new dog old trick

Fred Wilson: Events Overtake Companies

I'm a bit late commenting on this post by Fred Wilson from a couple of weeks ago. This idea must be in the water a bit these days - the same ideas behind Wilson's post are behind the new book I am currently reading titled Getting to Plan B by John Mullins and Randy Komisar. Also some of the same ideas are used by Eric Ries in his Lean Start-up concept. And it's all very much aligned with work that I've been doing around planning/strategy being an ongoing and continuous process rather being episodic. More on Getting to Plan B in another day or two after I finish reading the book. Here's what Fred Wilson has to say (emphasis is mine):

I've found myself saying "events overtake companies" a lot this week. I'm not sure exactly why it was the phrase of the past week, but I did spend a lot of time talking to entrepreneurs running businesses that are growing rapidly, causing the founders to rethink their strategic plans.

I think less than 20% of the companies we back end up doing what they started out planning on doing. They build something, get it into the market, and then things happen. ...

There are two big takeaways from this for me:

1) Don't get too attached to your strategic plan. If the market is telling you something different, go with it. The best entrepreneurs I know are great at "listening to the market" and quickly taking that input and reshaping the business to take maximum advantage of it.

2) Don't spend too much time on planning. ...

But don't take this post as a dismissal of the value of strategy and strategic planning. Strategy is critical. Everything flows from the basic strategic plan of the business. You need to have one, but keep it really simple at the start and be prepared to evolve it quickly once the market starts talking to you. If events start overtaking the company, go with them, it's usually the best approach.

Fred Wilson on Failure

Very good post by Fred Wilson this morning on the subject of Failure. He points to a comment in President Obama's school speech regarding learning from failure and then expands a bit. For many entrepreneurs (heck, for most of us) the most powerful lessons come from failure not success. As the innovation gurus say, if you're not failing, you're not trying hard enough and often enough. As Fred reminds us, it's almost uniquely American that failure is seen as a feature, not a bug, in a potential entrepreneur's track record...

I think embracing failure is one of the things that makes this country such a great place to do business in. In many parts of the world, if you fail once, you are done. People won't touch you with a ten foot pole. But here in the US, it's almost a badge of honor.

A Powerful Tool for Organizational Learning: After-Action Reviews

Matthew May has a good post on After-Action Reviews (AARs) over on the American Express Open Forum. When Peter Senge says that AARs are "arguably one of the most successful organizational learning methods yet devised" you know that they are a big deal.

May's post summarizes the steps to ensuring successful AARs. Powerful stuff. Tools like AARs are central to the new organizational forms and management techniques that we need in the post-"Big Shift" enterprise. We used the term post-mortems for the AARs we did after development projects - our only problem is that we didn't hold them often enough. One of the best sales VPs I have worked with used to insist that his sales teams debrief every sales call in something very much like the form the Army uses in its AARs.

AARs should be one of the most used tools in every entrepreneur's management tool kits.

Lean Start-up Introduction

I've been interested in the "lean start-up" concept that's being evangelized by Eric Ries on his Start-up Lessons Learned blog. One of the lean start-up concepts that I really like is Eric's minimum viable product . Also, the lean start-up also incorporates Steve Blank's customer development concepts. All very good stuff. Great for any sort of technology or internet start-up but applicable to almost any start-up.

Great list of readings for entrepreneurs

Steve Blank's list of books and blogs for start-ups.

Entrepreneurship and The Big Shift

A couple of connections between entrepreneurship and The Big Shift (TBS) clicked for me while I was reading the research report I've discussed here and here. I'm not sure if those connections are valid but they still work for me after a few days of consideration.

I see the "entrepreneurial economy" that has risen in the U.S. over the past 25 years or so as partially being both cause and effect of TBS. The drivers behind TBS have created waves of disruptive innovation in industry after industry which partially gives rise to the dramatic rise in topple rate found by TBS researchers as well as helps create the dramatic rise in competitive intensity. Once this starts it seems to me that another impact of the digital technologies that are being deployed in the big shift is that you get a self-reinforcing spiral of innovation, more toppling, even more competitive intensity, etc.

All of the disruption of industry leaders has also led to many workers being shaken loose from companies impacted by lower ROA, increased competition, etc. I think that's had the effect of creating lots of new entrepreneurs. Some of these new entrepreneurs felt pushed to start businesses due to changes in the economy while some viewed it as an opportunity to take control of their own destiny. Some transitioned back to established company jobs when one came along but many came to love the combination of freedom, control, passion, learning, etc. that they felt as entrepreneurs.

Now, the Big Shift isn't the only driver to all of this. Globalization is as well, although it seems to me that TBS and globalization have a bit of a cause/effect relationship too. I think we'd be seeing big changes in the economy due to globalization even without the rise of digital enabling infrastructures, etc. But, I think that TBS has enabled the effects of globalization to accelerate and intensify - which also has driven greater rates of entrepreneurship in both the U.S. and elsewhere.

Why vision statements matter

Link: BeyondVC: Why vision statements matter.

A good post by Ed Sim about the importance of a shared vision in a start-up.  I am a big proponent of creating a broadly shared vision for a company (start-up or otherwise).  I think that a shared vision is a fundamental platform for creating a great leadership team and great company.  I don't particularly care what terminology you use - if you're into Guy Kawasaki's "mantra" instead of mission, that's great, or you can use Collins and Porras's terminology (see below). 

It has always bothered me that many executives can't seem to understand the value of good vision and the value of investing energy in defining and maintaining a corporate vision and a supporting corporate culture despite all of the evidence regarding the importance in doing so.  I especially like it when supposedly short-term oriented investors like Sim (who is a venture capitalist at Dawntreader Ventures) or Kawasaki (of Garage Ventures) are clearly supportive of making such investments.

A solid vision should includes a purpose, values, and the other things that the classic Collins and Porras paper "Building Your Company's Vision" talks about.  Those ideas are embedded in the subsequent Collins and Porras book, "Built to Last" and discussed on Jim Collins website here.   Or see Jeff Cornwall's weblog, The Entrepreneurial Mind,  for some thoughts about why values should be an integral part of a start-up's vision. 

Here are a few of the things that Sim has to say in his post - but please do read the whole thing:

Vision statements matter.  Sometimes we get too focused on the daily bump and grind, the next product release, and forget about the big picture and what we are trying to accomplish (see an earlier post on Vision). Trust me, the word vision became a dirty word during the bubble as many companies were long on vision and short on execution.  I am not advocating that we return to that environment, but I am strongly saying that companies do need a vision and that it can help them with their execution.

I went out to dinner a couple weeks ago with a few key executives at a portfolio company and as we started talking about future product direction, it seemed that we all had different ideas of where the company should go.  Seeing some confusion I tried to get us focused back on the basics when I asked the team what our vision was.  The first pitch was great and so were the others but unfortunately they were all different.  It is really hard to drive future product direction when your key executives can't agree on what the company should be when it grows up.  In addition, it is quite difficult to get your employees on the same page without a simple, succinct vision.  Furthermore, it is hard to build word of mouth marketing without boiling down who you are and what you do in a memorable and short manner.  Yes, it can be challenging to distill everything you are doing into a short pitch but great companies are able to do this. 

Angel Investors Taking up the Slack?

Link: RED HERRING | Angels Fund More Deals in '05

Red Herring reports on a survey that indicates that angel investors are funding a higher percentage of the startups that approach them seeking funding.  It suggests that angel investors are filling a gap in the market created by the retreat of traditional venture capital funds from providing seed or first round funding for startups. 

The upswing in angel support comes as VC firms are shunning early-stage “seed” investments in favor of later-stage deals. Venture financing for seed-stage investments, as a portion of total venture investment, has fallen to its lowest level since 1999. Less than 2.9 percent of all VC investments in the first half of 2005 went to seed startups, down from 8.1 percent in 1999.

Of course, this research relates to those segments of the entrepreneurial economy where traditional venture firms prowl, e.g. software, semiconductors, bio-tech, medical devices, etc.  Outside those segments, angel investors (private investors investing their personal funds) have always been a major source of seed stage (and later stage) funding.   

In the software world, where my personal experience lies, I know quite a few entrepreneurs who now no longer even consider trying to approach the traditional venture funds for early stage funding.  Their model is to get the product (or service, which is the business model most "software" companies are shifting to) up and running, gain initial customers, and then leverage angel investors for at least the first round of external funding.  Traditional v.c. are not even considered until and unless the opportunity is demonstrated for sufficient growth that a B or even C round is needed of a scale beyond the ability of angels and strategic investors to fund. 

"The Science of Opportunity"

ooooohhhh...Jeff Cornwall is going to love the title of this interview from BusinessWeek. 

Link: "The Science of Opportunity".

There's a lot to be said for careful planning and cautious review when starting a small business. But there's another side to the story, say some entrepreneurs, and that's following up a good opportunity and seizing it.

Seven Deadly Founder's Sins: A VC's View

Interesting perspective from venture capitalist David Beisel of the seven deadly sins that distract entrepreneurs from the true path to success: inauthenticity, sloth, extravagance, taciturnity, greed, arogance, indecisiveness.  A couple of these probably only get elevated to the level of "deadly sin" for investor-backed (esp. VC-backed) businesses, e.g. taciturnity and greed (at least greed in the sense Beisel identifies) but the others make the hit parade for any type of start-up.

Link: Genuine VC: Seven Founding Sins.