on file is “out of sight, out of mind.” How can you make purchasing easier and less “thinky” for your customers so that the decision is almost automatic? Do you have something that could be billed on a recurring basis at a lower price point?
  3. But don’t. In describing how healthcare consumers do not look around for alternatives, Stiving makes a keen observation. Even when alternatives exist, they are often not sought out. Those who study consumer behavior far more than me would point out that the trouble associated with switching to something new holds many buyers back from changing to what may even be a better value. How can you use this behavioral paradigm to your advantage? Can you make it easier for others to but from you instead of the competition? How can you make it harder for existing customers to stop buying from you?

Finding a way to address these three issues in your own business will pay off. As you are able to make inroads, you will find that your pricing becomes justified and that you won’t have to fight as hard to maintain price integrity.

 

Rethink What it Takes to Innovate

Innovation inside big businesses requires a culture in which people feel relaxed, fairly rewarded, and valued. The same applies to small businesses, right? Recently, Charles Day, the CEO of Lookinglass, wrote an article for Fastcocreate on this truism as it relates to creative talent. He observes that, “Many creative businesses limit their talent recruitment and retention strategies to money and flattery.”

Day recommends the following 8 means to attract and retain top creative talent. Consider how many of these practices may be good human resources concepts that would apply across the board!

upside down worker

1. BUILD AN EVANGELICAL BUSINESS

Creative people yearn to make one thing more than any other. A difference. They want to solve problems they believe are important. Ten years ago, Netflix and Blockbuster were in the same business. The difference lay in their respective visions of the future of movie rentals. Internet-supplied delivery at your convenience? Or rainy Thursday nights staring at an empty shelf in a store? Which set of problems would you rather solve? 

2. AVOID THE DEFLATIONARY VALUE OF MONEY

In Daniel Pink’s excellent book, Drive, he explains that many creative people are in fact demotivated by money. In some cases it makes them perform worse, because when a task becomes “work,” creative people tend to feel restricted. As a manager, focus whenever you can on highlighting the intrinsic value of solving a client’s problem. And when your company decides it must “do it for the money”–an economic reality in virtually every business–be mindful of the impact this has on your most creative people.

3. PAY FAIRLY

There is a time to spend money. Paying “below the market” shatters trust. Many companies ignore this truth, underpaying early on when the company can, then overpaying later in order to keep talent locked in place. This builds suspicion and destroys loyalty. Instead be relentlessly pro-active in maintaining market-parity compensation, with bonuses for extraordinary results.

4. MEASURE PROGRESS

At Rosetta, one of the industry’s fastest growing interactive agencies, the rigor of the employee review program stands in stark contrast to most creative businesses. Employees are measured on a set of four published benchmarks that encourage both personal initiative and collaboration. The system is transparent and consistent. At the end of the year, everyone is evaluated and rated against their own peer group at their own level. This ensures that every employee has a clear understanding of how much progress they have made. According to a recent Harvard Business Review study, nothing matters more to ambitious people.

5. ENGINEER ENGAGEMENT

Gallup Organization research has shown that most people become less engaged with an organization over time. Nothing dilutes loyalty more than a company’s willingness to support under-performers. Be relentless about improving or firing the weakest links and raising standards and expectations. It attracts and unlocks greatness. 

6. INVEST IN INDIVIDUALITY

Google famously attributes its growth to the investment it’s made in allowing 20 percent of engineers’ time to be used for anything they want, so long as it makes Google a better company. Creative companies that charge by the hour can’t match this level of investment. But when you decide to invest zero in the possibility that your talent can create value in unpredictable ways, it suggests you think they are not capable of doing so.

7. BE OPEN. BE HONEST

Transparency is essential to attracting and retaining great talent. We define transparency as this: telling what you can and explaining what you can’t. Sharing openly encourages your people to give you the benefit of the doubt. Critical to building loyalty.

8. SAY THANK YOU

The artist in all of us needs to be recognized. So does the human being. And yet most companies are slow to praise or even to thank. Which is strange since each of us makes a choice every day about where we work. It need not, after all, be here. Saying thank you at the end of every day has always seemed to me to be a small acknowledgement that you take neither their talent nor their choice for granted.

 

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!