entrepreneurial thinking

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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When did entrepreneurs become so incurious?

Originally published on May 8, 2015 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-growth/day-to-day/when-did-entrepreneurs-become-so-incurious/article24310344/

Entrepreneurs are supposed to be the mavericks of the business world. They’re the idea generators. The marchers to different drummers. The innovators who drive the economy forward, by starting businesses and launching new products and services. They redefine technology and change the world around us.

At least, that’s how I’ve always thought of them.

Lately, I’m starting to wonder if some entrepreneurs are losing their sense of curiosity, along with that distinctive maverick swagger that makes them such crucial builders in the business ecosystem.

My clues? At the seminars, workshops and business events that I’ve been attending recently, more of the attendees seem to come from big companies – and fewer and fewer come from small and medium-sized businesses. It’s disappointing really.

Personally, I’m happy to learn from companies large or small. And I’m sure that event organizers don’t really care who buys their tickets. But from the perspective of learning and sharing of ideas, I believe that everybody loses. Large companies appreciate the candid, fresh voices of true entrepreneurs. Entrepreneurs can always learn something new from one another, as well from the attendees of the national and international organizations that we all hope to grow up to be.

In my column last month, I noted the stunning reality that 80 per cent of new businesses fail. While there are a host of reasons for all these fatalities, I believe that one of the very real answers is that, at the slightest taste of success, many entrepreneurs become complacent and incurious.

We allow ourselves to get lost in our little business bubbles, relying on today’s products and services to drive future success. Let’s be honest, we can get so focused and myopic that we often neglect to do the things that earned us our success in the first place – getting out of the office, meeting people and asking as many big-picture questions of ‘the crowd’ as we can.

It is a lovely notion to think that we can hole ourselves up in our new business and bide our time till the big ‘cash-out’ at the end of the road. But this tactic isn’t practical in an economy that demands continuous improvement, refinement and even replacement of our products and services as a matter of course.

Consider the digital picture frame. Ten years ago, these electronic photo albums were all the rage. Today they’ve been replaced by smart phones and tablets. And how about those Bluetooth headsets? Just a few years ago when the laws began to restrict drivers’ cellphone use, we couldn’t buy these items fast enough. Today, it’s hard to find a new car that doesn’t have hands-free built into it, complete with voice-assist and even access to intelligent personal assistants such as Apple’s Siri – rendering the headset embarrassingly passé.

Bottom-line: today, everything moves from ‘the rage’ to ‘remember when’ before you can say “Trivial Pursuit!”

You need to top up your product and service offerings just like you change the oil in your car. When we neglect to change the oil, our engines stutter, seize and ultimately die.

It’s no different in business. No business succeeds without revenue and, ultimately, profit to reinvest in the future. Revenue is generated by satisfied and engaged customers. If you neglect to constantly re-engage your customers with the new and different, they will quickly find a competitor who does.

If you want to think about it as a continuum, then understand that innovation drives marketing, which drives sales. If you take innovation out of the equation, your funnel loses the raw material that drives growth.

Sorry if this sounds doomsday-ish, but, unfortunately, innovation is no longer a nice to have. It’s a very real need. As our markets evolve faster and faster we have to ramp up our innovations and improvement, not cut back. Innovation isn’t an occasional remedy, like a cough drop, but an everyday necessity, like water.

All this means that innovation – sparked by curiosity and fuelled by constant communication with customer – has become a core competency of today’s successful businesses.

If you’re not ready to give your customers what they want, keep in mind that innovation is also an engagement tool for your team. Today’s employees want to be involved in exciting and meaningful improvement projects.

When I went into business I was taught that to succeed, I had to join a company, put one foot in front of the other, keep my head down and shut my mouth. Today we know that management has no monopoly on creativity. Everyone in the organization deserves and expects to have a voice, to engage in ideation and add value beyond the day-to-day.

If your company culture has moved from thinking, questioning and dreaming to just doing, watch out. Your best team members will gradually disengage, and likely revert to one of the first skills they ever learned: walking.

Revenue, profits, engaged customers and motivated teams are all crucial to your business. Keeping them strong takes constant feeding and renewal. That’s why it’s so important to hold your head up, sniff the air for new ideas, and keep questioning. Only the curious can change the world.

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Is crowdfunding the new tech bubble? Or just a good old-fashioned junk bond?

Originally published on April 10, 2015 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-digital/innovation/is-crowdfunding-the-new-tech-bubble-or-just-a-good-old-fashioned-junk-bond/article23823686/

Despite the headline, I’m a proponent of crowdfunding and believe it can bring innovative ideas to market. Fundamentally, I feel that new forms of financing provide additional access to much-needed capital and bring healthy competition to the lender market, benefits that all entrepreneurs and inventors can appreciate.

So why the negative headline? It’s not meant to be sensational. I have real worries about the mania that seems to strike the markets with every shiny new opportunity. Some would call it systemic greed. Others may be more forgiving, and call it the cost of innovation. Whichever camp you choose, it’ impossible to deny that there’s extreme pressure on everyone in business to return continuous, increasing profits to shareholders – whether the shareholders are ourselves, our families or the public markets.

Crowdfunding, of course, is the rapidly growing practice of funding creative projects or startup ventures by raising small amounts of money from a large number of people, usually via specialty websites like Kickstarter and Indiegogo. Maybe the early days of crowdfunding were the best, when early adopters and other hipsters invested in new projects to receive finished products, T-shirts and other promotional, non-financial “perks.” But that’s the past, not the future.

My fears started to heighten at a recent panel discussion I attended on the emergence of equity crowdfunding – the practice of “mass” funding of opportunities in return for equity. One panelist urged the quick adoption of this new financing frontier because he didn’t want Canadian businesses and investors to fall behind or lose out on this incredible opportunity.

While the parallels are not exact, this rhetoric struck me as reminiscent of the rise of junk bonds, the 1999 Tech Bubble, and yes, the subprime mortgage scandals that drove us into the Great Recession, the economic slough from which many individuals, companies and countries are still just emerging.

I want to remind would-be investors that, on average, about 80 per cent of business startups fail. Even successful companies have a success rate of about 15 per cent on new product ideas. More often than not, new business initiatives just don’t work out the way that we want them to.

If you’re taking fun money from your cookie jar to support a cause you believe in or a new product you love, then crowdfunding provides you a new way to back your convictions that has never existed before. But you should understand the odds.

As securities regulators approve equity crowdfunding – probably by restricting how much investors can invest per year, and how much companies can raise – it seems likely that today’s low-stakes “pin money” culture is going to change. Investors, by definition, want a return on their money. If crowdfunding truly expands beyond the hobbyist market, it will only be because a consistent percentage of issuers actually create incredible value for their shareholders. But how likely is that to happen?

You can say this for “old-school” backers. The professionals, whether they’re banks, venture capitalists or experienced angel investors, push you to truly understand and articulate your project and its potential market. They pressure you to justify the risk and return involved. Without that initial and ongoing demand for due diligence, crowdfunding will likely create a less disciplined marketplace in which success becomes even harder to attain, and failures increase in number.

On the other side of the deal, if you are successful in seeking capital, understand that you will now have to report to “the many.” You’re the custodian of the hopes and dreams and expectations of people whose motivations you don’t know. You have an obligation to keep them in the loop – and can only hope to keep them happy.

Never underestimate the impact of the mob, the Web or social media on your company and its reputation if something goes wrong. Face-to-face funding may have been harder to get, but that was not necessarily a bad thing – for you or the markets.

Bottom-line: Crowdfunding is an exciting new wrinkle in innovation funding. But it won’t change the rules of the marketplace: investors expect value for their money. Nothing comes free. The more expectations you create, the more your crowds will expect you to deliver.

I am a huge proponent of new financing mechanisms, including crowdfunding. I simply don’t believe in the tooth fairy.

I do believe in the notion of ‘buyer beware, seller take care.’ With a little more common sense, and less frenzy, I believe crowdfunding will help to bring a lot of remarkable innovation to market. Without that discipline, I fear we’ll see a speedy series of failures, losses and resentment that will burst crowdfunding’s balloon faster than you can say “count me in”.

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