Fail Fast or Win Big: The Start-Up Plan for Starting Now (2015)
If You Want to Be an Entrepreneur, Be One
There are a lot of books out there on entrepreneurship, as well as countless seminars you can attend. Not one of them will make you an entrepreneur. As I look back on my career and think about the hundreds of entrepreneurs I have met, and I consider what led me to become an entrepreneur, I see several interwoven threads. These threads have run through this book, but let me recap.
One, you have to be an expert or be amazingly passionate in your marketplace or industry. Remember the comment in Chapter Eight that it takes 10,000 hours to become an expert in any one area?
Experts get more choices and more
opportunities. What are you an expert in?
Second, you have to develop a tolerance level of measured risk. If you are young and don’t have much, then you have nothing to risk, so to speak. If you have a strong skill set and are an expert in some field, you can always craft that expertise for someone else, so why not take the risk? If you fail, you can always go back to being a highly paid employee.
After nine years of building my marketing career, I left a highly paid job to take a risk in creating a new kind of integrated marketing agency. If we failed, we could always go back and do what we were doing before. But how did I reduce my risk? I knew the industry. I had a highly developed marketing skill set.
Third, it takes an amazing team to create a great company. When I met the other three people who would eventually become my partners, I really took the time to understand their strengths and weaknesses and how I could complement the team. Trust within the team is so critical. Regardless of what kind of business you eventually build, trusting your partners, which initially can be trying, is so important to the success and growth of the company.
Fourth, in order to be successful, you have to be willing to work harder than anyone else, harder than you’ve ever worked before. I worked seven days a week for the first year of my marketing career, using weekends to learn how to use complicated computer systems that allowed me to create very insightful research reports. That made me one of the most valuable people in the agency. Thom McElroy, one of the founders of Volcom (see Chapter Nine), talks about how he worked two jobs for almost eight years before Volcom really took off. How hard are you willing to work?
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I was not born to be an entrepreneur. In the first part of my career, I helped build a small company into a much bigger company with almost $30 million in revenue. It was a private company owned by one person. As the company grew, other employees became disgruntled and wanted more of everything. They wanted more money, and they wanted equity in what was becoming a valuable company. They griped about it constantly. I finally told the people around me, “Get over it. It’s the founder’s company. He is not going to share it. If you want equity in a company, go create one and quit complaining.”
Those employees continued to work for other people. While I was fine working for an entrepreneur who would never share his company with me, it planted two seeds in my brain. First, that I could create a company someday centered on my area of expertise, just as he had done. Second, that I could create a company with a team of people whom I respected and trusted, unlike this founder. So, in the first seven years of my career, I built my marketing expertise. In the next two years, I hunted for opportunities and for the right people. Funny thing is, when you know what you are looking for, you are apt to find it.
* * *
If you want to be an entrepreneur, consider what your area of expertise is. What is your skill set? Can you leverage your skill set in an industry or an emerging marketplace? What does an amazing team look like?
If you don’t know where you are
going, any path will get you there.
I have met a lot of people who have become really good entrepreneurs. They are not special. What is the most important thing they do? It is that they do. They don’t walk around posing like an entrepreneur and attend start-up weekends, playing a role. They quietly go to work on solving a problem or addressing the needs of a large marketplace. They surround themselves with good advisers and they are constantly seeking counsel and customer feedback. They have very little ego (don’t mistake ego for confidence), and they believe the right (not necessarily best) idea and the hardest work ethic are what will win. They acknowledge that sometimes the reward goes to the team that just works the hardest. And so they don’t easily quit. They adjust, evolve, and pivot. Sometimes this works and a company is born. Sometimes this does not work. But these entrepreneurs realize that there is no rewind in life, so they are definitely going to enjoy the ride. After all, if they fail, they can always go to work.
In this concluding chapter, I offer some final words of advice to all those seeking to be entrepreneurs.
BUILD A COMPANY TO FUND A COMPANY
Let’s say you see a big opportunity in the marketplace but you don’t yet have the capacity or the money to build the company you would like. What do you do? You build a company to fund a company. Here are two examples, one big and one small, that were mentioned earlier in the book:
• Start with books, expand to retail e-commerce. Jeff Bezos, of Amazon.com, had a big-picture vision. He wanted to build the largest e-commerce company in the world. He was starting with books, but his goal was to grow fast and acquire millions of customers. Once that goal was accomplished, he would launch the world’s largest online retailer. The strategy worked.
• Sell competitive products online to create real company. Adam started out selling products online that matched competitive products in quality but at a 25 percent or greater discount. With about 100 products generating about $3 million in annual online-only sales, the company generated enough cash for the founder to create the solar products company he had envisioned a few years earlier. The new company is now branching beyond online sales into retail distribution, with its own line of branded unique products.
FOUNDERS CREATE START-UPS, TEAMS BUILD COMPANIES
Before I started building my career, I thought that any successful company just needed to have an amazing entrepreneur at its helm. That one person would know it all, had created it all, and was running it all. What I learned is that there is no such thing. Show me a founder who is a megalomaniac and I will show you a limited-options company. The very best entrepreneurs have a capacity for communicating a clear vision for their company and a passion to draw others to its mission. They have an ability to recognize talent when they see it, and have an amazing skill for recruiting people who share their passion. What true entrepreneurs realize is that they are only good at one or two things and so they need to attract the best possible people to help them in building a real company.
Here are the qualities and attributes of entrepreneurs who have the potential to build great teams:
• No ego but great confidence in themselves.
• Don’t take themselves too seriously (Caesars need not apply).
• Have a great ability to communicate.
• Are good listeners because they ask great follow-on questions.
• Are not greedy; they realize everyone wins if a great company is created.
• Have an amazing work ethic.
• Understand what’s important and what’s not.
• Under fire, have an ability to stay calm (even if they are really not).
• Have an honest passion that draws people to them.
By no means is this a complete list, but these are the qualities that successful entrepreneurs display. Every now and then, I meet the rare entrepreneur, age notwithstanding, who seems so cocky and arrogant, that I wonder why they have to behave that way. That attitude and arrogance creates a negative aura that surely can’t have enduring success. I think history has proved me right.
For those of you who have a great idea, and you want to build an equally great team, here is my advice for you in building teams:
• ABL—always be looking for great people
• Create the best possible diversified network you can; you will need it.
• When you think you found someone, do due diligence. You don’t need to throw equity around; let people earn it.
• Put everything in writing; provide clear expectations and communication.
• Be a leader, not necessarily a tough manager; lead by example.
• Find people you can trust and build a team around them.
• Be honest with people; don’t set them up for failure.
• Motivate and inspire people; no one wants to fail.
• Hold people accountable and make the tough decisions.
It’s not going to be easy to build a great team and, I hope, a great company by yourself. Support and insights come from your network, advisers, mentors, work experience, personal values, and skill sets. Treat people the way you want to be treated. Don’t worry about job titles, and be humble. Life is a journey, so at least enjoy the ride.
MENTORS REALLY DO MATTER
I did not have a mentor in my early days, when I was between 15 and 27 years of age. And I really don’t have a mentor today. I just have really good people who I trust and who I go to for advice. But from the time I was 27 through about 45 years of age, three mentors propelled me toward the career I could only dream about in my youth. Their impact was everything on my life. They managed me, advised me, counseled me, praised me, and pushed me.
Everyone in life should have a mentor, at almost every stage of their career. It’s invaluable. There are conversations, dinners, and ski trips that are etched in my mind as defining moments. I can honestly say I would not have had the career I did without my mentors. It’s probably one of the reasons I am mentoring so many entrepreneurs today. My mentors “paid it forward” for me—they never really expected anything in return. That was amazing to me. Why did they care about me?
For a mentorship to work, something amazing has to happen.
Both people have to trust each other. Really deeply. Sounds easy, but it’s not. I think it might be tougher to have a great mentor relationship than a marriage. Because this person will see you in ways your spouse might never see you. Most spouses don’t see your faults in ways that could hurt your career. But you will have conversations with your mentor that will be almost clinical, kind of direct, and perhaps with some brutal honesty. Mentors will help you neutralize your weaknesses and expand your strengths. They will keep you from making “careerlimiting” mistakes. They will be a great sounding board. They will make you think. They will hold you accountable. And, it is hoped, they will be your friend, even though that’s a plus and not a necessity.
If you are in a career today or are looking to create a company, who is your mentor? If you don’t have a mentor, don’t just seek out someone who seems well respected or is well known in the community. Look for a mentor who will really help you in your career. That means the person needs to have deep experience in your career field or be an industry expert in an area where you are looking to launch a company. You want expert advice, not a new friend to show off. Get beyond your ego, and examine who you need around you to push and support you toward the next level of your life.
ENTREPRENEURSHIP IS A MENTALITY
I teach a creativity and innovation entrepreneurship course at San Diego State University, and in every class, the students are given a problem to solve. In most cases, they will have only 35 to 40 minutes to come up with a solution (they have to draw or build the solution), that they will then present to the class. We tackle both simple and complex problems. They have almost no resources, except for themselves, yet the solutions they come up with are amazing.
The student entrepreneurs I meet and mentor on campus also come up with really smart solutions to their problems. They are so resourceful because they have no money to solve these problems and so they have to be creative. They are already eating “mac and cheese” and ramen noodles; they know they are at the bottom of the ecosystem. They feel that they have nothing to lose, so they just run forward. They are not afraid to fail.
It’s this same kind of lean mentality that you need to embrace as you start a company. You should be constantly in this state of mind regarding any and all resources. Because you probably won’t have enough money to do everything you want to do. Your biggest asset is leverage, therefore. Leverage every resource possible, whether that’s office space, technology, or people. Think lean, be lean. Guess what? If you behave in this manner, you will get things done and other people around you will become resourceful as well.
When I left my marketing agency assignment with Apple to join what would be my partners in the new company called CKS|Partners, I thought of all the benefits and perks I had working with Apple and with my previous marketing agency. Now, I pictured myself sharing an office in a building that used to be a prune-canning facility. There was no expense account. There was no private office. I was earning one-third my former salary.
What happens when this is your situation? You get hungry. You are hungrier than your competition. You work harder. You work smarter. Every dollar you spend is your own, so you spend less. We worked so hard and had so much fun that we built a $1 billion company.
So, assume you won’t get enough—or any—money to launch your company. Accept that, and embrace it. Don’t use it as a crutch or an excuse. Use it as an advantage that will move you faster. Leverage your way to creating some sort of prototype that you can test in the marketplace. Adopt a lean mentality.
EMBRACE THE IDEA OF LISTENING
An an entrepreneur you need to be constantly listening to your customers. The key is not to rely on customers to tell you what they need. Often they don’t know. Or they might tell you what they want. I would never expect to have a customer tell me exactly what he or she wanted (or needed). But by spending enough time with customers, you can see what they don’t want and don’t need. Or, you can see everything that the customer loves or hates about the competition’s products. Customer truth is your truth. Listen well and observe.
Customers are not always right but they are never wrong.
When you mention the name Steve Jobs, it polarizes people. Our agency worked with Steve for years at NEXT, Pixar, and Apple. Regardless of how you feel about him, he was insanely great at “being” the soul and voice of the customer inside Apple. Which means that he represented the customer to the Apple employees, the designers, and the engineers. He had a remarkable ability to spend time with customers or with competitive products, and to see the opportunities, again and again. Part of his talent was evident in his blending of customer insights and emerging trends. He was constantly interested in what was coming next, and he paid close attention to trends as they might affect customer behavior.
So, a collective customer voice is your truth. Ignore it at your peril. I almost feel sad when I think about the entrepreneurs who have tried to create companies but have absolutely ignored what their customers really wanted or needed. Their point of view was, “I created a great product or service, and if the customer can’t see that, then I am just going to ram it down their throats.” Of course, they failed—and they list myriad excuses why. The real reason? They did not know how to listen. They did not listen to their advisers, their employees, or their potential customers. The marketplace rarely has room for arrogance; put on your humble hat. Be prepared to adjust your product or service, based on feedback and changes occurring in the marketplace.
MARKETPLACES AND TRENDS YOU SHOULD WATCH
One of the by-products of my marketing career is an inability to stop watching marketplaces and trends. Most people don’t see the trends forming all around them. But learn to spot these trends, match them to large marketplaces, and you can almost “see” the next product or service people will need.
If you saw Netflix in early 2000, would you have reasonably predicted the demise of Blockbuster? I say, yes. Consumer behavior was trending toward watching content on computer screens. Someone who is 25 years old or younger probably doesn’t even watch television. They watch programs on a tablet, laptop computer, or their phone. Roku or Apple TV does not need a service repairman, or even a service van.
In no particular order, I present several marketplaces or industries to watch as opportunities linked to large marketplaces. You just need a big idea. Or a small one.
• Pet Industry: In the United States alone, the pet industry did more than $50 billion at the end of 2013 and it shows no sign of letting up. Plus, the trend is for parents to replace their college-bound children with pets. Over 150 million dogs and cats now live in the USA in about 78 million households. Throw in a desire for better food, smart technology, and urban-based services, and you have an industry that will be growing for the next 20 years.
• Anything Cloud: Standalone software is dead. Remote access to applications and services will not retreat. Email, social media, work platforms, e-commerce—everything cloud seems to be good. We will embrace smart cloud solutions that seemingly make our life better, but at what price? Oh, our privacy is gone anyway.
• Big Data: If everything we do is going into the cloud, and it’s all online in one form or another, that’s a lot of data. Who will turn that data into information? Who will create the smart “dashboards” that will make sense of it all? Several industry analysts claim big data will grow to more than $40 billion by 2017.
• Wearable Devices: We are simply fascinated by what we can monitor. Benefits in the future could be more predictive. Several fitness products in the marketplace today can give you important diagnostics on your heart rate and blood pressure. Products in the future will issue warnings based on your physical attributes and history. It’s not that I want a text message saying I might have a heart attack based on my continued high blood pressure, but I do think I would appreciate it.
• Remote Monitoring: Our 78 million baby boomers are going to resist the idea of dying, but the most important trend is that they want to live in their homes as they age. That means local neighborhood care and video remote monitoring. Loved ones can gently “look in” and see that everything is okay. Wearable and monitoring devices alert health-care responders to an emergency. Seems like a fair tradeoff.
• Smartphone Platforms: These things we call phones are really some of the best computers ever developed. They are only going to get more powerful over time. That means other products and services (e.g., Square) will be designed to either reside on or “snap into” the handheld computer … er, smartphone.
• Mobile Applications: I don’t want to sound smarmy or arrogant, but is anybody out there still designing software solutions for the personal computer? It’s all mobile and it’s all going on the smartphone. Niche and perhaps even disposable applications will do very well in the next 10 years.
• Social Causes: This one is my wild card. I’m not really sure how this area will do, but about 80 million millennials (by 2025) seem to really care about anything social, whether its clothes, shoes, or food. The environment and sustainability is big with this crowd, and they don’t even have any power or money yet. Once they get the money and the power, that will change big time.
• Healthy Fast Food: The fast-food industry in this country is in trouble. McDonald’s is on the down swing, while anything healthy, natural, and organic is on the rise. Millennials are not cooking as much and they are okay with eating on the go. Food trucks are popular (that will continue), but keep your eye on really healthy food prepared to go (or be delivered), and finished at home. That’s way better than the frozen TV dinners of yesterday.
• Rental/Sharing: A 2012 Wall Street Journal study asked 500 adults between the ages of 21 and 30 what was the most important thing they could own. Choices included a home, a car, a smartphone. More than 80 percent of respondents indicated the smartphone was more important than a home or car. What does this mean? Millennials want to live now. They are going to treat life as a journey to be lived right now, and they won’t wait for anything until retirement age. They are going to travel, eat, and dress themselves in the latest fashion. That’s why services like Car2Go and Über will be commonplace over the next 10 years. What will we rent next?
• 3D Printing: Another wild card. One industry analyst, SmarTech, estimates that the 3D printing market will reach $5.1 billion by 2018. If I had not seen someone actually use a 3D printer to recreate a door hinge (to replace a broken one), I would not have believed it. This industry will definitely grow. There will be 3D stores where people go and order something based on an image or drawing. Think Ceramic Café, but for 3D printing.
• E-Commerce Niches: We have really embraced e-commerce, and that is only going to continue. But I don’t think Amazon.com has the market cornered. I have been following Etsy, and they are doing well. Companies that make “unique” things (Betabrand clothes, etc.) are doing just fine, too. The “niche” e-commerce companies who specialize and offer great products in certain categories can do really well.
People often ask me what I read. I read everything, voraciously. I still read the Wall Street Journal every day. And in addition to several magazine subscriptions, I have over 20 Google Alerts coming to me on different subjects every week. As I teach several entrepreneur courses at San Diego State University, I am constantly reviewing both textbooks and trade books written by either subject-matter experts or industry experts. I feel we can never give up on acquiring knowledge, and knowledge can best be acquired through either reading or doing.
There are books that have definitely had an impact on me and I consider them valuable, not just for entrepreneurship but also for understanding all those other elements that go into building a brand and a great company. I share them with you here.
Brand Gap, by Marty Neumeier. If you are an entrepreneur, you will need to understand what your company stands for and how it will be viewed and felt by your customers. I spent a good part of my life supporting, marketing, or creating brands. And it’s not exactly the same thing as creating a company. While you can see the company, you really can’t “see” the soul of a brand. That’s because it’s what your customers feel about your product that is most important. It’s a great book that every entrepreneur should read before considering a name, logo, marketing message, or website.
Business Model Generation, by Alex Osterwalder and Yves Pigneur. This book was introduced to me by another professor at San Diego State University in 2011. The power and simplicity of generating and iterating a business model, with customers, to the point of failure as rapidly as possible, caused me to completely change my line of thinking as regards business plans. I now encourage potential entrepreneurs to forget writing a business plan and to use the business model canvas tool in this book. Period.
Don’t Make Me Think, by Steve Krug. As an entrepreneur, chances are you will need to know a little bit about good user interface design, whether you’re dealing with a website, a mobile application, or anything else involving interaction with a customer. This book was written by a designer for marketers, but every entrepreneur should read it as well. It will allow you to have intelligent conversations with user- interface designers and keep you from making big mistakes that could dramatically impact your company’s revenue. Great book that is simply written with lots of pictures and examples.
E-Myth Revisited, by Michael E. Gerber. This book seems simple in its premise, but really helps entrepreneurs understand how they can ruin their new business. Its shows entrepreneurs what their role is in the company, particularly what they are good at and what they are not good at. It’s a solid read if you are considering becoming an entrepreneur or an entrepreneur struggling with your responsibilities in your current start-up.
Founders at Work, by Jessica Livingston. Entrepreneurs should read this book just so you understand that nothing goes exactly as planned in a start-up company. And to adopt a philosophy of being ready to pivot based on listening to the marketplace and customers. Having helped launch Yahoo! and Amazon.com in the very early days, I can tell you we were constantly changing and revising our plans. By reading how some other well-known start-ups had major issues and pivots may give you a little reassurance before you descend into the chaos of a start-up.
How to Win Friends & Influence People, by Dale Carnegie. My first mentor must have noticed my complete lack of communication skills and networking grace. Not only did he make me read the book but he also sent me to a six-week class. It changed my life on how I communicate and network with people.
Positioning: The Battle for Your Mind, by Al Reis and Jack Trout. Most people never really understand how marketing, positioning, and branding actually work. This book does a great job of helping you to understand that it’s not what you actually say or show to customers that matters. It’s what you make customers feel. And their chapter about how to create a new category ladder in a competitive marketplace is invaluable to an entrepreneur.
Search Engine Marketing Inc., by Mike Moran and Bill Hunt. In meeting with a CEO/founder of a search engine marketing start-up in late 2008, I noticed he had a stack of more than 100 copies of this book behind his company’s reception desk. I asked the CEO why he had so many copies of the book. He told me that every single employee, vendor, partner, board member, and adviser was given a copy of this book. He called it the bible for understanding search-engine optimization. He was right. Every entrepreneur will be impacted by search-engine results and needs to read this book before doing anything online.
Spin Selling, by Neil Rackham. Early in my marketing career, my second mentor took me aside one day and said quite bluntly, “You don’t know how to sell.” Then he did something amazing. He sent me to a weekend seminar on spin selling and it changed my life. I began to see my family, friends, clients, and professional associates differently. As an entrepreneur, your ability to understand multiple people types and to really grasp the difference between wants and needs is critical. This book will help you become so much better at getting people to want to buy from you, as opposed to your selling them something.
Tipping Point, by Malcolm Gladwell. As a marketing expert, I learned how important it was to have your new product or service focused initially on a group of early adopters or influencers, and that they would influence others to consider purchasing the product. Reading this book gave me additional insights into what has to happen, to whom, in order to create a “tipping point” in the market, the place where the product or service takes off. Companies like Google and Facebook, both of whom did no marketing in the early days, benefited from understanding how targeting early influencers could really drive market adoption of a product or service—to the point where mass-market users learned about the product with essentially no marketing. Good book to read, as it will help you understand the ecosystem of potential users in a marketplace and how to create a potential tipping point.