Entrepreneur

Getting to scale: the Entrepreneurs curse

As Kim and I spend the week noodling on our 3 year strategic plan (more golf, less work??) this just in from John Hamm, from my local Sydney paper. A great read for entrepreneurs. The short version is here:

One of my favourite articles on the topic was by the academic John
Hamm in the Harvard Business Review earlier this decade. His
classic piece, “Why entrepreneurs don’t scale” should be mandatory
reading for business owners. A friend recounted his own inability to
scale the other day, and said he ticked each of the four boxes that Hamm
says stop entrepreneurs scaling. They are:

Loyalty to comrades: the excessively loyal
founding entrepreneur is the growing organisation’s worst enemy because
they will not make the tough staffing decisions.

Task orientation: the entrepreneur is the
organisation’s weight-lifter – brilliant at executing short-term
projects, but lacking in long-term strategic ability.

Single-mindedness: the entrepreneur is too
insulated and does not communicate well enough with staff or accept
opinions different to their own.

Working in isolation: The brilliant, isolated
entrepreneur struggles to present his venture to the world. They don’t
enjoy leading the sales effort or being their enterprise’s public face.

I’ve got my own thoughts about why so many entrepreneurs don’t scale:

Scale tales: Business plans are full of material
about where a venture can grow, which is all exciting, though rarely
happens. Hardly any business plans I read have detailed information on
how scaling can be achieved. They are too light on execution.

Poor systems: Strong systems and structures
provide the foundation to scale ventures. They make it easier for
entrepreneurs to work on, rather than in, the business. Too many
entrepreneurs chase growth first and worry about systems later.

Lack of self-understanding: Some entrepreneurs
love repeating their business idea everywhere possible and stick close
to their core product. Others find running a large organisation, with
more staff and bureaucracy, stifling. It feels like a job. They can’t
make the transition from entrepreneur to chief executive, or don’t want
to. They should have sold their business to a large player as it took
off, and moved to their next start-up.

Capital: Some entrepreneurs wait too long to
access capital. Being well-capitalised at the start, even if it means
giving up more equity, can be advantageous for businesses that want to
scale. Sometimes you have to let go of equity to get a smaller piece of a
much bigger pie.

Relationships: If want to scale a venture rapidly
you need a business partner on the same page, an understanding life
partner, and a willingness for a different work/life balance.

Entrepreneur

21 Economic Models explained with Cows

SOCIALISM You have 2 cows.
You give one to your neighbour. 

COMMUNISM
You have 2 cows.
The State takes both and gives you some milk. 

FASCISM
You have 2 cows.
The State takes both and sells you some milk. 

NAZISM
You have 2 cows.
The State takes both and shoots you. 

BUREAUCRATISM
You have 2 cows.
The State takes both, shoots one, milks the other, and then throws the milk
away. 

TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income. 

SURREALISM
You have two giraffes.
The government requires you to take harmonica lessons.

AN AMERICAN CORPORATION
You have two cows.
You sell one, and force the other to produce the milk of four cows.
Later, you hire a consultant to analyse why the cow has dropped dead. 
 
ENRON VENTURE CAPITALISM
You have two cows.
You sell three of them to your publicly listed company, using letters of
credit opened by your brother-in-law at the bank, then execute a debt/equity
swap with an associated general offer so that you get all four cows back,
with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a
Cayman Island Company secretly owned by the majority shareholder who sells
the rights to all seven cows back to your listed company.
The annual report says the company owns eight cows, with an option on one
more.
You sell one cow to buy a new president of the United States, leaving you
with nine cows.
No balance sheet provided with the release.
The public then buys your bull. 

AN AUSTRALIAN CORPORATION You have two cows. Business seems pretty good. You close the office and go for a few beers to celebrate.

A FRENCH CORPORATION
You have two cows.
You go on strike, organize a riot, and block the roads, because you want
three cows. 

A JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and
produce twenty times the milk.
You then create a clever cow cartoon image called 'Cowkimon' and market it
worldwide. 

A GERMAN CORPORATION
You have two cows.
You re-engineer them so they live for 100 years, eat once a month, and milk
themselves. 

AN ITALIAN CORPORATION
You have two cows, but you don't know where they are.
You decide to have lunch. 

A RUSSIAN CORPORATION
You have two cows.
You count them and learn you have five cows.
You count them again and learn you have 42 cows.
You count them again and learn you have 2 cows.
You stop counting cows and open another bottle of vodka. 

A SWISS CORPORATION
You have 5000 cows. None of them belong to you.
You charge the owners for storing them. 

A CHINESE CORPORATION
You have two cows.
You have 300 people milking them.
You claim that you have full employment, and high bovine productivity.
You arrest the newsman who reported the real situation. 

AN INDIAN CORPORATION
You have two cows.
You worship them. 

A BRITISH CORPORATION
You have two cows.
Both are mad. 

AN IRAQI CORPORATION
Everyone thinks you have lots of cows.
You tell them that you have none.
No-one believes you, so they bomb the **** out of you and invade your
country.
You still have no cows, but at least now you are part of a Democracy…. 

A NEW ZEALAND CORPORATION
You have two cows.
The one on the left looks very attractive
Entrepreneur

gDiapers, Prius and new ways of doing things…

20pingxlarge1 Great piece in yesterday’s New York Times that resonates with us here at gHQ. Like a Prius, gD requires a change in behaviour.

By G. PASCAL ZACHARY

January 20, 2008
THE Prius has become one of the hottest cars in America — an amazing development, because this hybrid-electric car requires some rather large changes in how people behave.

I learned the need for Prius-style adaptation early this month, when I rented a Prius from Budget Rent A Car in Seattle. Much to my embarrassment, I couldn’t get it to go forward. Once I got going and arrived at my destination, I couldn’t figure out how to put it in reverse.

Fortunately, another Prius owner on the premises — they seem to be everywhere these days — gave me a quick lesson. You start the Prius by pressing a button on the dashboard, not once but twice. To put it in drive or reverse, you manipulate a very small stick protruding from the dashboard.

The next morning, I awoke before dawn and started the Prius, but no matter how many times I pressed the button, I couldn’t get it to move. I finally called Budget roadside assistance, and a polite man talked me back from my private technology disaster. It turns out that I had failed to tap the brake while moving the gear shifter in a certain inexplicable way.

I don’t think I can adapt to the behaviors required by the Prius. But thousands of people are, and Toyota, its maker, is reaping the benefits.

Whether humans will embrace or resist an innovation is the billion-dollar question facing designers of novel products and services. Why do people adapt to some new technologies and not to others? Fortunes are made and lost on the answer.

Great innovations have foundered over human stubbornness. Consider the Picturephone, trumpeted by AT&T at the New York World’s Fair in 1964 as a major technological advance. Engineers reasoned that if hearing someone’s voice over the phone was terrific, wouldn’t seeing a face be even better?

Consumers didn’t think so. AT&T’s Picturephone, which would have added around $90 to a person’s monthly phone bill in 1974, a huge amount for the time, “was superfluous, adding little information to voice alone, especially considering its high price,” said Kenneth Lipartito, a professor of history at Florida International University.

Even today, when adding video to a phone is a trivial cost, consumers may rebel. Video-conferencing often remains an activity forced on people by their employers.

Resistance to technology is an omnipresent risk for every innovator. Even a device as fabulously freeing as the personal computer struck some people as an abomination. In 1990, the poet Wendell Berry famously declared his perpetual allegiance to the typewriter in his essay, “Why I Am Not Going to Buy a Computer.”

Few people joined him, however, a reminder that rejection isn’t the real specter facing new gear. Adaptable humans usually trade one technology for another, rather than reject any and all. To be accepted, innovations must deliver benefits — enough benefits to make change worthwhile.

“As consumers we’re constantly asking ourselves, where do we draw the line? How far do we go?” says Mitchell Kapor, chairman of the Open Source Applications Foundation in San Francisco.

Businesses crave a sweet spot: where the line is drawn in favor of the innovator. The late Akio Morita, founder of Sony, talked about satisfying appetites that people didn’t even know they had. He achieved such a feat with the Sony Walkman, the music player introduced in 1979. While at the Lotus Development Corporation, Mr. Kapor created another such “killer app,” or application: the spreadsheet for the PC.

Killer apps are sought-after innovations because people get addicted to them and make behavioral changes that might otherwise be unthinkable. “Those who benefit from a technology adapt to its constraints and become dependent on it,” says John Staudenmaier, editor of the journal Technology and Culture and a historian of technology at the University of Detroit Mercy.

Dependency drives profits, the ultimate arbiter — for some — of an innovation’s success. Look how Apple has converted the mania for the iPod into record profits — and a record stock price.

IPod “addiction” seems benign. Yet some worry that other innovations may harbor health threats. As a result, they may be vulnerable to what Marc Ventresca, a lecturer at the Saïd Business School at Oxford, calls the “frog boiling” problem. For the frog, gradually rising heat causes no alarm — until the water is so hot that death is imminent.

“Adaptation can sometimes be dangerous, but the hazard isn’t apparent until it is ‘too late,’” Mr. Ventresca says.

While people may be fearful of allowing a seductive technology to imperil them — the “Frankenstein effect” — they may also fear the consequences of not changing their ways. As the case of climate change illustrates, many consumers are enthusiastic about changing their behavior — in this case, the way they drive cars — if they believe that by adapting to new technologies they will save themselves and the planet. Think of the Prius again.

FOR technological innovators, the cash register can ring either way. They may achieve a smash-hit breakthrough, or simply make a slight improvement in a technology that humans already feel comfortable with. Most innovators no longer even try to predict human reactions to their creations.

Henry Kressel, a partner at Warburg Pincus and a co-author of “Competing for the Future: How Digital Innovations Are Changing the World,” says, “You throw technologies into the market and see what sticks.”

The hope is that passionate “early adopters” will blaze a path toward mass acceptance of a new technology. Yet the truth is that no one can tell in advance which innovations people will adapt to and which will become the next example of the Picturephone.

Where people draw the line can be known only after the fact. Which is why innovation is always a risky — even humbling — business.

Eco-entrepreneur, Entrepreneur, Green Business, Stories from the trenches, Sustainable Business

NY, NY

Images Kim and I just blasted our way through New York. Three days, many meetings from gMums to strategic partners with the odd good meal thrown in. Nothing better than starting a day with a run around Central Park. It amazes me that at 5.30am there are huge Peletons doing laps and runners of all shapes and sizes putting the hard yards in. There was a quote near the Children’s Zoo – a city’s greatness is measured by the quality of their green spaces. NYC has done an amazing job.
And as you leave the tranquility of the park and negotiate around the horse drawn carriages you are transported right back into the thick of a major city the highlight being those delightful tax drivers. I had an idea for a reality tv show…take a NYC cabbie and a Portland cabbie and have them swap cities for a day. Make that an hour…