The 5 C’s of Clairvoyant Companies

6 03 2016

Keys to successNo one is psychic at TechCoastAngels.  Yet, we believe there are keys to success for start-ups.  For the past couple of weeks, myself and 6 other angel investors from TechCoastAngels of Orange County have screened more than 120 entrepreneurs in preparation for the  “finals” of our fast pitch competition at TCA’s upcoming Celebration of Entrepreneurship event to be held on March 10.  We have listened to these entrepreneurs’ 60 second pitches which would be provoking enough to take a meeting with them and listen to their pitch decks. In my last blog, I shared the early pitch decks of 7 Unicorns courtesy of CB Insights.

For this blog, I want to put it all together and share what I see are the common themes that came out of the pitches and the pitch decks.  Now, while we have been focusing on start-ups, the principles enumerated in my 5 C’s of Clairvoyant Companies are equally applicable to on-going companies, large and small.

1.       Conveying the story.   The first “C” relates to conveying a story of what problem(s) the company is solving and telling a succinct story to entice the listener to ask for more information.   If it is a start-up, the entrepreneur has to put the listener in the shoes of the person having the problem and convey the solutions.  In the pitch deck (or business plan), the CEO (or presenter) provides the details on how he or she will execute on the plan and drive financial results.  Conveying the story clearly applies to ongoing companies as well, particularly if the company wants to attract new customers and brand itself in the market as something special.  Just think about the stories being conveyed by Nike and Under Armour or your favorite consumer or business product.

2.       Customer Clarity.   The second “C” relates to the target customers.  Who is the ideal customer?  Can you describe them and how do you find them?   If you think about Airbnb, the customers are both the person wanting to rent his property for a short period of time, to the other customer, a person wanting to rent a room or house.   The marketing and business plan should clearly indicate the problem the customer is facing and the solution offered.  Additionally, the company needs to present a cogent case for their marketing tactics to drive awareness, adoption and use.  Without clarity on the customer and how to find them and motivate them to action, financial success will not be achieved.

3.       Competencies of the Company.   This third “C” relates to the existing or needed competencies within the organization that can drive the financial results.  It also relates to the intellectual property (IP) that is required to support the business or product.    How do you acquire and sustain the competencies that are needed for success?  Do you hire software developers on your team to build the product or can you outsource that skill?   What is critical based on your strategy and your competition?

For an on-going company, this is equally as critical.   A competitive analysis and environmental scan may lead to the conclusion that skill sets that were once required are no longer required and new skills must be added.  That may lead the company to a training program, a partnership, or replacement of existing resources with new ones.

4.       Competitive Advantage and Moat.   This fourth “C” is pretty evident.  No company operates in a vacuum.  Both startups and on-going companies need to be aware of the existing and potential competition that exists.   A competitor in the future may not be apparent  today but may have the competencies, technology, leadership and resources to compete in a new and growing market.   Five years ago would GM or Lexus have considered that Tesla would be a competitor or that Google would enter the realm of cars with their automated car program?  A few short years ago, who would have thought that Red would be the camera of choice and used in three of the Academy Award nominees for best film?

With technology and apps changing so quickly, competition can change just as fast.  Technology is the new enabler helping young entrepreneurs compete with established companies and with each other.  Recall what Andy Grove, former Chairman of Intel said:  Only the Paranoid Survive.  Whether you are a startup or an established company, be paranoid and keep your eyes open.

5.       CEO vision and passion.    We at TechCoastAngels say that we have to like the horse (the business concept) but must LOVE the CEO (the jockey and her team.)  As we screened the candidates for our upcoming event, we looked for a CEO with passion and vision and who can relate to us, the investor.  We wanted to find someone who had a history of success, was decisive, yet approachable and coachable.   We believe we found those characteristics in each of the 12 finalists.

Think back to the great leaders of on-going businesses or coaches and CEOS of sports teams.   Who is your model for a CEO with vision and passion?  I personally thought Lee Iacocca was great when he resurrected Chrysler.  Jack Welch turned GE into a world class company with his vision to be #1 or #2 in his markets.   Steve Jobs showed the world a new vision for technology. And Alan Mullaly took Ford after the great recession to a new level of respect and performance.

What else did these CEO’s have in common?  They had the ability to execute a plan.  They were also the keys to establishing a culture in a company that was hard to replicate.  In many ways, they became the icon for their brands.  And they were highly regarded by their employees and feared by their competition.   In a startup it is perhaps hard to discern whether the CEO can execute, yet we can judge their past successes with other companies and who they select as operational execs, advisory board members, and board of directors.

As we near our Celebration of Entrepreneurship, I trust that these blogs and the ideas herein will help executives of start-ups be successful and also be used by executives of on-going companies to help them guide their companies to business success.  I would be glad to continue the dialog on what makes a successful company.  Feel free to reach me at dfriedman@clevelpartners.net and if you enjoyed this blog please like it, repost, and retweet it.

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Confessions of a Successful Entrepreneur: Dan Rodrigues

10 02 2016

Kareo 2The other night I was asked by a colleague who had a question from a reporter at INC Magazine what are some success tips for entrepreneurs and additionally what are some tips when you run into trouble.   I have written about tips for budding entrepreneurs in my blog on The Business of Business in the past and have written on behalf of the TechCoastAngels as well.

Serendipitously, the day after I wrote my comments to the reporter, I had the opportunity to listen to an interview by Andrew Bermudez of Digsy (www.getdigsy.com, www.meetup.com/OCfounders), of Dan Rodrigues, CEO and founder of Kareo (www.kareo.com).   Dan’s company, Kareo, has raised more than $100 million and is the fastest and largest growing company in Orange County, CA.  His company provides a cloud-based platform for independent medical practices and currently has more than 35000 providers served by more than 500 employees.

I want to share Dan’s perspective on how he grew his company and the road he had to travel.  Let’s lay out the journey in three chapters: Genesis and Euphoria; Reality of Funding and Growth: and the Path to Success.   And in each chapter there are lessons to be learned and tips for the entrepreneur.

Genesis and Euphoria

After Dan sold his first company, Scour, he started a software development consulting business.  During this time, he worked on a project for a client in the healthcare space. Through this project, he learned about healthcare IT.  Yet he also applied his knowledge of the consumer, gained from his stints at Vizeo and Real Networks, to the business.   He took the knowledge and the project and built the beginnings of Kareo and the first customer was the company for whom the original project was designed.

Lessons  learned:

  1. An inquisitive mind can yield interesting insights into new ideas. In this case, Dan used an inductive process to define the requirement to serve one customer and used that platform as a base of expansion to other similarly situated companies.  Entrepreneurs can take a custom project and move it to a generalized solution which might give you an immediate customer base.
  2. Integrate different perspectives to develop your business. Dan leveraged his prior experience in a different market space and was able to apply that knowledge to make Kareo different than other software companies in the same space. In a later chapter, Dan directed Kareo to be an online provider of SaaS services to this market.
  3. Build relationships as they will be valuable for funding as well as support and resources. Dan was able to use past relationships built over time to get to VCs on Sand Hill Road and High Net Worth individuals to help provide the initial funding.

Reality of Funding and Growth

Initially, Dan bootstrapped Kareo and now with some funding and the opportunity to gain more, the business seemed off to a solid start. And while you might read about Dan’s story thinking that it was all wine and roses, the truth is that Dan had some tough days early on with Kareo. In 2008, Dan received a difficult call from an investor who was unable to deliver a promised next round of funding. With no time to find another investor and significant bills to pay, Dan made a very tough decision. He reduced the company from 35 employees to 7, and found a new path for Kareo. During the entire year after, Dan did not take a salary as CEO so that others could be paid.  The goal was now survival and the focus was getting customers, reducing product expenditures, and finding more efficient ways to support existing customers to reduce cash burn.

Lessons Learned:

  1. Never take anything for granted. An investor can change his mind and funding may no longer a certainty.  The business environment might change too and entrepreneurs need to be fast, fluid, and flexible.
  2. Spend wisely and carefully. Kareo built a company and moved into expensive office space.  How many of the readers can relate to the euphoria of getting funded and spending lavishly with those funds?  I know I have been in companies that did not spend wisely and had to retrench.
  3. Learn the way to manage the business in the most efficient manner.
    1. Develop good solid cash management and make that a core competency
    2. Build a support infrastructure in synch with the services your company provides and find ways, at least initially for minimizing spending on infrastructure. Try to build a solid online help solution, provide excellent documentation, a good knowledge base.  But also have an additional second layer of support if needed.  Train people to do double duty.
  4. Learn to sell online. Other software in the healthcare market was sold through VARS.  Selling online gave Kareo an edge and reduced the cost of acquisition.

Path to Success

With revenue ramping to $3 million, and cash flow positive, Kareo was on the path to success.  During this phase, the goal was to grow the business through disciplined growth using the lessons learned during the prior chapter.   Over time, Kareo started adding back employees, expanding its product set, and increasing sales.

Lessons Learned:

  1. Maintain the discipline of cash management. Remember the lessons from when growth and cash flow were hard to come by.
  2. Define metrics for success. Share these metrics with your team and manage them religiously. Metrics used by Kareo included cost/customer, payback on margin, return on cost of customer acquisition, churn rate, and lifetime value of a customer.  Note: these are very similar to other SaaS and technical service companies that use subscription services as their business model.
  3. Hire the right talent. It is difficult in some ways for a small company to recruit good technical talent in Orange County vs. in San Jose.  There is frankly more talent there by virtue of the number of companies in the tech space.  Don’t let that be a daunting task.  Dan created a culture in Kareo and a solid reputation of being a progressive company which attracted talented individuals.  On the flip side, retention might be easier in OC and probably is for Kareo given their culture, the fact that the smaller company can provide a solid platform for growth of its employees, and Dan’s vision and leadership style.

According to Dan, when the company had fewer than 50 people it was easy to attract a great talent pool because of the excitement.  When the company had between 50-200 people, Kareo started to compete for talent as employees looked for other exciting opportunities or felt they had the ability to move out on their own.  After growth to 200 employees, Kareo had established its reputation and talented individuals wanted to work there.

Lessons learned:

  1. Recruit a top level executive team. Building the team is critical to any company and is especially true for start-ups and growing companies.  Some of the executives were recruited from outside of Orange County and complemented those from the OC.
  2. Find leaders who know others and can attract talent and capital. This makes it easier to sustain growth.
  3. Change the culture with changes in the business. Dan indicated that culture changes at different stages of growth.  When you have between 1-10 people you are in survival mode.  As his company grew, it felt more like a family.  At a certain point as additional employees were on-boarded and new geographic locations were opened, the culture changed because not everyone knew each other nor worked with each other on continual basis.
  4. The company is a platform for growth for its employees. Reinforce and support educating employees, building their skills, and adding to an employee’s competencies.  I know many executives who don’t want to invest in employees because they are fearful of losing them to competitors.   I personally believe Dan’s approach is the better one and creates a culture and brand that ensures talent will stay with Kareo.

Dan was asked what he would do differently if he could do it over again.   After reflecting Dan accepted that there were mistakes and missed opportunities.  So let’s frame them.

Additional tips and lessons:

  1. Build a business first and a product second. This means don’t normally chase individual customer requests and spend money on unique features and services for different customers.
  2. You need to keep the lights on even if the product stands still for a while.
    1. Under invest in the product and invest in the business side. From my viewpoint, this is a difficult lesson for many engineer-founders.  Therefore make sure you have a good solid business partner as the ying to your yang.
  3. Companies need to be agile and reorganize at transition points and at changing stages of growth.
  4. Companies need the right advisors and investors. While the CEO is focused on growth and getting the product into the market, advisors and investors have the opportunity to look forward and may see minefields ahead.  The CEO needs to heed them.

On behalf of TechCoastAngels, Andrew Bermudez, and Dan Rodrigues, I trust you find this blog and its contents useful for entrepreneurs in their own quest for success.  Please share and forward to others.

Let’s work together to build a strong entrepreneurial eco-system in Orange County.   And if you want to talk further feel free to contact me at dfriedman@clevelpartners.net.  Hope to see you at our March 10 event on celebrating entrepreneurship at the Segerstrom (www.techcoastangelscelebration.com.)





Building Differentiation into a Product or Service: Creating a Sustainable Moat.

4 02 2016

product differentiationThis is a particularly interesting subject as we, investors, think about investing in a company.  And while this blog is directed to those potential entrepreneurs, the ideas suggested in this blog are equally applicable to new products and services developed by a business to increase their revenue, replace existing products/services, or compete in the market.

Many entrepreneurs – and investors alike- think that differentiation is based on the Intellectual Property underlying the product.   That may be true if the IP is really unique.  Yet, as one knows patent protection only goes so far.  If a new smaller company has a patent that “infringes” on a larger company’s business, for example, the larger better financed company can sue for infringement and cause the smaller company to lose focus on their end game.

Differentiation can enable a company to create a moat around their business that would make it difficult for a competitor to penetrate.   At best, it protects the company for the long term.  At worse, it enables protection for a period of time so the new company can establish their brand and get first mover advantage.  And, in the best case, the new company has such an advantage with their product that the larger company buys the smaller company for $1 billion or more and the founders feel pleased that they created a unicorn!!!   (We can all dream, right?)

Differentiation can take place on several levels.  The following diagram shows and input/output schematic for product/service differentiation.  In the diagram, there are 11 different areas where differentiation can take place.    The entrepreneur can focus on one or several of these areas keeping in mind that they are competing for a customer’s mind share relative to what either direct competitors can offer or other solutions that the customer may find acceptable.  For example, when I was commercializing Wi-Fi on airplanes we initially thought that the competition was the on-board entertainment system.  In fact, that was only one competitor; the other “competition” that competed for the customers’ attention included eating, sleeping or reading!!  It was evident in the rear view mirror.

Product Service Architecture for Differentiation

Differentiation can take place at one or several of the components of the product or service.  In this diagram there are 11 different areas where the entrepreneur can focus.  Most of the time, the focus is on the main platform or product and its features.  Yet differentiation can take place in the following areas as well:

  1. Accessibility: How a customer finds the product or service.  This includes channels of distribution, online, door to door, word of mouth and is part of the input process.
  2. Interactivity: Does the product or service require input from the customer? Is this input active requiring the customer to input information or is it more passive, with the input process providing the input by reaching out to other databases?
  3. Input process: Is there a unique way that the product or service uses the data to and integrates or converts the data into elements which can be acted upon by the platform?
  4. The platform: this is the core of the product and the essence of the technology. It is the engine to drive applications and features.
  5. Features: the specific features that provide benefits to the customer and are inherent in the platform.
  6. Applications: the specific uses for the product that the customer may or may not realize. These applications can be developed by the company or by partners.
  7. Maintenance and customer support: Is the product self-testing or do customers have to provide some input into testing and maintenance?  Is customer support online only or a combination of online and human interaction?  Maybe I am old-school, but occasionally I would like to speak with a human and the documentation and self-help guides are not necessarily very clear.
  8. Output process: What is the output process necessary to translate and provide an output to the customer? Can the output process be linked to another product or service from one of the company’s partners or another provider?  For example, if the product/service is a new CRM system for the small business, can that system be integrated into a marketing automation or e-commerce system from Salesforce or Marketo?
  9. Reports and Results: This is what the customer actually sees as an output and is usable.  Maybe this is a timeline, a report, a database, a social interaction, a picture or a posting, or even a data (Think of Match.com.)

In each of these elements, the entrepreneur has a few choices.  We use the concept of PPT: people, process (automated), and technology to look at ways the element is enabled, used and managed.  It is up to the entrepreneur how he/she wants to balance each of these three components because they will affect effectiveness and efficiency.

I want to point out one other way to differentiate and develop a moat for your company and product.  In a book called Profit Zone, authors Adrian Slywotsky and David Morrison point out ways that a company can protect its profit and revenue stream.  In developing and commercializing a new product the entrepreneur can think about the following elements as well.  Strategic control points are normally industry specific yet we can general from most protective to least protective:

  1. Owning the standard through technology and IP
  2. Managing the value chain- including channels of distribution, input materials, shelf space etc.
  3. Developing a super dominant position by dint of their market share in specific markets, through specific channels, or with specific products. This is probably less likely for a start-up.  Yet, perhaps the technology originated in a university and by dint of that they are super dominant in that market and want to expand beyond the university.
  4. Process including a unique way to provide information to a customer. Think Amazon
  5. People including the relationship of their customer support team to addressing issues. Think Nordstrom or Zappos.
  6. Own the customer relationship by focusing and understanding the unique preferences of a well-defined niche.
  7. Brand and trademarks. Think McDonalds, IBM, Google, Snapchat.
  8. Development lead time enabling the company to be first to market and build up first mover advantage.
  9. Cost advantage or cost parity enabling the company to compete should there be a price reaction from a competitor.

I trust this blog- perhaps a little lengthy- can provide some useful information for the budding entrepreneur and even those in corporate America engaged in developing and commercializing new products, services, or businesses.  There is no easy answer; yet having a framework or two and breaking a complex problem into smaller manageable components can perhaps lead to success………. and the next unicorn.

You can hear and see entrepreneurs pitch their products at the TechCoastAngels Celebration of Entrepreneurship at the Segerstrom in Costa Mesa on March 10.  Check out http://www.techcoastanagelscelebration.com to get tickets.  Also, feel free to continue the dialog or contact David Friedman at dfriedman@clevelpartners.net or via phone at 949 4394503.  Or retweet this to people who would like a good read.





What Makes a Company Great

21 12 2015

Company cultureI was at a very interesting meeting hosted by Brett Olinger and Susan Howington, founder, Power Connections on Dec. 16, 2015.   There were about a dozen high level executives around the table with titles ranging from VP to COO to CMO to CEO.  Susan got us together to talk about business issues and she asked a relatively simple question: What makes a company great? And the subordinate theme of what kind of company would you want to work for or build?

As a tech executive and one involved in the entrepreneurial eco-system in southern California, I would have imagined that I would hear about things such as the latest and greatest technology that captures people’s hearts and minds.  Or maybe I was hoping to hear about the great opportunities for career advancement or companies doing social good.

I did not hear of specific industries, technologies, functions, unique characteristics of the leaders or anything that you might glean from an employee survey.  Remember the ones commenting have been and are successful executives.   After listening intently – and contributing as well- I captured their thoughts into three areas:  Culture, Leadership, and Customer Focus.   And I have to admit that is probably the order of importance because to me, culture is a platform upon which to build and enact leadership and a customer philosophy.  As you read the following, just ask yourself about the companies for which you worked.  What made them good?  Why did you like coming to work?  What drove your passion?  What made these companies great for you?

Culture

Culture was the number one item.  Culture was a necessary but not sufficient condition for making a company great.  Think about Tony Hsieh of Zappos.  He has instilled a clear culture in that company that focuses on the customer.  Do what is right for the customer. Certainly his vision and bent is the customer.  But without a cultural underpinning, Zappos would not be as successful as it has been.

Culture is also unique to a company.  It is hard to duplicate and is normally set by the CEO.  Think about other companies that are successful and have a truly unique culture.  Think about Disney and the culture about Imagineering.  Think about Intel and the culture of innovation.  Think about 3M and their culture that they encourage people to invest their time on new ideas.  Without a culture of innovation and support for innovators, many companies may not achieve success.

We discussed other components of culture as well.  Those components included telling it like it is……. but respectfully and constructively.  (As an aside, I can certainly relate to this coming from Brooklyn, NY and have seen direct cultures like New York and oblique cultures like I have seen in the Mid-west.)  Another element was pushing employees to the next level, i.e. making them believe they can succeed and giving them opportunities to succeed.   In the process of encouraging people, the culture must also accept failure (fast failure is preferred) and must set up a reward system for those that are successful.

Culture is also critical as the underpinning of being customer focused.   Think about a company that is just focused on the bottom line versus a company that is trying to help a customer and wanting them to be happy.  Think about your experience with Zappos.  Or if you have web service or webhosting from 1and1, think about the great customer service you have received from them.  Was it easy to talk with the company and its reps?  When they talked with you did you believe that you were the only person in the world on their mind or did you feel that you were imposing by asking them a question?   We heard a story this morning about how Steve Wynn chose people to work for him.  Applicants were told to go to another part of the building and when they got there, Steve was sitting behind a desk, rose to greet the applicant and wanted to see their reaction.  If they were friendly and responsive, they were hired.  True?  I am not sure but it makes a good story.

Leadership

We all know that leadership is critical.  Leadership starts with the CEO and filters down to people in the organization.   The leader sets the culture.  When I was head of marketing at US Cellular, our founding CEO, Don Nelson, was a great leader.  He selected an eclectic group of people, set the objectives and measured results meticulously and religiously.  But what distinguished him was his willingness to listen to his people, set and change vision and set a clear direction for the company.  The result, during my tenure was that the company grew fourfold in revenue in only five years.

Think back to the CEOs and possibly mentors you have had in your career.  What has distinguished them?   This morning, the executives around the table believed that not only did the CEO establish and set the culture for the company, in essence being the chief culture officer, but also set a clear and compelling vision for the company.  As the Cheshire Cat said, “if you don’t know where you are going, any road will get you there.”  Leaders know where they are going.

Coupled with the vision is the ability to articulate the clarity and alignment of the messages across the entire company, and in my humble opinion, do it in a personal way.   As companies grow, become more complex, and are geographically disbursed, having a common vision and alignment of messages are critical to ensure everyone is marching in the same direction.   In this case organizations become both effective in generating profits (the end game for most) and efficient in doing so.

The group believed that a great company has a servant-leader.  A servant-leader focuses primarily on the growth and well-being of people and the communities to which they belong. By focusing on people first, it empowers employees to be successful.  It also has a mentoring quality enabling employees to trust the leader such that when these employees are pushed to success by the leader, they trust that their best interests, and in turn the company’s, are aligned.    To be a true servant leader, two other elements must ring true.  The leader must be authentic and must be transparent.  There should be no hidden motive or ego at play.

 Customer Focus

As a businessman and marketing executive, I have written extensively and talked about customer focus.  The customer, the one who buys your company’s products and services, must be foremost in your mind.  Companies who are customer focused truly understand the behavioral drivers of the customer and why they buy your products and services.

The executives at our meeting believed that great companies connect with the customer.  These connections may come from a better user interface, or the way they train their front line people to interact with customers.    We bandied about the concept of Customer Experience Officer because customers, who are not happy, not satisfied, become disloyal.   And, all of us recognized that retention of customers is critical to a company’s success.  Further if you connect with the customer and relate to the customer, if a company makes a mistake there are positive “chits” that have accrued over time and forgiveness by the customer of any faux pas is normally granted.

Note that customer focus relies on a specific culture.  Again, think back to Zappos or think about any experience you have had at a retail store or an online store.  Systems are critical to help achieve customer focus but in reality it is the people, those front line sales people and customer support people that guarantee that the customer is important. Most of us go to Starbucks to get coffee.   Think about your experience.  They ask your name and if you visit the same store more than a few times, the baristas and others will get to know you.  How do you feel?  Pretty loyal I would assume.

Starbucks, Zappos, US Cellular and other companies have realized something very critical.  The people who interact with the customers ARE the brand.  Leadership sets the vision and a customer centric culture is established.  Yet customer focus is executed by the people.   All of us agreed that great companies are those that have this passion for the customer, exercised by supporting a customer first philosophy on the front line.

Going back to the original question posed by Susan Howington of What makes a company great, it comes down to three areas:  culture, leadership, and customer focus.   All three are interrelated.  In short, great companies balance the needs of customers, employees, and owners.  What companies would you want to work for?  What makes a company great in your mind?  Let’s continue the dialog.

For more thoughts and ideas, feel free to contact me at dfriedman@clevelpartners.net  or visit us at www.clevelpartners.net.  I will also guarantee that if you write or call me, I will pick up the phone and talk with you.  Why?  Because we, too, love our customers and we have implemented a culture in our company of helping and sharing.





Successful Management in Two Words.

3 04 2015

Rudyard Kipling in his poem, “IF,” (see http://www.poetryfoundation.org/poem/1757720) said:  “If you can keep you head about you while all about you are losing theirs…… then you will be a Man, my son!”

Management

I was talking with one of my mentees today regarding his question of how to stay on top of projects and tasks and making sure he doesn’t get overwhelmed, i.e. keeping his head about himself.  Clearly there is a relationship and an opportunity to quote Kipling.  My mentee is a student who is working with a team to develop a new product/service and is doing this through the Center for Entrepreneurship at Chapman University where I am a lead mentor.    Since I have many more years of experience, I shared some of my learnings and some of the tools I have used and developed.

I was taught in my early career about good management by a disciple of the late Harold Geneen who was the architect of the rise of ITT Corporation as a successful conglomerate. Over time, I developed my own spin and teach this and consult with others who want a simple powerful system to implement.  The basic principle is simply stated in two words:  FOCUS and PODFU.

Focus is pretty simple.  Make sure you know the two or three most important things to do.  Simple to say yet sometimes hard to do.   In fact, as an executive you should be even more myopic and focus on the ONE key thing that needs to get done.  When that is complete move on to the next item.   The reality is that you cannot get overwhelmed by trying to tackle too many tasks at one time.  This also entails discipline and priority setting.

Second, as a young entrepreneur, my mentee is working with other young entrepreneurs and has to learn leadership and management.  Leadership means that he needs to convey his vision and excite the team so they can be engaged and successful. Management means the ability to ensure what needs to get done, gets done and gets done on time.  And this is where PODFU comes in. The acronym is Plan, Organize, Delegate, and Follow-up. It sounds so simple yet is also surprising how many fail at this.

I suggested a few tools that he can use in his regularly scheduled project meetings.  This tool can be repurposed for operational and dashboard reviews as well. The tool is shown in the following Excel spreadsheet with the listed columns.

PODFU Chart

In the example there are four main objectives and supporting tasks to be completed by a variety of people.  In this case my mentee is trying to get a new product/service into the market and this template displays the format and the kinds of activities he and his team might undertake.  (Note:  this is notational only and not representative of his project.)  There is clarity in the metrics to determine if the milestone/task was complete, a time period, a person accountable (if you use the RACI system, the is the “A” in RACI), and a color chart indicating if the task is on target (GREEN), potentially may miss date (YELLOW), or will miss or has missed the due date (RED.)

In each meeting, those tasks due at the meeting date and ones that are due at the next meeting date are discussed. If the task is “green” then there is little reason to discuss it unless there is something that must be brought to the attention of the team.  If the task is yellow, the comments should summarize what will be done to get back on target.  If the task is red, the discussion might go deeper- we call this a deep dive- to see how we can complete the task and if the completion affects other tasks, how might the team get back on schedule.

Of course, there is more to managing and leadership than just a chart.  Yet this template presents a very powerful way to manage using only these two words:   FOCUS and PODFU.  This system can help managers be successful.

If you or your company wants to explore how this tool can be adapted to your unique needs, please contact me at dfriedman@prodigy.net, visit my LinkedIn profile at www.linkedin.com/in/davidfriedman, or call me at 949 439-4503.





A View to an Angel…Investor that is.

12 03 2015

Entrepreneurs.  Love ’em    At the Meet the Angels event in Irvine, CA last night I had the privilege to talk with many of the Entrepreneur170 would-be entrepreneurs in attendance.  I hosted about 25 of them in a separate breakout session to answer specific questions they had regarding the angel investment process and other activities surrounding building a start-up.

Many entrepreneurs, especially those just starting out, have an impression – or mis-impression of the angel investor.  Because of the hit show “Shark Tank” many people believe that angel investors sit around and make instant decisions and throw money at companies.     That is theater and entertainment.  Let’s also not minimize the fact that the “sharks” DO invest and many companies in which they invest become successful.  However, angel investing is a little more than having many

mini-shark tanks around the country where entrepreneurs come to champion their ideas.

During one of the panel discussions one entrepreneur asked “what do the investors want to hear during a pitch.”  On Shark Tank the investors seem to ask the same questions and want to hear answers particularly relating to current revenue and revenue growth.  So I thought I would compile two lists of what I heard- and what I also believe- are things we angle investors want to hear, and things we DON’T want to hear.

Things Angel Investors Want to Hear

  • How the background of the CEO/Founder relates to the opportunity
    • Does the CEO/Founder have experience in this industry and market?
  • Skills and competencies of the management and advisory team
    • Ideally, has that team been in place for 6 months or more or better yet has this same team been successful in the past on a previous venture?
    • Is the team virtual, distributed or in one place
  • Skin in the game from the founders and early executives
  • That the entrepreneur and team are “all-in” committed to make it work.
  • A team that can execute to plan
  • Commitment and passion of the Entrepreneur (see my previous blog on this subject https://streetsavvymarketing.wordpress.com/?s=passion+of+the+entrepreneur )
    • One entrepreneur I know developed a medical device for insulin delivery because he would be able to use it for himself and his background was in medical devices
  • Strong product concept
    • What is the concept and why is it a strong one?
    • Has it been tested with customers in some manner?
  • Extensibility of the product concept
    • Is this a one trick pony or does the product have legs to spawn new products or be applicable to other markets?
  • Solid go to market plan
  • Identification of the ideal customer
  • Reasonable valuations
  • Credible evidence that the market will accept the product and it is scalable in some manner
    • This could include trials, early betas, partnership agreements, letters of intent, earlier funding.

What Angels Don’t Want to Hear

  • We are going to be the next Google and have a market cap of over $100B in only 2 years.
    • Or our valuation today is $100M because we have a solid concept and a breadboard design.
  • Our product is unique and we are alone in this space
    • It might be and that would be great but help us understand that. You might be the next SNAPCHAT and we don’t want to miss that opportunity!!
  • We have IP and no one can copy that?
    • This might be true but if you tread on the grounds of a giant company do you really want to pursue IP litigation over the next 7 years at a 7 figure cost?
  • We have a lot of downloads and freemium users
    • That is a great start but can you tell us about your conversion plans to paid users?
  • We have no competition
    • There is always competition or alternatives to your solution. The issue is how you will market the differences to get people to use your product or service vs another option.
  • Trust me; we know what we are doing
    • I am very attached to my dollars (my little financial soldiers so to speak) so I trust only those that have proved themselves to me in the past.

Certainly every start-up and entrepreneur is different.  In the early stages of a market, the team and the ability to execute is more important than the product per se in terms of sustainability of the business.  Early on, the management i.e. the CEO should have a clear view on the product, the vision for the product and business and a plan they can execute because we investors will track that to see if you make your commitments.  There should be clarity on what the ideal customer looks like.   For proof of concept, the angels would like to see functionality, a 3D model, capabilities comparison, market research to the extent practicable, feedback from current users if there is a product or input from lead users suggesting that the product or service in question makes sense and they would be interested in buying it.

We would be glad to hear from entrepreneurs on their concepts and ideas.  TechCoastAngels is always looking for deal flow and we would be glad to entertain those ideas.  Feel free to submit an application on www.techcoastangels.com.    And I would glad to talk with entrepreneurs who actually do have the idea for the next Google or Facebook!!





Maintaining the Innovative Edge

12 02 2015

Exploding Innovation

I was having coffee at Dana Point Harbor in California with a friend and a former colleague of mine, Gary Wallace, who is a VP at Sirius Connected Car.   We were talking about business and the Feb 1, 2015 issue of Fortune magazine with a Unicorn on the cover.  The unicorn symbolizes start-ups that have cracked the $1 billion valuation mark, notwithstanding any sustainable revenue to support that valuation.  (Can you say Dotcom bubble?)

As we talked about these companies we focused on the concept of innovation.  Why were these companies successful in coming up with an idea and just as importantly, what happened to the high flyers, the innovators in the past that have gone “subterranean” and in many cases have died on the vine.   Since this is a blog and not a research tome, let’s look at some of the companies that were stars at one time but have lost their luster.  My goal in this blog is to provoke thought on how to be an innovator and to ensure that complacency doesn’t reign in the future.

Since Gary and I come from the technology world of networking, wireless, and computers, it was easy to find examples of these lost innovators.   And because I am an angel investor with TechCoastAngels in Southern California and lead mentor to start-ups through the Center for Entrepreneurship at Chapman University, I have a good perspective on innovation and what it takes to be successful. Gary, in turn, is a very successful tech executive and was one of the executives who helped build ATX/Agero into a telematics powerhouse.  He is very smart businessman with a tremendous breadth of knowledge.

We pondered if it was an issue of focus, execution, leadership, or a combination of things?  We talked about a few companies:  Nokia, Motorola, Blackberry, Northern Telecom, Jawbone.   I know the first four of them having dealt with them as an executive at telecom/wireless companies.  I know Jawbone because I was a huge fan of their headsets and Bluetooth speakers and the recent article in Fortune (same issue with the Unicorn) made me remember their previously fantastic products.

Nokia was a classic company that started in the rubber industry and through bold leadership became a telecom powerhouse and the darling of the wireless industry in the 90’s and early 2000’s with its Nokia 1100 and then the Nokia 3000 series phones.  Heck, I bought a bunch for my family.   Fast forward to 2013 and Nokia sold off its wireless phones to Microsoft.   Note from the graphic below courtesy of CNET the market shares today based on the operating systems.  And the subsequent chart on Global Smartphone market share tells a powerful story.

Smartphone platforms

Similarly, Blackberry which use to rule the “smart phone” world with its business oriented devices. Unfortunately, has lost its way and while it still produces phones it is focusing on applications and recently introduced the Blackberry Classic, harkening back to the glory days of the late 2000s.   Many people I know still like that classic design because all they do is email and text from the device.

Motorola in a sense invented cellular service.  Martin Cooper made the first private handheld call in 1973.   They came out with a brilliant design for a small clamshell phone called the Startac in 1996.  Great phone that was a must have.   In 2011 Motorola sold off its mobility division (cellular service) to Google and subsequently Google sold the division, sans its patent portfolio, to Lenovo.

Smartphone market share

Similarly Nortel, formerly Northern Telecom, once a power house in telecom infrastructure with nearly 100000 employees and a huge market cap on the Toronto Exchange, filed for bankruptcy in 2009.  They had great product and when I was an engineer I highly admired their technology.

Jawbone is a little different in that they still have a great technology and a superb well thought of CEO in Hosain Rahman.  They introduced several products that made the market but then other competitors came in to take share.  Currently they are pivoting to focus in part on the wireless fitness craze in competition with companies such as Fitbit (a relatively new Unicorn established in 2007).

When Gary and I talked we thought about our experiences with these companies and ruminated what they could have done differently.  Now this is not a scientific study by any means but here is what we thought resulted in the downfall.  And for context, remember Andy Grove’s cautionary words: Only the Paranoid Survive.

Could these companies have survived and changed?  I don’t have the answer but it is an interesting discussion.  By looking at what we believe were their failings, Gary and I posited that these four areas could have been changed.

  • This is the opposite of arrogance.  These companies relied on their past successes and thought that their view was the right view.  They became insular and lost touch with the customer.  From personal experience these companies except for Jawbone would not accommodate unique requirements.
  • Customer perspective. While these companies focused on their products they did not really listen to their customer wants and needs and did not accommodate their needs. Other competitors eager to take share were more accommodating.  Companies need to have a direct pipeline to their customers.  Engineers should visit customers.  Customer panels and advisory boards need to be implemented.  Lead users, i.e., innovators and early adopters, need to be identified and used in early product trials.
  • The telecom companies grew fast with introduction of new products and excellent technology.  But the leadership seemed to lose focus on execution.   I give credit to Nokia and Motorola for spinning off their mobility groups to Microsoft and Google to give those entities a better chance of survival.  Regardless of anything else the basic notion is that P=R-C where P is profit. Execution needs to be de rigeur for all companies through a solid business battle rhythm of managing the business, and tools such as balanced scorecards to help guide the way.
  • All the companies I mentioned and certainly those in the Fortune article achieved success through innovation.  Innovation takes place on several fronts and all characterized as “new.”  Newness and the pursuit of newness on several vectors give companies an advantage.  You can have a new product(Fitbit), new application in a market(think baking soda in toothpaste), new pricing ( Solar leasing, ATT’s Digital One Rate), new technology offering new benefits (drones, Space X, First Solar), new processes (Amazon, Tom’s shoes), new support systems, new branding, new partnerships, new eco-systems.  And the list goes on.

Achieving sustained success is very difficult.  Companies need to develop the right strategic imperatives, the right innovation centers, the right product development processes, the right customer interface processes.  Many companies can do this on their own but also many companies are so focused on today and execution they may need help from an outsider, sort of an alter ego, to help with guidance, advice and tools.    Feel free to comment on this blog or contact me to chat about your business needs.  My contact info is dfriedman@prodigy.net.