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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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!

 

 

Do You Understand Which Customers You Want to Develop?

Whenever I have the opportunity to sit down with an entrepreneur to discuss how an idea is going to be commercialized, a hot topic is “who is your buyer, and how will you win them?” Amazingly, many who aspire to start businesses (even some who have been in business) have very little strategic insight into the answer to this question. By going after the universe, in a shotgun method, the business owner shortchanges the enterprise of the opportunity to develop authentic connections with targeted customers who become loyalists. We break the broad question down into tactical components such as how to listen to customer input and revise a product or service offering. Yesterday I read a LinkedIn article by Steve Blank, the author of The Startup Owner’s Manual. Blank wrote about an interaction with a former student who claimed that following Blank’s advice on customer development was causing his company to fail:

We Did Everything Customers Asked For
“We did every thing you said, we got out of the building and talked to potential customers. We surveyed a ton of them online, ran A/B tests, brought a segment of those who used the product in-house for face-to-face meetings. ” Yep, sounds good.

“Next, we built a minimum viable product.” OK, still sounds good.

“And then we built everything our prospective customers asked for.” That took me aback. Everything? I asked? “Yes, we added all their feature requests and we priced the product just like they requested. We had a ton of people come to our website and a healthy number actually activated. .  . everyone uses the product for awhile, but no one is upgrading to our paid product. We spent all this time building what customers asked for. And now most of the early users have stopped coming back.”

Customer developmentWhat’s your business model?
“Business model? I guess I was just trying to get as many people to my site as I could and make them happy. Then I thought I could charge them for something later and sell advertising based on the users I had.”

I pushed a bit harder and said, “Your strategy counted on a freemium-to-paid upgrade path. What experiments did you run that convinced you that this was the right pricing tactic? Your attrition numbers mean users weren’t engaged with the product. What did you do about it? Did you think you were trying to get large networks of engaged users that can disrupt big markets? Large is usually measured in millions of users. What experiments did you run that convinced you could get to that scale?”

I realized by the look in his eyes that none of this was making sense. “Well I got out of the building and listened to customers.”

The idea of the tests he ran wasn’t just to get data – it was to get insight. All of those activities – talking to customers, A/B testing, etc. needed to fit into his business model –how his company will find a repeatable and scalable business model and ultimately make money. And this is the step he had missed.

Customer Development = The pursuit of customer understanding
Part of Customer Development is understanding which customers make sense for your business. The goal of listening to customers is not please every one of them. It’s to figure out which customer segment served his needs – both short and long term. And giving your product away, as he was discovering, is often a going out of business strategy.

Blank then shared the lessons learned by his student:

  • Getting out of the building is a great first step
  • Listening to potential customers is even better
  • Getting users to visit your site and try your product feels great
  • Your job is not to make every possible customer happy
  • Pick the customer segments and pricing tactics that drive your business model

Gorillas Ask 7 Questions in Marketing: Do You?

Rediscovering a classic book is such a treat. Business books can, however, become outdated. New editions containing updates for changing market conditions can ensure a timeless and informative experience for the reader. In the field of marketing, Jay Conrad Levinson and his wife and business partner, Jeannie wrote a quintessential work on small business marketing, the Guerrilla Marketing Field Guide. They have released a new and updated version, serving the needs of a new generation of guerilla marketers.

Guerilla marketingToday, marketing seems very complicated. In a blog post last month for Entrepreneur.com, the Levinson’s argued that a marketing strategy, however,  doesn’t have to be complex. They believe that a comprehensive strategy can be articulated in seven brief sentences:

  • The first sentence tells the physical act your marketing should motivate.
  • The second sentence spells out the prime benefit you offer.
  • The third sentence states your target audience or audiences.
  • The fourth sentence states what marketing weapons you plan to use.
  • In your fifth sentence, you define your niche or what you stand for: economy, service, quality, price, uniqueness, anything.
  • The sixth sentence states the personality of your company.
  • The seventh sentence states your marketing budget, expressed as a percentage of your projected gross sales.

They describe in the book how such a strategy highlights the prospective buyers targeted by the marketing. They recommend starting with the people and then working backward to the offering. By organizing this way, results become more easy to attain, planning to obtain the results has meaning, and a specific call to action can be developed without much additional work. By doing this “blocking and tackling,” your team is able to anticipate market shifts over the long haul. The Levinson’s suggest the following:

The strategy must be expressed in writing, and it should not contain headlines, theme lines or copy. The strategy is devoid of specific marketing copy because it must be solid, yet flexible. Specific words and phrases pin you down. A strategy should be developed as your guide, not as your master.

After you’ve written all seven steps, read it a couple of times, then put it away for 24 hours. It’s just too important to be accepted — or rejected — hastily. Look at your strategy from a fresh perspective on a different day. See if you still love it and believe in it.

When is the best time to change that strategy? The first time you see it — before you’ve invested any money in it. After you’ve finalized it, don’t change it again for at least six months; then do a review and see if you need to tweak your strategy. If you have it right, you may not need to make any changes for several years.

Your approved strategy should be pinned up on bulletin boards and emblazoned in the minds of everyone who creates marketing for you. Keep the strategy handy in a drawer, on your desktop, or in an accessible file so you can reach for it the moment anyone presents even a tiny opportunity for marketing to you . . . or when you have a killer idea yourself.

Now that you know what we mean by marketing strategy, it’s time for you to create one for yourself.

Ask yourself these questions so you can create your seven-sentence marketing strategy:

  1. What physical act do I want people to take after being exposed to my marketing (click here, call a phone number, complete this coupon, or look for my product next time they’re at the store)?

  2. What prime benefit do I offer? What competitive advantage do I want to stress?

  3. Who is my target audience?

  4. What marketing weapons will I use?

  5. What will my market niche be?

  6. What identity do I want my business to have

  7. My marketing budget will be _______% of our projected gross sales.

Following this outline will help organize your small business around what’s really important. Good luck!

 

 

Be Bold and Flexible In Leading Others

One of the challenges that leaders face is the need to customize their approach to individuals under their charge, at the same time as driving corporate performance. Far easier is it to try a singular approach–either one we’ve seen others before us model or one that is very comfortable. To be observant and empathetic enough to notice what others need, in what measures, and at what distinct moments delivered in ways that are point is a skill–particularly if you as a leader are able to do this consistently for many who look to you for guidance, direction, and nurture.

Nick Petrie from the Center for Creative Leadership wrote, “Hindsight does not lead to foresight since the elements and conditions of the system can be in continual flux”? Understanding what we should have done in a particular situation does not, as Petrie indicates, bode well necessarily for interacting with others going foreward. 

Jane Perdue, in a blog post last Friday, says that “it’s time to hang up on heroic leadership — the notion that a single person has all the answers — and embrace a new orientation to leading yourself and others: flexibility.” She quotes Scott Yorkovich, adjunct faculty at Capella University, in defining  flexible leadership as the “ability to receive and process diverse and potentially conflicting sources of information, the openness to implement a variety of strategic solutions, and the ability to adapt to changing conditions.”

Perdue  writes that “getting comfortable with ambiguity is a must in a turbulent business environment filled with perpetual transitions. Having a boundary-spanning mindset is crucial for successful personal and professional leadership.” She recommends the tips below to assist in developing a leadership style that is adaptive and connecting:

contrarian

  • Be the water. The past’s linear lessons have questionable applicability in today’s hyper-connected, technology-driven, multiple-generations business world. The mental scripts we’ve written based on our past experiences can limit our ability to think and respond creatively, a performance gap that can render us obsolete. Flexible leaders are fluid — managing to drive change and innovation while still preserving a core of stability.
  • Transcend ego. Agile leaders naturally think less of “me” and more of “we,” having long ago abandoned command-and-control power trips. As Ben Dattner, adjunct professor at New York University, advises us, “Twenty-first century leaders might benefit from thinking of themselves as being in the center of a web rather than on top of a pyramid.”
  • Keep the number of rules, policies and procedures to a minimum. Four-inch-thick policy binders foster rigidity and stifle innovation. Flexible leaders know when to go by the book and when to take a risk. “If you want to encourage more risk-taking in your company or your unit, you’ll need to reduce the conflicting signals and create an environment where the benefits of taking a risk outweigh the costs,” writes Ron Ashkenas, an organizational transformation consultant.
  • Embrace the contrarian. We’re rewarded for and conditioned to rely on our strengths, a default position that sometimes prompts us to marginalize ideas generated by those with whom we disagree or discount. The trouble is that over-reliance on a strength can become a weakness. Flexible leaders seek out those with alternate points of views and listen closely to what they have to say before things go wrong.
  • Think paradoxically. Managing contradictions and opposites are the power breakfast of flexible leaders. One’s leadership focus may be on task completion, yet there is still an understanding that building and maintaining relationships is equally important. Flexible leaders are both strong and vulnerable, provide both structure and managed chaos, and value hard and soft skills equally.