Entrepreneurship

How a hackathon can encourage your employees to innovate

Group Of Multi-Ethnic People Working On Digital Devices Around Table

Group Of Multi-Ethnic People Working On Digital Devices Around Table

Originally published on March 16, 2017 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/hackathons-arent-just-for-hackers-any-more/article34146640/ 

Everyone in business has heard the expression that if you’re not disrupting your market, someone else will soon be disrupting you. But this raw challenge doesn’t help most leaders understand how they’re supposed to get started in the creative-destruction business.

But Steven Stein has figured it out. The chief executive officer of Toronto-based Multi-Health Systems Inc. has created an in-house “hackathon” to encourage innovative thinking and transform ideas into new products.

Stein is a true believer in creative destruction. He founded MHS 33 years ago to disrupt the psychological-testing industry by automating conventional paper-based tests for the personal computer. Today, MHS is a global industry leader, with 160 employees and clients in more than 75 countries. But Stein knows his company remains vulnerable to new entrepreneurs with better ideas – so he’s shaking up his team to ensure they develop those bold new products first.

It was an off-site strategy session for senior leaders that launched MHS’s innovation project. “Two years back, we had a presentation on disruption,” Stein said. “We went home and had nightmares about how new people could kick us out of the market.”

Stein and his team knew hackathons were popular, if sometimes messy, events that help small teams turn new ideas into working prototypes fast. Even when they don’t produce new products, hackathons can be powerful problem-solving exercises that can build positive attributes such as agility, risk tolerance and trust. So Stein appointed a team, led by president Hazel Wheldon, in the summer of 2015 to put MHS on the hackathon circuit – and make it fun and engaging.

Since then, MHS has held two hackathons at its Toronto headquarters, and created a five-person “innovation hub” to select the best ideas and turn them into customer-ready products. Innovation is a long game, and the first market tests are still in the field. But Stein believes the process has already been successful. “The biggest benefit is the excitement it created,” he said. “People loved working with new people. It’s been worth it just for the engagement, not just the products we got out of it.”

Could your company pull off a similar innovation coup? Here’s how MHS did it.

  • After researching how other companies managed innovation events, MHS’s hackathon planners developed guidelines and rules. They decided on a one-day hackathon on a January Monday – with the 15 teams competing in a “Demo Day” the following Friday, in conjunction with MHS’s annual awards dinner.
  • Teams formed in groups of five to eight in early fall, so they would have lots of time to develop ideas and research solutions prior to the big day. To help the teams focus, planners identified four sectors as most likely to be disrupted: big data; mobile apps; gamification; and process improvement.
  • As the employee teams took shape (each one restricted to one programmer and one employee from user experience), the planners scheduled a series of “lunch and learns” through the fall. Topics included creating prototypes, writing business plans and making killer presentations.
  • The incentives? The team with the most promising idea (as judged by Stein and a panel of internal and external judges) would win $5,000. There would also be a $2,000 second prize, and a third prize of $1,000.

On hackathon day in January, 2016, the 15 teams had until 6 p.m. to finalize a prototype and hammer out a business plan. MHS supplied food and colour-coded team T-shirts, creating a festive atmosphere. Participants were laughing, sweating, debating and tweeting – so much so that competitors started noticing. For 2017, MHS had to say no to tweets that gave too much away.

All teams presented to the judging panel on the following Friday. Each team was allowed a five-minute presentation, followed by five minutes for answering questions. Stein was thrilled by the winning ideas: an inexpensive “candidate competencies” test for employers to help MHS hack its way into a highly lucrative market; a mobile “early warning” solution that let psychologists share with patients (or their parents) preliminary test results in minutes instead of weeks; and the identification of new markets for some of the firm’s underused mental-health surveys through sales to the insurance industry.

Stein said some of these ideas might have daunted the team prior to the hackathon. “But now these guys have mapped them out. They said: ‘We can do it. Here’s how.’ ”

The next step was for the implementation team to review the finalists’ ideas and adopt the most promising projects. For now, MHS is funding this project through unbudgeted foreign-exchange gains; Stein hopes the group will start paying its way before the Canadian dollar turns up again.

The innovation hub – two psychologists, two programmers and a UX person – fine-tuned initial prototypes for hand-off to sales, which arranged pilot programs with real customers. The team set itself quarterly goals to ensure it was doing its job; in innovation, knowing what to stop working on is just as important as spotting winners.

“Over all, there are eight or nine projects we’re moving ahead with,” Stein said. With two hackathons now under his belt, a pipeline of new projects and a re-engaged work force, he said the whole process has been a winner. “It’s turned us from a disruptee to a disruptor.”

Ken Tencer is chief executive officer of design-driven strategy firm Spyder Works Inc. and the co-author of two books on innovation, including the bestseller Cause a Disturbance. He holds the Institute of Corporate Directors certification (ICD.D). Follow him on Twitter at @90percentRule.

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Companies built on customer needs are all too rare

factory machine producing customized item based on customers' needs preferences style and requests

Originally published on December 22, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/companies-built-on-customer-needs-are-all-too-rare/article33213377/

After years of fussing over KPIs, management by objectives and zero-based budgeting, I am pleased to see more and more business owners coming to grips with one essential truth: without customers, there is no business.

It sounds so simple. But companies that are designed and built around the needs of customers are scarcer than tulips in December. Businesses are started for many reasons – to put bread on the table, scratch a creative itch, fill a perceived need – but rarely to serve a specific client base. Companies have to learn to put customers’ needs ahead of their own, and it’s a journey that will last a lifetime.

Some of the worst offenders are startups – particularly the high-growth tech startups that Canada is counting on to generate jobs and export revenues. Typically started by engineers and scientists trying to solve specific problems, these companies tend to be product-oriented. When they encounter a setback developing a new widget, they are more likely to tackle the problem with new approaches or technology than by talking with customers to ensure they’re still on the right track. Result: many startups go through a series of jarring, risky “pivots” rather than continuous, informed iteration.

But there are signs of hope in the Canadian startup scene. More companies are joining incubators and accelerators to learn entrepreneurship from mentors, advisers and fellow entrepreneurs. And increasingly these groups are pushing the idea that success doesn’t come from the lab, but from meetings with customers.

In Ottawa, Carleton University’s Lead to Win program is one of North America’s Top 10 university business incubators, according to Swedish research and benchmarking firm UBI Global. Lead to Win was founded in 2002, following the bursting of the tech bubble, to help Ottawa-area technologists become business founders. That meant immersing them in the entire business community: professional advisers, seasoned coaches, service-providers, other entrepreneurs, suppliers, investors, and, yes, potential customers.

“The research is clear: high-achieving technology entrepreneurs operate in a business ecosystem that includes many different stakeholders, including partners, critical suppliers, and market channels,” says Dr. Steven Muegge, an associate professor at Carleton University, and one of the organizers of Lead To Win. Companies applying to Lead to Win go through a rigorous opportunity review process to ensure they’re ready to benefit from the Lead To Win ecosystem in ways that create value for themselves and for their partners, Muegge says: “If the founders are only thinking about the product, they’re probably not ready.”

Although Lead to Win stresses an “ecosystem” approach, its key success metric is sales: companies that earn entry to Lead To Win must demonstrate potential to generate $1-million in annual revenues within three years. “A good product is not enough,” Muegge says. “Revenues are the proof that what you’re doing is valued by customers.”

Program advisers and mentors help the entrepreneurs to identify prospects, build a pipeline, train salespeople, work on their pitch, and arrange customer meetings. Advisers may even sit in on early customer meetings. But what they’re best at, Muegge says, is demanding progress on all of a business’s sales activities. “We train and support, observe and provide feedback, and keep metrics, but the entrepreneurs are ultimately responsible for sales. They know that, on Monday morning, someone is going to ask how your sales call went. It creates accountability.”

In Waterloo, Ont., they’re setting high targets for customer development. Communitech, an industry-led technology association, has launched a six-month sales-acceleration program called “Rev.” Its goal: to give startups the vision and process to scale to $100-million in revenue.

With the aid of experienced product, marketing and sales executives, Rev helps client companies master all the intricacies of sales: segmenting and targeting markets, pricing, developing key messages, building buyer and user “personas,” perfecting their pitch, and building and training a focused sales force. Rev also tackles a challenge most startups overlook: finding large distribution partners to scale up sales quickly. “These are aspects of building the business that most of our founders have never confronted before,” says Communitech executive director David Chalmers. “At Rev, we build that structure out.”

Companies enter Rev with a product or service, and some sales. “Rev tries to work with the foundation they’ve created,” Chalmers says. “But sometimes, there is a reset. When you’re growing companies, what you did historically, might not be the same framework that is required to take the company to new heights.”

The biggest hurdle, he adds, doesn’t usually come from the market – but from the entrepreneurs themselves. “When CEOs come into this program, they have a good understanding of their business. Our goal in Rev is to work with them on the areas that require more due diligence and refinement, specifically those related to revenue attainment and growth. In other words, you need to see your business from the customers’ point of view, identify functional gaps, then build the necessary tools required for sustained growth.”

The good news is that once you accept that reality, your viewpoint shifts immediately. By the time Rev CEOs graduate from the program, Chalmers says, “Their go-to-market strategy becomes very transparent and their business confidence goes right through the roof.”

Open your eyes and ears to your customers. Success is waiting. Up there on the roof.

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Why you need to be selling your company every day

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Originally published on August 2, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/why-you-need-to-be-selling-your-company-every-day/article31141189/

About a year ago, I was listening to a prominent accountant speak to a room full of business owners. His message was both clear and simple: “Each day you should run your business like you are in the process of trying to sell it.”

This simple message created many frowns and furrowed brows. Clearly, people in the audience wanted to respond, “But I’m not selling my business, and I don’t plan to any time soon.”

Not the point.

It doesn’t matter whether you’re thinking of selling your business. Some lucky owners get to simply pass it on to the next generation. But the real point is this: You need to think and act like you are selling your business, every day.

Why? Selling a business is an extended process, often a gruelling one. Compare it to selling a house. The first step is to “stage” the property. This means taking a hard look at your surroundings with fresh eyes, to help you recognize which furnishings and decorations add to your home’s ambience, and which are just clutter.

It’s a tough thing to do. For most people, everything in their home represents a memory or a milestone on the journey of raising a family. Prospective purchasers care nothing for memory or sentiment, seeing every unnecessary element as a flaw that diminishes the value of your home.

When you are selling a business, the process is little different. Prospective buyers go through your numbers, your assets and your records with the diligence of a home inspector. They will scrutinize your sales, margins, inventory, returns, client list, receivables and payables. They will dig through your sales history and your new product or service pipeline, looking for any irregularity, liability, trend or threat that could detract from the value they are paying for your company.

While some may see this as a tedious, time-wasting process, I see due diligence as a very positive exercise. It’s a way to identify issues before they become problems. In fact, this process shouldn’t just be limited to when you buy or sell a business. I believe that entrepreneurs should initiate a mock due-diligence process every year, preferably just before their company’s annual retreat or strategy sessions.

Think about it. Your goal as the owner or manager of a company is to increase its intrinsic value (how much the business would be worth if it were going to be sold). By rigorously and formally questioning all of your business’s habits, assumptions and processes, you’ll develop a culture that embraces change and continuous improvement – and increases the value of your business on an ongoing basis.

In my opinion, your company’s value is the single best measure of how well you are running and building your business. Value incorporates all key time horizons that buyers and evaluators employ when assessing a business – how you are running your business today, what you are doing to keep it relevant and meaningful to your customers in the short term, and how you establish and execute on your grand, long-term vision.

“When it comes time to sell their business, many business owners are surprised to receive a lower valuation than what they had expected,” notes Murad Bhimani, a Toronto-based partner with accounting firm MNP LLP. “That’s why we recommend to our clients that they should operate and build their business as though they could sell it any minute. This keeps you focused on what is critical every day, such as sound operations, diversity of customer base, building a strong management team, and proactive product development.”

If your kitchen’s ceiling is leaking, you wouldn’t wait for a home inspection to find the cause and fix it. Don’t wait to see whether your company is leaking opportunities and profits. Whether or not you’re planning to sell, take a good long look at all of your key performance indicators on a regular basis. Your bottom line (and your wallet) will thank you for it.

And some day your children may, too.

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