Category: My entrepreneurial adventures

How the Priority of a Company Should be to Survive

I noted this interesting quote: “a business professor at INSEAD, the renowned global business school, hammering to his students: “You know what should be the priority of a company? It’s not growth, or anything else. It is to survive!”” from a post on Facebook business model by Frederic Filloux. In my experience as an entrepreneur and wathcing also our industrial clients be born, live and die, I find this assertion quite true.

In particular, over-extension in growth is often a very fatal situation: the burden of debt can’t be repaid when the industry comes down or when execution does not follow. Focus on survival, prudent management should definitely be essential priorities.

I am always amazed on how tough it is to be profitable and build substantial reserves to cover downturns, and how quick things can go down when there is a downturn. There is an essential non-symmetry that is very difficult to overcome even when ones reacts quickly and massively to a downturn, cutting costs.

Finally it is all about natural selection: extinction is the rule, and survival is the exception. Substantial growth is the uber-exception, so when it happens, care should be exercised!

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How Companies Should Promote Senior Management from Inside

A few interesting points can be noted from the very interesting post by  Dom Moorhouse: ‘Identifying and developing your senior leadership team | Five buckets‘. In this post, we will develop his thoughts about the senior management team. The post is specifically applicable to service companies such as consulting companies, but the concept can probably be applied to a wider range of businesses.

Dom Moorhouse states: “As a general rule-of-thumb – backed up by some tough lessons learned personally – I would strongly encourage you to develop your seniors, as feasible, from within your company as opposed to hiring from outside. The risk of external hiring grows the more senior the position.” The rational is that this practice is much less risky specifically on the critical issue of values alignment.

I would personally temper a bit this affirmation. It depends on the life phase of the business. If a transformation is required with an influx of new ideas from outside, hiring a senior executive from outside might be the right course. However it general it is quite right that it is preferable to hire from inside. Therefore, an active development and promotion scheme needs to be implemented to achieve this objective.

Have you thought in your business – if you are beyond the start-up phase, how you will identify and develop the future senior managers?

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How Startup Founders Should Not Work for Free

In his post ‘Pervasive Startup Myth: Don’t Work for Free’, Tim Berry explains why investors are generally not impressed by start-up founders working for free: “Investors want people committed to working their startups, and that usually takes getting them paid“.

From my perspective and experience, there are lots of good reasons for not working for free and a few caveats:

  • working for free or cheap will not demonstrate if your business model really works at the normal price it should command, and the market price of the contributors,
  • working for free or cheap does not favorably reflect on the value you provide to the client,
  • entrepreneurs still have to provide for their family, and even if their significant other can compensate for a while, it is not a sustainable proposition.

There are a few caveats from my experience and practice though:

  • In my companies we do account for what the founders or partners should get paid but we may postpone payment of part of it to protect cash flow, which is what really counts in startups growing rapidly (fixed salary would be typically be quite low, and ‘bonuses’ paid when cash flow is good),
  • There are instances where working cheap to establish oneself in a new market might be a conscious choice. It comes with the difficulty of raising prices later, so should rather be presented as a special discount against a normal price rather than a low price,
  • Sometimes working for a low price but being compensated on knowledge and exposure might be a good deal, but it needs to be strictly limited in time.

So, stop working for free when you deliver value to your clients: stop devaluating yourselves!

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Five Conditions for Large Organisations to Develop Innovation Through Acquisition

Large companies seem to be considerably advantaged when it comes to innovation thanks to their unlimited resources to buy and bond together smaller organisations and startups. However this can often be a mirage.

In the past months I have been involved as a creator of small companies, as Business Angel for startups, and also with very large companies in strategic reviews to develop new businesses. Large companies have the great advantage of unlimited resources (at the scale of startups or small companies) when it comes to put together a new business through multiple acquisitions. However at the same time they are probably not the best soil for new ideas (refer the previous post on ‘How Large Should Creative Organisations Be?‘).

Keeping innovation sprouting in a large companies trying to develop a new business by acquisition requires:

  • First, a relative isolation of the innovative branch from the rest of the business and its bureaucracy. It needs to remain independent and enabled,
  • A certain level of stress to be maintained, otherwise, as I have observed, confort and overhead will grow tremendously without real commercial development.The unlimited resources and cash is a great advantage to develop new businesses; at the same time it can be a bit too confortable,
  • An industrial logic to the shopping spree around a driving idea that makes sense,
  • Keeping competition for the services offered by the innovative branch to the original business to detect new offerings and competitors,
  • Exchanges of personnel between the historical activity and the new activity to produce progressively an understanding; however this must be carefully limited and people from the original organisation carefully vetted for their adequacy.

Developing a new activity by acquisition in a large organisation is no easy fit. It requires a lot of management attention. The ‘ugly duckling’ syndrome is never far. Apply those principles to overcome the issue. Any additional idea?

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How Your Business Needs to Become Your Mission

Robin Sharma writes “until your business becomes your mission, your business will never become a movement“.

This statement is interesting and inspiring because it puts back on the table the question of why we are entrepreneurs. Why are we giving so much of our time and attention to our entrepreneurial endeavor?

We are doing it because we have an internal impetus to give out our energy to something we believe in, a mission we believe will improve something in the world around us. And because we are doing this sacrifice, it has to be for something we believe in.

If the mission is really useful for people out there, then yes, maybe it will also become a movement. But first, let’s work to realise our mission.

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How I Believe That Building Slowly, On the Long Term, Is the Way

Following up on our post ‘How Entrepreneurship is Not a Rich Quick Scheme‘, I do believe in entrepreneurship building slowly, on the long term, the foundations of a new business, at least until there is such an adoption of their product that scaling becomes the main issue.

Like Richard Branson says, “there are no quick wins in business, it takes years to become an overnight success“. I am always amazed at how start-ups try to develop quicker than the natural development time of their product, boosted by substantial investments from rapacious investors.

It might be that I am excessively on the safe side, favoring minimum external investment and self-development (which is also a way to remain free), and that my ventures could benefit from some injection of cash to grow quicker. At the same time, I am a firm believer that new approaches and products need some time to get adopted and understood and that there is a limit to the speed of development, at least until they reach a stage of adoption where scaling becomes an issue.

I am interesting in building stuff of quality and that will be viable for the long term. It takes time and that’s normal. So let’s assume it and avoid again those ‘get rich’ scheme delusion.

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How Entrepreneurship is Not a Rich Quick Scheme

The entrepreneurial world is full of the delusion of the ‘quick success’ scheme, and many would-be entrepreneurs and investors are addicted to the ‘rich quick’ delusion. This creates behavioral problems and disappointed expectations.

Of course there are famous and visible examples of start-ups that have had stellar trajectories, but they represent less than a fraction of a percent of all the entrepreneurial initiatives.

In reality, entrepreneurship is tough hard work, week and week-ends, to build something new. It will take years to build something strong enough to be worth being re-sold. All of this in an uncertain context where it is not sure the organisation will still be around in a few months time.

And on the investor side, there is no guarantee that a start-up investment portfolio will be a rich quick scheme either. There will be more disappointments than successes, and disappointments will also happen earlier, with sometimes disastrous psychological consequences.

Entrepreneurship is not a rich quick scheme. It is another way to look at work with an objective to change the world. And in most cases, it will end in disappointment.

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How People Buy Why You Do It, Not What You Do

Simon Sinek the author of the bestseller ‘Start with Why: How Great Leaders Inspire Everyone to Take Action‘, writes: “People don’t buy what you do, they buy why you do it. And what you do simply proves what you believe“.

I was initially a bit sceptical with this affirmation, and with time I see increasingly the value of it, specifically when one is in the business of selling services like I am. Our clients do bother somewhat on what we propose and our track record, but most of all they are sensitive to the fact that we have an intent, a mission, that is benevolent and powerful.

And in reality when we do selling, people buy the reason why we are in business, and they see how our mission unfolds as a permanent background in the services we provide. Keeping the mission, we can be very flexible about the means to reach it. The avowed mission and how we demonstrate our commitment to it is the key.

How clear are you with your mission? Is it broad and benevolent enough?

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How to Overcome the Challenger Syndrome

In my consulting work I am mainly working to help market challengers become better, or tackle more complex and larger contracts by applying best practice approaches. Some of my clients aspire to become leaders in their market. But often they can’t break through the psychological ceiling they put on themselves: behaving like a leader is very different from behaving like a challenger.

As a market challenger, you promote your reactiveness, your flexibility to accommodate client wishes, the ability to respond to tricky out-of-the-normal situations. You show you deliver under the most challenging circumstances.

As a market leader, you promote that you deliver the golden standard, and you promote volume gains that are acquired through standardisation of ways of working or of products.

It is extremely difficult for a challenger that has promoted adaptability and flexibility for years to change behavior and enforce standardisation on its clients. This is a difficult psychological barrier. Only by changing behavior can one become a leader in its market. It takes vision and guts to behave like a market leader when one is still small with a limited market share. But that is what it takes to eventually become a market leader.

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How to Deal with Both Luck- and Skill-Driven Situations

In this excellent post ‘The Difference Between Luck and Skill’, Valeria Maltoni explains how there are situations that are driven by skill, and other by luck; and that it is important to understand what is driving the situation to take the right behavior.

First, our brain is not geared to distinguish luck from skill. “Our nature throws a wrench in our ability to distinguish luck from skill. The problem is that we naturally embrace stories and shy away from statistics.” We need some analysis to understand what is at stake and it may not be easy. As a result, we overestimate the importance of skill and underestimate the situations that depend on luck.

Then, “In The Success Equation, Michael Mauboussin says that when skill is predominant in a field, the best course of action is to engage in deliberate practice with feedback and coaching; while when luck is predominant, he advises not to worry over results, because we have little or no control over them. Instead we should just focus on getting our process right to succeed long term.” (which means, get ready for the opportunity that will present itself one day or the other). Thus we need to behave markedly differently whether skill or luck drives what we are trying to achieve.

It gets complicated, of course, by “The paradox of skill — In fields where skill is more important to the outcome, luck’s role in determining the ultimate outcome increases. While in fields where luck plays a larger role in the outcome, skill is also very important but difficult to ascertain without a large enough sample set.”

So, is your project luck or skill-driven? Adapt your behavior in consequence!

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How a Collection of Top Individuals is not a Top Team – Specifically When Setting Up an Organisation

Sometimes as a consultant I get involved in supporting the setup of new organisations. Invariably, and more so even if the organisation is rich, top individuals from all required disciplines are head-hunted for key positions. Alas, this collection of individuals often does not make a working team and a successful setup. This even sometimes ends up in disaster – just because the collection of individuals does not act as a team.

The more individuals have been successful, the more generally their ego has grown and the more it is difficult to get them to participate to a collective adventure. Professionals that have been successful and recognised also sometimes lack the drive and energy that is required when setting up a new organisation; not to mention that they may not be willing to work out the required nuts, bolts and details of setting up something from scratch.

From my perspective, the recommendation in this situation is two-fold:

  • try to get seasoned individuals that are still energetic, motivated, and open-minded, than top leaders in their discipline. The small lack of experience will be largely offset by the capability, motivation and willingness to build as a team something new;
  • invest largely in teambuilding and make sure there are plenty of alignment sessions to make the team work together to build something new. It is essential that they work as a team and understand each other’s needs.
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How to Embrace Things That Might Not Work

Following up on Seth Godin’s four elements of ‘What Makes an Entrepreneur Different‘, it is interesting to elaborate on the fourth element: “Embracing (instead of running from) the work of doing things that might not work“.

As an entrepreneur and junior business angel, I have now had this experience repeatedly. Things that looked like great ideas and that turn out to be utter failures almost leading to bankruptcy. Things that looked like great opportunities and finally just purred away with little or now growth. And a very few things that often looked mundane but finally delivered the most value.

Still somehow I am still keen to try new things. How come?

I guess there are two elements to it:

  • Curiosity. I have always been curious and willing to explore many different fields.
  • Resilience. I have learned that it is possible to try many things without dying (financially or socially). It is even possible to highlight the fact that I have tried something and failed. And now I don’t care too much, because the things that worked kind of excuse and finance what does not.

Stay curious. Become resilient in trying new things – and understand most won’t work.

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