Secrets to Create Your Own Luck

Sheryl Sandberg said:  If you're offered a seat on a rocket ship, don't ask what seat! Just get on. Here's the rub: will the rocket ship ride be successful or will it blow up? It's easy when you have made it to look back and give advice. Remember Tevye from Fiddler on the Roof when he sang "If I were a rich man..........." People would fawn on you because you made it and listen to your advice but that advice may or may not be useful.

I DO believe you can create your own luck and you need to take chances because opportunities come along infrequently. Just don't be rash. And let's be realistic – luck plays an important role in which rocket ship you jump on. So the question to me is how can you improve your luck?

Let me change course for a minute. How many of you get emails hawking a system in stock trading that says you can make $1million with an investment of only $10,000? I get those emails all the time and sometimes I am curious enough to find out how. It’s usually based on highly leveraged trades using options or other derivatives and the deals are truly based on luck. I will give you an example that has the good and the bad of both. If you would have invested $8,000 in Ethereum (ETC), a cryptocurrency, in Dec. 2016, and you sold only 7 months later you would have made $380,000!!

Hindsight is wonderful. Or if I invested only $100 in the lottery and was successful, I could have made $100 million. Makes me want to run out now and buy a ticket.

Investing $8,000 is a lot for many people and the potential for loss in the stock market is fairly high. Risking $1 or even $100 on a high potential return is less risky and most people can afford to lose a small amount of money to win something very large. Playing with your career, however, is a high risk venture so you have to be somewhat cautious and take calculated risks. Additionally, as business people you may be faced with several different projects or opportunities that you can jump on (the rocket ships) and the question remains:  “how do you select the right opportunity?” So, the question exists whether you are playing the stock market, the lottery, being an angel investor or Venture Capitalist, or just a good business person. The answer is not simple yet those successful in finding that rocket ship have a system they follow – or they are just plain lucky.

A system is a set of rules and methodologies that are used to select options from a set of opportunities. And, moreover, it is a set of principles to follow that tell you when to exit and while you are in the opportunity, how to manage the opportunity to achieve the best success. Whether it is the stock market, your business career, or the leader of projects the same general principles will apply. Jack Schwager wrote a series of books called The Market Wizards  (click the link for Schwager’s Amazon site). In short he discovered that each successful investor had different systems but the one thing that stood out is the discipline each investor had at implementing their system AND each investor had some unique skill or advantage that he/she put to use, e.g. great analytical mind, attention to detail, or understanding of a specific market.

Creating a 6-step system for luck

There is no magical system that can be implemented that creates luck. There is no service to which you can subscribe. Yet, there are some steps you can take that will improve your chances of success and make you lucky. As Thomas Jefferson said: “I am a great believer in luck. The harder I work, the more I have of it. Here are 6 steps you can take to work not only harder but also smarter.

1.   Get organized. Create a journal of ideas and catalog them. Have a special book with tabs for these ideas. I set up a journal using Staples ARC system and have tabs on new ideas, new blogs, interesting articles and I review them regularly.

2.   Live your passion. This sounds so simple but from the perspective of building luck, living means getting out and networking and attending events with others who share your passion. I believe luck is improved when you focus on your passion. If you are a technologist live in that environment by attending events at schools, through meetups and other in-person activities. Relationships with others can lead to luck. Think about people at Harvard who met Bill Gates or Mark Zukerberg and had the opportunity to know them and eventually work for them. Attend TED events for new ideas. I am interested in AI and deep learning so I pay attention to meetings that talk about these technologies. I have become active with a group at CHOC hospital called MI3 (Medical Information and Intelligence Institute) run by Dr. Anthony Chang and whose focus is on applying AI to health care. Companies that present there and discussions on topics may give me ideas that I can enter into my journal.

3.   Improve your learning. With the Internet it is easy to learn. You can sign up through Coursera or the Kahn Academy or through colleges who offer educational information. It’s also easy to sign up for Google Alerts for things that are important to you. I also read Investor Business Daily, not only for stock information but also the sections on New Technology and New America. But don’t stop there; you can set up your reader on the internet to send you articles on topics of interest. My home page on Yahoo is set up with RSS feeds on subjects of interest.

4.   Evaluate ideas and perform due diligence. There will never be a dearth of ideas. The issue is evaluating these ideas based on attributes that are important to you. Consider risk vs. reward. If it is a new company you are evaluating (the rocket ship) look at the competition and the management team. In angel investing we pay more attention to the management team than any other factor. Do some market research, preferably first hand research. I recall a postal worker who delivered the mail years ago and he saw something very interesting. People were having red disks delivered to their homes. The company was Netflix and he invested early. In June 2002 the price was under $1 per share; now it is nearly $200. It is not as rapid a growth as Ethereum but it has been and probably will be a good ride. Another way to research something is to walk around the malls, especially for consumer goods. See where people, especially young people, are buying and what they are wearing.

5.   Act quickly. You don’t want to be rash but when opportunity knocks you have to act quickly. At this point you will have had collected ideas, learned about new things and probably evaluated ideas. When the idea is presented or the opportunity materializes you might have already analyzed it. Then make a decision and move on. As they say, success is never final; failure is never fatal. This brings us to the last point.

6.   Develop a contingency plan. Uncertainty exists and sometimes events beyond your control can put a damper on the best plans. Therefore, it is always good to reevaluate your plans and opportunities on a regular basis, e.g. every 6 months but certainly not longer than a year.

Final thoughts

The system is important and if you have a good system positive outcomes will accrue in time. If you are not getting positive outcomes either your system is not good or your “edge” is not as great as you thought. Here are some considerations for you.

• Early failure is not the end of the world. You have to get comfortable in your system and potentially tweak it. The key is the ability to fail fast and learn from your mistakes.
• Flexibility. I have written in the past that a great business executive has to be “fast, fluid, and flexible.”  This is certainly true for those in business and in improving their luck at getting on the right rocket ship.
• The method used to improve luck and success has to be right for you. Just as Schwager showed for great investors, their systems matched their personalities. You have to find a system that works for your temperament and your level of risk.
• Being lucky is not easy but luck increases with more opportunities and learning. You can make your own luck by hard work and learning from your mistakes. The key factor though may be how you personally deal with setbacks and success. It is said you learn more from setbacks and as I look at my own career, I can certainly resonate with that point.

There is no perfect system that can be implemented to improve your luck. And frankly, I believe some people are luckier than others. An actor that is “discovered” by a movie executive is one example. For others, especially in the business world seeking success or fame and fortune, it is more likely a combination of keeping your eyes open, actively seeking out opportunities, and a balance of IQ (innate intelligence) plus EQ (emotional intelligence and resilience) plus BQ (business sense which can be learned).

And maybe one day, for those readers of this blog who become successful, I will see you on the cover of Forbes magazine. For more discussions, feel free to reach out to me at dfriedman@clevelpartners.net.

6 Steps to Beat the Competition: Analysis and Discipline Pay Off

It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.
                                    Sun Tzu- The Art of War

I am a believer in the Art of War, especially applied to business and marketing. When I talk to groups on business and marketing subjects I use this quote and it has guided me in the way I approach building businesses and helping companies grow. I have listened to numerous investment pitches at TechCoastAngels screenings (a real Shark Tank) and have heard too many times that the entrepreneur believes there is NO competition. There is always competition, i.e. another way to solve a problem or provide a service. Even when a company realizes that there is some semblance of competition, many executives believe they have more attributes, a better business model, and a stronger brand than reality leads them to accept.

Sadly, this problem extends way beyond the start up world. In 2008, Jim Keyes, CEO of Blockbuster said: “Neither Redbox nor Netflix are even on the radar screen in terms of competition.” While Redbox had its glory days and has now faded, Netflix continues to soar as they are able to take advantage of streaming media and they have evolved their business model. Blockbuster and its ubiquitous blue and yellow stores have faded into oblivion after ceasing operations in 2013. When I was at RCA (when it existed as a standalone company) one of the execs in the tube division beat his plan but unfortunately failed to recognize competition from semiconductors. He was fired. And let’s not forget other companies such as Digital Equipment Corporation, Wang, Motorola and Nokia in the tech field. Not only did they fail to understand the competition, their business strategies did not evolve. We are now seeing consumer companies such as Macy’s and Kohl’s which failed to recognize the competitive environment fast enough (can you say Amazon and online shopping) and are now closing many of their stores.

There is hope though, for most companies as they consider their competition, the environment and the competencies they need to put in place to execute a new business strategy. To that end, here are the six steps companies must take to gain and/or retain a competitive edge.

1. The first step to beat the competition is to recognize that there is competition! Competition comes from direct competitors, i.e. those offering the same type of product or service; indirect competitors; and even the do-it-yourselfers. Even if a competitor is small today, should technology or macroeconomic trends change, a small new company can become dominant. That is what happened to Blockbuster. Competition doesn’t have to come from the same players in the industry. Who would have thought Google and Apple, both, would be developing an autonomous car or at one time a smart phone. As we celebrate the 10^th anniversary of the iPhone, there was a time when dominant companies in the market such as Nokia and Motorola did not consider Apple a threat and frankly, they did not believe companies like LG and Samsung were threats either. Both Nokia and Motorola have lost their luster.

Keep alert and be paranoid. Use user panels talk to “lead users” who are early innovators of new products, set up Google Alerts on companies that are current competitors as well as those which have the right competencies to become competitors. Your product might be better and that message needs to be conveyed to your target audience. You can recognize the competition through the use of user panels, discussions with “lead users’ and even setting up Google Alerts.

2. The second step is to know the competition. A couple of months ago, I was watching a classic war movie called Patton. Patton was reading the works and biography of Rommel, his nemesis, competition and enemy. Rommel in turn was trying to learn through books and other sources, how Patton thinks and how he would fight. It’s classic Sun Tzu! Even without teams of analysts and staff there are a few tips in understanding and knowing your competition.

Executives can become the equivalent of Undercover Boss. When I was the top marketing executive for US Cellular, I personally visited both my stores and those of my competitors. It’s easy to do even in a business to business environment. Other tools that can be used include Customer Advisory Boards, user panels, cross-functional teams that meet regularly to discuss competition and the environment. At ATX Group (now Sirius Connected Car), every other Friday morning I hosted a cross functional group of executives to discuss new technology and competition. Certain execs were tasked with following specific competitors and sharing that information in Microsoft Exchange folders for our sales, marketing and technologists to use. Other tools include Spider diagrams, focus groups and market research including subscribing to the industry analysts that cover your industry. In the tech field those industry analysts include Gartner, Forrester, IDC and Ovum among others. If a public company is a competitor, read their 10-Ks; it’s amazing how much information is available in that document.

3. The third step is to know yourself. Some of the same tools used to understand the competition can be used to understand your own company. Spider diagrams, side by side market research matrices that can highlight those attributes that are important to your customers and for which you perform well or poorly can help set your company’s strategic imperatives. I am a huge fan of developing a SWOT analysis which covers strengths, weaknesses, opportunities and threats. To do SWOT well companies should seek out key thought leaders in their company, regardless of level and even use newly recruited employees who have a different perspective because of their recent outside experience. Doing mystery shopping even in a business to business company is also relatively easy. At a telecom company in New Jersey, one of my marketing managers set up a false company called The Fred Racciopi Cement Shoe Company of Central New Jersey (obviously we set this up tongue and cheek) and became a customer of each competitor and well as our own company. It’s amazing what we learned and through those learnings we adjusted our training program, branding, positioning and marketing material.

4. The fourth step is to develop and explain the factors that make you different. Customers buy from companies that provide a unique value for their needs. If the value is significant, relevant to the customer, sustainable and credible, the company will have a differentiable advantage. This enables executives to create a “moat” around their company and its products, protecting the company from competitive incursions. The strength of your differentiation is akin to the size of the moat. Even commodities have moats. Think about salt or rice, two very basic commodities. Do you believe that Morton’s salt is better than other salt and worth a 15% price premium? Or how about Mahatma rice vs Kroger-branded rice? What about chicken? What company said: It takes a tough man to make a tender chicken?” (The answer is Purdue Chicken.)

If you can differentiate these commodities, you can differentiate any company and its products. There are several ways upon which to differentiate. Intellectual property (IP) or Patents is an obvious one. Even IP may not be sustainable or even relevant to your target market. Other ways to differentiate are based on what Adrian Slywotsky, author of Profit Zone, calls strategic control points which are defined as some type of unique advantage for a company based on competency or partner relationship. All companies can find at least one. These could include their brand, their business partners, distribution partners, unique processes, innovation, low cost of manufacture, unique customer knowledge, access to certain resources be they commodities or people and similar items. A company has to find those strategic control points that are relevant to their markets and be consistent and credible in delivering on those elements.

5. The fifth step is to develop plans: Developing and executing a plan is critical to success. A written plan should include specific elements. By target market, a goal needs to be defined, a strategy clearly enunciated, and tactics developed with specific milestones, costs, and a person responsible for delivering the tactics. Our opinion is that a plan should have one specific leader who is accountable for the entire result. Individuals who report to this leader need to be designated for each tactic and milestone. C-Level Partners also believes that these plans need not be long winded and in fact the best plans have focus and clarity and might even be codified on one or two pages at maximum. I personally am in favor of one page plans with specific deliverables. I like using a method called RACI (responsible, accountable, consultative and informed) to ensure that the right people in a company are involved in the development and execution of the plan.

6. The sixth and final step is to monitor, measure, modify.  Each plan developed in step 6 should have a complementary set of metrics to track the success of the plan. Metrics vary depending on the plan and some of the metrics can include: average revenue per sale, total sales, return on investment, market share, win/loss ratio of business, aided and unaided awareness, average order quantity, SEO, the timeliness of performing the tactic, and other operational, business or product criteria. Each month these metrics should be added to a scorecard – preferably balanced – and reviewed with the operational or executive team. If a metric is not on target, then the executive responsible for the metric has to provide a corrective action plan. If the metric is very critical to the business strategy or to the overall goals of the plan, then a separate deep dive should be performed where the elements of the plan can be discussed in detail.

As an executive it is sometimes hard to see the competitor when you are mired in the day to day operations. You can always look to outsource part of these six steps or recruit internally some of the best and brightest less tenured people in the company. Successful companies couple strategy with competitive analysis to create and maintain an advantage. When I first converted from an engineer to a marketer, I cut my teeth on competitive analysis. It was the perfect start to figure out how to gain an advantage for the new products I was developing for my customers. I was fortunate to have the opportunity to help drive the strategic vision of my company at the same time. That integration is, in my opinion, critical to a company’s success.

Once you gain a competitive advantage, you have to stay ahead of the competition. That is a subject for a future blog, yet we at C-Level Partners believe that maintaining a competitive edge means companies have to continue to innovate, with technology, with their people, and through their processes. They must maintain contact with customers and open their ears and even seek out criticism. And they must strive for not only incremental improvements but also stretch for what we call the “art of the possible.”

As a technologist and business executive, I always keep in mind the title from Andy Grove’s book, “Only the Paranoid Survive.” Yet with discipline and a plan as outlined in these six steps we believe that companies will be able to develop a competitive edge and flourish in this hyper competitive environment.  

If you have comments or would like to see if you qualify for a complementary appraisal contact me at dfriedman@clevelpartners.net or call me on 949 4394503.

Do You Have What it Takes to be a Visionary?

Do You Have What it takes to be a Visionary?

Visionary. (noun). A person with original ideas about what the future will or could be like.  These visionaries will change the world for the better over time. Who are those visionaries around you?  Do you – or they – have what it takes to be a visionary?

Visionaries come from different walks of life and professions. But generally, they are activists, artists, scientists, engineers, entrepreneurs, and in, general, non-conformists. All have a different view of the problems they face. All have changed the world. We know who visionaries were in the past. Here’s a short selection of some of my favorites: Thomas Edison, Henry Ford, Albert Einstein, Gandhi, Walt Disney, John F Kennedy, Martin Luther King, Steve Jobs, and Elon Musk.

I decided to give my perspective on the characteristics of a visionary. This is not a well-researched statistical piece; it is based on what I have read and observed in my 30+ years of business and worldly experiences.

1. Open-mindedness. This refers to one’s ability to keep an eye open for new thinking and not be closed to new ideas just because they are different. In fact, actively seeking out new ideas would be ideal.
2. Values diversity of thought. Sometimes surrounding yourself with people from the same background provides a very narrow focus and homogeneous solutions to the problem. I like diversity of people and diversity of thought. That is how I like to construct cross-functional and matrixed teams and I find it amazing to see the robustness of decisions and options.
3. Action oriented.  There is a difference between a dreamer who thinks about a different world and a visionary who sees the different world and puts a plan in action to get to that point. If Martin Luther King’s Dream Speech just shared the dream of one world with all people created equal change would not have occurred or occurred as fast. Rather, he put into place activities that began to implement his dream.
4. Conviction.  If you are a visionary, you might be treading on existing ideas and values. Many people don’t like change. So visionaries have to have a firm conviction that they are right in seeing a new world even when many shun those new ideas.
5. Persistence. Coupled with conviction is the characteristic of persistence. Being visionary challenges prevailing wisdom and the road to change is fraught with difficulty, roadblocks, and potential legal and regulatory restrictions.  A visionary accepts those challenges and preseveres. A significant amount of energy comes from the visionary’s followers.
6. Inspiration.  We all know of inspirational and charismatic leaders. I used to think that inspirational leaders were vocal and can get a crowd excited by rhetoric. I was wrong. To be inspirational the visionary needs to deliver clarity in the new world order and be articulate in explaining the benefits.
7. Clarity. A fuzzy vision doesn’t work because with change, people must “see” and believe in an end result. Think about JFK’s speech on Sept 12, 1962 to 35000 people in Rice Stadium in Texas wherein he said “We choose to go to the Moon! .. We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win..”  This was not a fuzzy vision of space travel but a clear goal and vision of space exploration taken with first steps to land a man on the moon in a specific time frame. And, of course, in 1969 I watched as we landed a man on the moon.
8. Boldness.  Along with clarity, the vision should be bold, something that is not just an incremental improvement but a major change, a major shift in the way things are done. Sometimes we call this a BHAG – a big hairy audacious goal. Boldness with conviction is critical because it rouses the energies within people to achieve success.
9. Risk-tolerance. Along with risk tolerance is the lack of fear of failure. Thomas Edison said that “I have not failed. I've just found 10,000 ways that won't work.”   He framed his end product in such a way as to give him the will to succeed. By positive thinking that he is closer to an end result, he was able to maintain his work ethic and develop the electric light bulb.

Are you born with these characteristics or can you learn them?  My personal belief is that there is some internal encoding of these characteristics in your DNA but that family and environment coupled with some good mentors and influencers will solidify these characteristics.  Reading biographies and auto biographies can also help understand the thinking of visionaries.

There may be other characteristics of a visionary and you can certainly add to this list.  When you attend entrepreneur events and innovation conferences think about how these apply to the people who present and the people whom you meet.  Then imagine you, the reader, having these characteristics and the opportunity to change the world.

C-Level Partners is dedicated to helping companies achieve value creation through revenue growth and margin improvement.  We can also help with your innovation plans, advisory services and helping establish a framework for innovation (see our blog on this subject at http://clevelpartners.blogspot.com/2016/10/how-to-institutionalize-innovation.html).  Or feel free to call me at 949 4394503 for a complimentary analysis.

Cheat Sheet to Innovate New Products and Services

Today, as part of TechCoastAngels (TCA), I participate in pre-screens and screenings (shark tanks), mentoring teams who have new ideas they want to pitch, and judging fast pitch competitions. Before I became an angel investor I worked in the corporate world as an intrapreneur. It is quite different in many ways but similar in other ways. I have found that what I learned in both the corporate world and the angel world can be shared with future innovators and visionaries and these ideas and templates can potentially help them to get funded and be more successful. I put some of these learnings into the following checklist.

Many entrepreneurs, especially those more technical, are sometimes ill-prepared to make a pitch. They get enamored with new technology. It’s interesting to note that many in the corporate world, too, have that same fixation. So, when I developed pointers for entrepreneurs as they pitch TCA, I believe that basically the same type of checklist can be used in the corporate setting as well. Whether a business model canvas is used or an opportunity template is developed, the same questions appearing on this checklist would need to be considered. In the end, the checklist is used to tell the story of why the opportunity, start-up idea, new product/service concept or new business model makes sense as an investment to be funded by third party investors, or internal corporate resources.

While this checklist presents a sequence that might work for some, I understand that each entrepreneur or intrapreneur may want to tell the story of the business or service or product in a way that fits their style and personality. Therefore, it is ok to sequence the presentation story in a different manner. For example, some intrapreneurs or entrepreneurs with a very strong background, having done similar ventures before, or those with exceptionally strong teams, may want to lead with the team structure.

Realistically though, in the first few minutes of the presentation, the entrepreneur or must state the problem that is being solved so that the “investors” listening to the pitch “get it.”  
Recognize that not all the points below will be answered in detail and some may not be answered at all. Yet, each of the 10 elements must be covered in some manner to tell a solid story of why the product/service or business is unique, sustainable, and a good investment with the potential to increase revenue and value for the investor or company if it is internally funded.

1. Summary of what problem is being solved and why your company/product/service is different

·         Problem customers face. Maybe there is a lead user (a potential customer that kludges a solution that can serve as the initial customer).

·         Short simple 15-30 second pitch on what the product/company/service is and why you are different from the competition (and there is always some form of competition, be it direct or indirect).

·         What you do relative to alternatives and why your solution is better. 

·         The entrepreneur or intrapreneur can state the vision for a product/company/service which may be much broader but he or she must specify the initial target.

2. Market Size (Answering the questions of what is the market, its size and growth potential)

·         Your specific target market in the short term.

·         Some mechanism to determine the size of the market.

·         What does that market look like? I.e. what is the “ideal” customer and how do you find them? 

·         Can you leverage existing partners, channels, relationships?

3. The company/product/service (Answers the question of how do you make the product/service or put the business together)

·         What is the technology to be used?

o   Patented or licensed?

·         What is the “architecture“ of the company and the product/service?

·         How do the pieces fit together?

·         What is the IP behind the company or the product? 

·         Is this an execution play, i.e. land grab or land and expand?

·         What is the unique differentiation of the product?

o   What is the brand promise?

o   How do you create a moat around your business or product?

·         What are the strategic control points, i.e. where do you have strength and why in distribution, unique customers, brand, IP?

·         Is the product scalable and to what markets and with what resources?

4. The Team (Answers the question of who will be responsible for execution of the plan if approved)

·         Executive team and past experiences and accomplishments.

·         Advisory or BoD that supplements exec team and how you can use the team to help your business get off the ground or grow.

·         Setting up the RACI (responsible, accountable, consulted and informed) of how you will get information, make decisions, and share those decisions with your constituents.

5. The Financial plan. (Answers the question relative to the goodness of the product/service or business and whether you can make money and have adequate margin.)

·         Growth path, i.e. product plan, partnership plan, channel plan over time.

·         Business model including pricing for different markets.

o   Growth plans and sequencing of new products, services, alliances, partnerships.

·         Metrics for determining success (Some examples follow yet may be unique to the industry).

o   Cost per acquisition

o   Time to close sales

o   Churn rate

o   Inventory turns

·         5-year revenue growth path, EBITDA.

·         Different revenue paths over a five year planning horizon.

o   Routes to revenue and business model for each.

·         Risk impact and contingency plans. (See our earlier post by Brian Newton on risk impact analysis.)

o   Risk includes technical, market, regulatory, key personnel, development, operations, resources, supply chain and manufacturing risks among other categories.

6. Competitive analysis

·         What is the brand and can you sustain the brand?

o   Part of an existing family or new product/service family?

·         The basis for your idea being different.

·         Feature differences.

o   Use “Harvey balls” for making comparisons of features and benefits

·         Sustaining the differences.

o   R&D

o   Marketing

o   Partnerships

o   Acquisitions

7. The Deal (if it is an externally funded deal)

·         Pre-money or current valuation if known.

·         Convertible note v. equity.

·         Prior investments/ cap table.

·         Capital and expense requirements (Required even if internally funded).

o   How long will the money last?

o   Will you need additional funding and if so when?

o   Organization growth plan

8. Use of Funds (What will you use the money for and over what period of time)

·         How will you spend the money and on each of the following categories.

o   Sales and marketing plan 

o   Operational plan

o   Distribution plan

o   Partnership plan

o   Development plan

·         What milestones will you achieve with the funding gained?

·         Will you need more funding, how much and in what time frame?

9. The Exit or Integration

·         What is your plan going forward?

o   Will this be a separate business? Product line? Merged with another entity?

·         Will you sell and to whom?

o   Why would they buy the company?

10. Summary

·         The five major take-aways from the pitch and a recap of why this makes sense to pursue.

These questions make sense and are easy to ask. Yet it takes significant strategic and tactical thinking to build an executable plan. Let me know your thoughts on this and how you think it integrates with other templates such as the business model canvas. Our belief is that if you can at least address these 10 questions, whether you are an intrapreneur or entrepreneur, you will have a better chance at success. If you want to chat further, feel free to contact me at dfriedman@clevelpartners.net or call me at 949 439-4503.

7 Keys to Make Complex Technology Simple to Understand

Have you ever listened to a company pitch their service or product and your eyes glazed over? I have, and it happened again this morning. I am both a consultant and angel investor and have listened to hundreds of company CEOs extolling the virtues of their company and product. In many cases when I have listened to a start-up pitch I have had to ask the presenter – normally a smart, technically adept founder and CEO – what the company or product really did. Being a techie myself, I can normally “get it.” However, sometimes the explanation is so obtuse and so long that I space out and don’t pay attention. And then, of course, if it is a presentation to an angel group, the presenter has lost his or her audience as well as the ability to raise funds.

Clearly, there are several ways to explain your product. To that end, I was reading an article on cloud computing and the author explained "For geeks cloud computing has been used to mean grid computing, utility computing, Software as a Service, virtualization, Internet-based applications, autonomic computing, peer-to-peer computing and remote processing -- and various combinations of these terms. For non-geeks, cloud computing is simply a platform where individuals and companies use the Internet to access endless hardware, software and data resources for most of their computing needs and people-to-people interactions, leaving the mess to third-party suppliers."  (From: http://searchcloudcomputing.techtarget.com/feature/Why-is-cloud-computing-so-hard-to-understand by Andy Mulholland, Jon Pyke and Peter Fingar.)   

That led me to investigate further and ask the question: How does one explain complex technology and make it simple to understand? To find that out, I had the luxury of moderating a Technology Panel on Eye On Business (watch https://youtu.be/2rRa5DwnoNA ) and with four technology executives discussed how to communicate complicated technology to investors and potential customers. The discussion is equally applicable to companies introducing a new product or service as well as ones that have technologies in the market.

Based on the thoughts of the panelists and some of my own thinking, I developed a list of 7 elements that should be considered when explaining complex technology.

1. Customer Context. The consensus of the panel was that you need to understand the customer, their frame of reference and talk to them in their terms. Put yourself in the shoes of the listener. If the listener is a VP, Engineering you can talk techie. If it is a businessperson, talk benefits and applications and solutions. I have extolled the virtues of a concept called “customer jujitsu” wherein you use terms similar to what customers say in a way and context they understand to make it easy for them to grasp what you are selling.
2. Use visual imagery. People learn and absorb information in different ways. Most are visual and therefore visual words such as imagine, see, view, picture are used in their pitches. If the listener is more aural, then use words reflecting sounds.
3.  Animate. As a corollary to using visual imagery, if you have the right marketing material on your website, develop the visual imagery into a story or animation to show what the product is or does. In the video from the technology panel, note the animation by ICS Software to explain one of their cyber products.
4. Naming/subbrand. Tying a new concept to a current concept or brand may make it easier to understand. People normally get the concept of better, faster and cheaper. Additionally, the words used to describe a concept hints at the benefit or application. For example, my colleague Vince Ferraro was GM for one of the HP laser printing groups and his team came up with the name Vivera ink to reflect the new technology of ink they developed. Without understanding the technology behind the ink or how the printer uses the cartridges, the name itself connotes brightness and vibrancy. It gets the point across very well. The biotech/pharma market in the way they name their products has been a master at explaining their products in this way.
5. Competitive Comparison. There is always a danger in raising a competitive name as the listener may question why you are better. But that also gives you the opportunity to discuss the virtues of your product or offering. The way to explain your product or service uses the following structure. “We developed a unique thermometer using technology x. This enables the thermometer to do a, b and c. Unlike competitors such as Thermometer Giant, Inc, our product does it better by x, y and z.” By using this system you show what you do, how you do it with an underlying technology while at the same time putting it in a competitive category by reference.
6. Analogy/metaphor. Metaphors and similes are used to explain the analogy. Sometimes this works and sometimes it doesn’t. I have heard many pitches for cloud and Internet of Things companies that say they are the “Uber of x.” I get the gig economy but sometimes that reference is overblown. The concept though, is to make a complex product simple by the analogy. I was working for a company, Narus, which used a complex technology to manage cyber security risks. To explain it we developed the analogy that Narus’s software monitored the digital DNA of the network by looking at the bits and bytes running across the network. Even the least technical reporter understood the concept.
7. Application/benefit. This is commonly used, in conjunction with functional descriptors to make it easy for the listener to understand the input and the output of the product. In explaining a product or service, the presenter uses concepts the audience knows or is interested in and presents the product, service or company in terms of the problems it solves or the benefits granted. Think about explaining a piece of hardware called a firewall – also uses a nice descriptor in the name to give an indication what it does. The benefit of using a firewall is to prevent things you don’t want from accessing your computer. Simple and easy to understand.

We trust that some of these ideas can help you. And we would be glad to discuss how you can explain complex technologies and products to generate top line revenue growth.

Avoid the 4 Major Legal Risks for Start-ups

As a corporate executive, I tried to bond with lawyers who were business people first and foremost and not just ones trying to tell you why you cannot do something. However, over time, I learned that having a good legal mind attached to your project/business is critical for success. Why? Because a good business attorney is critical to manage the risks (and there always are risks) of the business.

If you remember the movie The Social Network, one of the original founders, Eduardo Saverin, did not pay attention to the terms of a contract he signed with Facebook’s Mark Zuckerberg. That cost him dearly although I have a hard time feeling bad for someone worth in excess of $5 Billion. It makes you think though that perhaps startups are different animals than normal businesses and perhaps the participants – the founders, employees and even the contractors – involved in a startup need to pay attention to several aspects of the business. By so doing, these participants can avoid the things that can go bump in the night.

I therefore, welcomed the opportunity to listen to Mark Skaist, co-chair of the corporate practice of Stradling Yocca Carlson & Rauth, one of the leading law firms in California, talk about the Legal Pitfalls in Entrepreneurship. And it is particularly relevant for me as a consultant to start-ups, a member of the boards of start-ups, a potential employee of a start-up, and as an angel investor with TechCoastAngels. I provide the following information as a convenience to the readers to be aware of these elements and strongly suggest that for legal advice see an attorney as they can help you avoid major issues. I took his talk and developed a simple checklist which can be used to ensure vital points are covered.

Mark laid out four areas that can create pitfalls. These areas are:

• Capitalization/Equity
• Taxes and financial obligations of company and executives
• Intellectual Property
• Employment

Checklists

Capitalization/Equity

1. Have you documented all the equity transactions? Type? Class of stock? To Whom? Number of shares?
2. Have you sold to accredited or non-accredited investors? Were the rounds distinguishable?
3. For equity to the founders, have you adequately described voting rights, vesting terms?  
4. Do you have a contract with the founders regarding performance, trade secrets, non-competes and similar items?
5. Do you have any “bad actors” as executives whose prior issues might result in a problem for future investors?
6. Do you have acceptable deal terms for original and successor investors, specifically issues relating to non-dilution rights (which could be a problem) so you don’t have an investor having leverage over the company?
7. Do you have convertible notes with a valuation cap (if so, make sure it’s not too low)? When is the maturity date? Is this date after the potential raise for the next round?

Taxes and financial obligation of company and executives

1. How is the stock that is granted to the different shareholders and the executives valued?  Will there be a tax liability based on the valuation of the company as reflected in the share price? Are they truly founders shares worth only a few cents or has a prior round, e.g. friends and family, been offered at a higher value per share which may create a financial obligation to the grantee of the stock?
2. Is the stock to be granted restricted stock or stock options and what type of options are they?
3. How is the company being valued? Have you or will you use a third party for valuation of the equity?

Intellectual Property

1. Have all IP developed by the employees, founders and third parties been formally assigned to the company?
2. Have all the graphic designs, logos, domains, visual representations, iconography been assigned correctly to the company?
3. If the company is licensing IP, are the agreements to license been signed and reviewed by attorneys?
4. Is there a clear definition of trade secrets so there is no misunderstanding as to what constitutes a trade secret?
5. If an employee leaves the company, how are you protecting the company against loss of trade secrets? Are your internal procedures clear to safeguard trade secrets?
6. Are all trademarks registered to the company? 
7. Are all domains, logos, tag lines and other marketing items available for use and registered in the company’s name?  Do they conflict with a third party’s rights?
8. Is the company name registered to minimize the potential for a legal battle with a larger better capitalized company?
9. Are you using open source code? And if you are, are you co-mingling open source code with proprietary code such that the entire code tree is tainted and therefore treated as open source?
10. If you intend to patent an invention, have you inadvertently “publicly disclosed” the invention (which could affect your ability to later patent it)?

Employment

1. Do you include non-competes  in contracts with the executives, employees and contractors (if so, in some states this could be a problem)?
2. Are all contractors clearly third parties and contracts in place between the company and them?
3. Is there anything in the way you operate that could be construed as contractors are in essence employees of the company e.g. titles, office space, working hours, benefits, stock grants? Are contracts with individuals for less than one year?
4. Do your contracts with suppliers state that the contract may be terminated for any cause with 30 days or less notice?           

   

Clearly the checklist is not complete and most likely other questions will arise for your particular case. Hopefully, though, this checklist is a good start to use in working with your co-founders and attorneys in structuring the best deal for the company. Many attorneys have special rates for promising start-ups and my suggestion is to talk with them to understand what they can do to protect your business and its Intellectual Property. Without this protection, things can go bump in the night. I know as I have been on both sides of the fence.

C-Level Partners helps small to mid-cap companies in the tech, service and manufacturing markets grow their top line and their margins. If you have any questions on growth and managing risk in a growth or start-up environment please feel free to contact me at dfriedman@clevelpartners.net or call me on 949 439-4503.