I made a fairly big mistake with my company at the start, I tried to segment functions in the company too fast. Maybe it was my business education, maybe it was books like “The E-myth Revisited,” and certainly it was my lack of management experience, but I tried to keep my area focussed on business development and away from technology for which “I have a CTO.”

But startups don’t work this way and the entire reason for working in a team is that you share the work and hopefully create synergetic effects (1+1=3!) in the process.

And the truth is that even as for non-technologist like myself (I am a geek though) designing products is not so hard.

I had a discussion with an industrial designer (my all time fav. people to hang around with) concerning the term ‘a perfect product.’ Her field understands the term as a product that functions perfectly, I choose to add “for the customer” to that definition.

The start of product design is always to ask: “so is this cool for people?“, meaning will they like it, do they need it, will they pay for it? I don’t think all question can be answered from the start, except the one of “is this cool?”

A very big part of entrepreneurship is sales, and as they say: you have to believe in what you sell. Easier when you already have a product, I’d love to sell Apple computers for a living, but when the product doesn’t exist, you have one of two choices: one, you design the product yourself, starting with “is it cool?”; two, you trust that your CTO can design something cool.

That’s not a problem, except for one thing: is cool something we decide or the market decides? It is of course the latter and one bullet point in an entrepreneur’s job description missing from that of the CTO’s is keeping a close eye on the market.

Therefore, product design is absolutely something entrepreneurs cannot delegate! And on that short note, I’ll leave it.

All my entrepreneurship diary posts can be followed under the tag ‘Vincent’s eDiary.’ I don’t write about what we do as a company on purpose, but you can always ask in the comments or via the email address on the right. Picture courtesy of The Esoteric Church (of all places!).

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I asked yesterday for a more graphical and intuitive way to plan out costs for products and projects. The reason lies in an essay I co-authored several years ago with Jeremy Fein, co-founder of this blog. I forget the exact title of the thing, but its premise was that good entrepreneurial teams are composed of both brains & brawn (Asterix and Obelix, in other words). It has since become my philosophy towards entrepreneurship and building teams.

Good ideas also reside in intersections between different modes of thinking. I don’t know who made up the idea of the ‘execution multiplier for ideas‘ (Derek Sivers posted it on his blog once), but an idea is worth little without someone carrying it out. Similarly, in Neil Fiore’s book “The Now Habit” (the ONLY self-help book I would ever recommend to people) he writes about the source of good ideas, which often come when you least expect it: on your breaks, your holidays, anywhere which is not work-related.

While productivity is a great thing and crucial to executing ideas, idea-generation itself is actually not very compatible with the productive mind. But it’s not impossible to combine the two either.

Let’s look at a sample workflow from problem to idea generation to product (product meaning the outcome of idea generation, which has to lead somewhere):

1. You have a problem (duh… no really, don’t come up with an idea if it doesn’t solve a problem!)
2. You discuss it with people to try to figure out it’s parameters —what is the true gist of the problem?

This is a good time to get stuck. Where do you go from here? Do you go the left-brained route — the super-rational approach that would e.g. benefit from some number crunching in Excel? Or do you take a right-brained approach — the artistic approach of drawing out the problem further on a white board or an outliner?

It of course depends on the complexity of the problem, but it isn’t time yet to go super-rational all of a sudden. It breaks you out of creative solution mode and gets you into execution mode, which is really brain-dead “getting things done” mode. Before you get things done, you have to define “things” much further.

The next step in my process would be:
3. draw out several solutions, preferably in a group, and discuss them and the logic behind it. Is it an elegant solution to the problem? Does it solve it or does it complicate it? What scenarios are there and what are its parameters?

As soon as you come to scenarios, we come into process mode. And this is where a more left-brained approach of calculating resource-allocation (people, time, money) absolutely makes sense. In my last post, I was hoping that someone would have a good way of making this more compatible with step 3, I am still waiting for someone to come up with a good solution, however.

4. calculate it out. What are the costs associated with each solution, what are the benefits of each solution?

Costs vs. benefits could also be called expenses vs. income on a financial projection for a startup. Solid resource allocation is ultimately the lifeblood of a company, however in an early stage it is also the language to use when looking for funding for your company.

I don’t want to be too rigid about this; I’ve struggled with the process of “problem -> idea generation -> execution -> product” in the past and think that it’s an area that benefits from several approaches and also leads to more-than-several pseudo-suggestions on how to approach this.

Rather, I thought to expand a little on yesterday’s post and clarify why I really do want a more visual Excel (for lack of a better term). If you want to combine right- and left-brained perspectives, a white board alone won’t do it and Excel alone won’t do it. I want software that does both.

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Just a quick shout out to all you smart people out there. For a cost analysis, I’m trying to build several alternative cost-structures, but preferably in an outliner-like format. I’ll go into what I mean in a second, but if you can think of anything, please comment or send me a mail on techiteasyblog (at) Google Mail.

What I want is a combination of this:

And this:

And what I’d like to do with it is drag & connect different modules together and have it auto-add the end-sum when multiple modules are linked.

Any help appreciated, thanks! I have no reward for you at the moment, except if you’re in the Netherlands or I’m in your country, I’ll take you out for a drink and I will definitely pimp your site in this blog post if you include it with your awesome answer!

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Having reached a personal milestone, part 5 of my entrepreneurship diaries, I should mention that it’s very pleasurable and useful for me to write on these topics, and I hope it’s the same for you. In this post, I want to briefly address the issue of uncertainty in early stage technology companies and how that affects management.

As I mentioned before, I was asked to join this company as CEO after consulting them on the commercial applications of this exciting new technology. Joining a year later, we had a good understanding of the strengths and weaknesses of the current organisation. During the consulting stage, I wrote a business plan with a fairly clear time line (to me and our sponsor), but it wasn’t being executed upon as required. One of my the deliverables I set myself was therefore to get development back on track, which not only respects the resource boundaries (financial, human, technological) we face, as well as sends out the signal that we are a serious business.

One thing I keep hearing over and over from entrepreneurs is that you have to be comfortable with ambiguity. And that is absolutely true. We continue to iterate on ideas based on changes in technology, customer and partner feedback, and our own ideas, something that would drive any sane man crazy, but we have to keep it under control. The best way that I find to do that is continuing to develop the vision of where we are going (the strongest motivator I can imagine) and maintain a loose type of project management that gets us to that goal.

I call this project management, as it deals with schedules, milestones, and resource allocation over a period of time. Uncertainty is an important factor to consider in this. In a large company, chances are you’re dealing with a predictable environment, in an early stage startup this is not the case. Getting a tighter schedule in place continues to be a challenge we are working on, however I find that being alert, flexible, and adaptive all the time contrasts with the more stable art of project management. Please correct me if I’m wrong, in which case present a solution also! Of course, there have to be thresholds in place, which to me is very much defined by risk assessment.

Regarding risks, let me start by saying that not all risks can be addressed, which is why being comfortable with ambiguity is so important. And second, there are many different types of risk, technology, financial, market, etc., but one usually outlines the thresholds that you have to respect. In my case, I see this clearly as market risk, as nothing matters if your customers aren’t buying… however, this really is not something to take for granted.

In medicine for instance, which is traditionally patent-based and largely dependant on a complex regulatory process, you have a 15 year window, of which you can spend up to 12 years developing your super-innovative cure. Clearly the technology risks outweigh the market ones (note: this ignores the rise of generic, cheap, knock-off drugs). In the web-industry, on the other hand, it’s perfect for rapid prototyping, it’s hard to protect innovations and easy for competitors to clone them, and it makes much more sense to push out your products asap. That means that there can be plenty of competition and the risk lies in grabbing sufficient market share to make a (sustainable) profit.

In our case, we are not as “high-tech” as medicine and not as “high-market” as web-development, in the sense that we face both market and technology risks. However, I see market risks as more important and try to align both market & technology approaches together. As an example, one of the things we did several months ago, was demo our technology to the general public and to selected partners. After the experience, we interviewed them thoroughly on their experience, as well as their initial expectations. We want to make sure that people don’t expect something different than what we deliver and that our product meets and exceeds their expectations. That gives us a clear view of where we want the product to go.

On a technology level, that presents us with certain thresholds in terms of “the experience” and price-points. And whenever we face a technology change, whatever solution is being developed, it has to fit within that end-picture the customer expects. That also overcomes the problem of black-box development, which is not uncommon in technology development.

So, that’s more or less how we continue to develop the vision for our company and the project management that supports it. We started with a lucid dream of producing great technology. We demoed initial versions and tried to align our vision to the needs of our users. And we end up (hopefully) building what our customers want and pay for. I would love to do this in a web-environment, as that really makes prototyping so much cheaper and quicker, but we do the best we can with our not so intangible technology.

All my entrepreneurship diary posts can be followed under the tag ‘Vincent’s eDiary.’ I don’t write about what we do as a company on purpose, but you can always ask in the comments or via the email address on the right.

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This is just a short list of challenges that I faced with my current business. Feel free to suggest other things in the comments.

1. your relationship with the company & people you’re starting with: coming out of a position that involved reading a lot, a lot of contracts, I’m kind of particular about how to phrase them. I like the idea of contracts if they very clearly state the boundaries of your position and the relationship you have with others. It should also clearly state the deliverables that have to be met, though that can also be included in a separate “action plan.” A good contract should leave no room for misinterpretation, which is why it took about 3 weeks and 8 draft-revisions to get it just how both me and the company wanted it. Of course, a 1 person business doesn’t have to do this, nor someone that doesn’t get paid, though both in “hobby (that become) startups” situations and multi-team startups, it’s good to have a thing on paper that states a number of things including responsibilities & shares, as well as, if possible, time-frames for carrying out the job. You don’t need a lawyer for this, it’s best to start with a simple list of what you want to achieve and work from that. Very important is to mention what national law this contract falls under (e.g. Dutch law or French law), full names & addresses, etc.
2. your intellectual property: I’m kind of running up against something like this now, which is why I think it’s worth mentioning. IP has different values in different industries of course, but in my industry, a high-tech non-software one, it plays an important role. Not only is it important to dedicate certain resources at protecting your IP, you also have to watch out that others don’t lay claim on it, just because you spoke to them once or twice (or worked there at some point. The Mattel vs. Bratz case is an interesting one to follow for that.). IP protection also plays a part when talking to outside parties like investors. Last but not least, it does protect you against copycats, though, as mentioned, the value of patents or similar varies from industry to industry.
3. your own finances: They say that you should have enough saved up to not have to work for 1 year. I’ll just say that I made sure that I do have a comfort zone, though not so much that I won’t stay hungry (lesson 101 in entrepreneurship and raising (rich) kids: instill a hunger for success).
4. the company finances: at my last company, my job was to handle certain business affairs for companies that have their legal address with us. Company finances are a complex affair, and plenty of swindlers out there try to get out of taxes here and there. Not that I don’t sympathise, but be careful of not signing something that makes you responsible for someone else’s problem. Something similar occurred last year, where someone signed something that nearly (!) made him responsible for ca. 1 million euros in unpaid taxes. Let’s just say that the lesson was to have complete transparency from the start and not sign if it doesn’t exist. Preferably this should be specified in the contract (point 1) also. The other side of the coin is that the company has to become a financial vehicle for the people working there. That means that managing its finances (income and expenses) is vital to making sure that there’s also enough money to pay all the costs.
5. staying organised: Kind of obvious, a chaotic entrepreneur doesn’t make for a good entrepreneur. As I have about 12 different jobs, I have to make sure that I don’t forget what needs to be done, to prioritise the important things at the right time, and to delegate those tasks that I have no time for or someone else is better suited for.
6. staying healthy: I’ve seen three people pass away that I’ve had a professional relationship with. One was of an advanced age, one had a deadly disease, and the third passed away at a very young age of medical complications. Two of these were entrepreneurs, and both let themselves get carried away by stress. Stress means: less sleep, eating crap-food (my new term for fast-food), and not taking the time to exercise. It is not where I want to end up, I want to do a good job (it is just a job) and live long enough to reap the rewards (preferably, I’d like to live forever, but that’s a future startup).
7. staying connected to people: as a first time CEO, I have a lot of questions and the best way to have them answered is to ask them to people that are smarter than me. Luckily, there are many, many smart people out there, and people love talking about that which they know.

That’s it for now and all I could fit into 30 min. of writing. All my entrepreneurship diary posts can be followed under the tag ‘Vincent’s eDiary.’ I don’t write about what we do as a company on purpose, but you can always ask in the comments or via the email address on the right.

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Both ’startup’ and ‘entrepreneur’ are terms that immediately evoke an often false reaction from an audience and I would personally prefer not to describe my work using those words. In the following post, I write about three associations in regards to entrepreneurship, one positive, one negative, both somewhat false, and one what I see entrepreneurship as really: just a job. As usual, these diary posts, which I try to write in a short amount of time, are produced with minimal editing. I hope it makes sense. All my entrepreneurial diary posts can be followed under the tag ‘Vincent’s eDiary.’ I don’t write about what we do as a company on purpose, but you can always ask in the comments or via the email address on the right.

The popular associations
The word entrepreneur has two popular and a third upcoming association. One association is negative, that of a risk-taker and in some ways a loser—this would be more in a European context where job-security is highly valued. The other is positive, that of a potential Bill Gates or Steve Jobs, i.e. the smart entrepreneur who sees a big opportunity and has the drive, intelligence, and access to other resources to make it very big.

Of these two, the latter is what we are all aiming for, but realistically that applies to less than 1% of entrepreneurs today (using the very broad definition of someone that starts anything from 1-man webdesign company to an ambitious cure for cancer). The first association is also a misunderstanding of entrepreneurship, as entrepreneurs are not blind risk-takers, or at least they shouldn’t be. I would say and hope that it applies to a minority of entrepreneurs also.

The third association: a career-choice
The third association is that of an upcoming trend: entrepreneurship as simply a job. You’ll find plenty of job-adverts with “entrepreneurial attitude a plus” or similar in the job-description, a term I hate just as much as the often mis-used “business development,” standing for just B2B sales.

Added to the job-description part comes that there are plenty of entrepreneurial courses and full academic programmes available to the public, one of which I enjoyed, though I know from personal experience that that doesn’t make a person an entrepreneur.

A third factor contributing to the ‘entrepreneurship is a job’ association is easier access to the marketplace. I’ve had some online discussions with Cecil Dijoux on this blog about today’s technology culture in the context of enterprise software development, and there is as much a democratisation of software-/web-ware development, as there is of other increasingly “low-tech” industries. (As a side note: My definition of low-tech is a technology something has very low barriers to developing it.).

I think that the abundance of resources (not just) in regards to programming, to very well developed (internet) distribution methods for getting products, tangible or intangible, out to customers, as well as more-and-more programmes for funding/assisting startups, means that entrepreneurs have access to a better developed funnel where it comes to their profession of gathering resources and marketing their products.

That doesn’t make it easy, and actually brings other challenges like being one tree in a very large forest, but it does mean that it can be seen as a type of job.

Now, what is there not to like about the word ‘entrepreneurship’?
Maybe it’s a personal thing, but I feel very uncomfortable telling people I meet that I’m an entrepreneur. One, I do see it like a job, a job that I have to do well, and nothing special really. The term ‘entrepreneurship’ makes it sound fancy, which it is not. Two, I’m a European and I do feel the same association that many Europeans have to the word, which is that it’s “less than a real job.” Rationally, I don’t think that’s true, but emotionally I have found myself feeling the following initial reaction more than once when someone comes up to me and describes himself as an entrepreneur:

“Get a job, you hippie!”

Add to this that a startup is not a company until it makes money, and an entrepreneur is not an entrepreneur until he makes money doing what he does.

So I think the term ‘entrepreneurship’ is glorified, perhaps invented to make entrepreneurs feel like they’re doing something special, same as the term ‘Artist’ or ‘Inventor.’ Art isn’t art unless the audience considers it so, and people have invented plenty of mousetraps that are now collecting dust in a garage somewhere.

Suggest something new please
I’d like a new term for what I do and maybe you can suggest one. It should perhaps be related to a startup, which immediately summarises what is happening: A company that is starting up and isn’t there where it wants and needs to be yet.

The problem is that an entrepreneur is not always in the same class as a startup. He can be 50 years old and have a long and successful career behind him. Would you call him a “starter,” a term often used for people fresh out of college applying for a job at Consultant X or Multinational Y? Generally, entrepreneurs are responsible for the activities that happen in a startup in order to make it a success. Their chances of success increase if they have prior experience, resources, and networks to build upon, that make it easier to access the three pillars of “starting up,” as I’ve summarised in the picture above.

In regards to the above, I personally like to describe my work as “I’m running a small company and we’re developing a new product X,” but that is also a bit of a mouthful.

The other side of the coin is that entrepreneurs are in (desperate) need of marketing, where glorification does play a part. I read somewhere that entrepreneurship can be described as the process of developing something irregardless of resources currently in possession. That suggests a pitch is necessary, and perhaps already being termed an entrepreneur helps getting a foot in the door. I doubt it and it would personally bother me if that’s all it took, but I’m smart enough to realise that we “entrepreneurs” need to do whatever it takes to acquire resources, as long as it fits our code of ethics of course.

So, entrepreneurship, yes or no? I don’t like the term, but I may be stuck with it. If I come up with something more apt, I’ll let you know. And same for you please!

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This post is part of a series, a diary of starting a business if you will. It follows part 1, the decision of becoming an entrepreneur.

One thing I found out is that it’s hard to put your responsibilities down on paper… there are so many!!! There is of course a basic job-description, which more or less sounds like that of a project manager/pull-the-rabbit-out-of-the-hat magician: “make it happen that we go from this thing on paper to the product in the hands of customers.” “Make it happen” is a super-loaded phrase, which can mean countless things.

There is a continuous struggle between micro-management and keeping the overview. Micro, because it is your responsibility that every (little) thing is carried out by your employees (if you have them). Overview, because You the entrepreneur are The Organisation. There is a third struggle that shouldn’t exist really, that between your professional life and your personal life. I’ve come to the conclusion that the only way to do this thing well is to focus on it exclusively. Friends, family, love, …blogging… it’s a nice luxury to have, but it comes second place.

The responsibility of an entrepreneur are thus: have a goal and make sure that everything is executed to get to that goal.

In a technology company, there are matters of technology and business (really, in what business except for strategy consulting isn’t there a mix of “technology,” which can mean anything from cooking to software development, and the commercial side of things, which is meant to pay for everything?). What I found was that as someone with a business background, who sort-of-kind-of has an idea about product development, and has a better grasp of business development, I still can’t let go of the reigns of product development entirely.

Product development ties in directly with business development. People are unwilling to pay for something that doesn’t exist and similarly our budget is supposed to last us until we have something worth paying for or investing in. Therefore, as an entrepreneur I have to make sure that product development stays on track. The absolute best way to do this is to have a capable product development manager in charge. The truth of it is that startups by their nature are resource-poor, which includes tripple-A product development managers (probably employed at multinational X or Y somewhere), and there is a lot of learning/training on the job. Learning/training means that the (hopefully) existing product development manager (in our case yes) still has to be managed, through schedules and regular meetings. In any case, product development is in its conceptual stage a very brainstorm-friendly activity, which means the more the merrier. But ultimately, a startup must get beyond this stage, respecting the entire resource-poor situation that a startup usually faces.

So, responsibilities of an entrepreneur as far as the technological product development is concerned: If you have a product development manager, you have to make sure that he works under the realities of the business. If you don’t, which I imagine many 1-person software startups operate under (as well as those lucky strategy consultants), well then you have to do the job of product development as well, keeping a close eye on the business realities.

OK, the business part of things. My role is fairly well-defined here as I come from a business background and approach startups from a business perspective. Assume that role 101 is having a firm grasp on everything that goes on, which can be phrased as “where are resources (people, time, money) being expended at and is it wise to do so.” This entails having a good budget plan and sticking to that.

Role 102 is to build the business, which I call business development, but that often gets confused with sales as that that is what it says in job adverts. Business development is the building of the business, which includes sales, but also includes building the company and all that entails.

So, we are trying to get from point A to point P, how do we go about it? If product development is about turning an idea into a product, business development is building a business plan into a business. Business plans are total BS unless they contain validated information. Some key-chapters in business plans are the market overview, the market approach, the time-line, and the financial need to meet all these objectives. Business plans can serve as a. cannon fodder, b. a plan of approach, c. one of several signals to attract investment. For c. no investor will take a look at your business unless you have a plan of approach (b.). On that plan, there should be a time-line, which you are following (predictability!) and there should be a goal: the market you are targeting and your approach.

The market section of the business plan presents a big problem for technology entrepreneurs. Because (non!) customers often don’t know what they want. I can ask a target group “what kind of air do you like to breathe?” and it wouldn’t surprise me if a significant number of responses would say: “I like to breathe air that smells like perfume.” OK, that’s a terrible question, but what I mean is that people sometimes make up answers that have nothing to do with reality (that said, both the perfume business and the fast-food industry have made lots of money from essentially selling air that smells good. Scent is also plays a very important part in memory, but I digress…)

What I’m a big fan of is validated market data, which is data gathered from actual customer experience with your product or part of it. That brings forth another problem of a bias towards early (and over-excited) adopters, something which the book “crossing the chasm” deals with, but is really not something that I think is realistic to address at an early stage, except that validated market data can also come from experts in the markets you are targeting.

The implication is also that product development is again completely tied in with business development which leads us down the path of rapid prototyping, another practice that works great in software / on the web, not as easily (though not impossible) with hardware. In any case, the experts in this area most well-known today are:

• - Steve Blank, who wrote “The Four Steps to Epiphany” and is currently hosting the excellent Stanford’s Entrepreneurial Thought Leaders seminars (btw. Steve Blank also writes a great blog on customer-focussed development, which I’ve only just started reading.
• - Eric Ries, who authors the blog Startup Lessons Learned and has some great articles on responsible (=lean) development.
• - And Donald Reinertsen, who wrote an incredibly dense book called “Principles of Product Development Flow,” a book which is clearly an authority in the field, but which I cannot recommend to any sensible entrepreneur with a 60hr/week schedule. Those principles, by the by, number in the 100+.

As well as of course Toyota and plenty of other experts out there, I’m sure, many of which are referenced by the people mentioned.

I think that it can safely be said that task 3 or a sub-task of business development is working towards the customer, the lifeblood of a business.

There are other tasks of course, which have to do with human resources, legal work, accounting, etc. Some of which can be outsourced, some of which can be done half-heartedly (oh no, I didn’t say that), some of which are really-really important, etc.

All these tasks, however, require a certain authority. The entrepreneur’s responsibility is to either be an authority on a task level or to be sure to work with authorities, either in the company or in an (informal) consulting fashion, so that they are carried out responsibly.

Task 4 can thus be entitled: be an authority on the tasks that need to be carried out or have access to one.

So, a whole can of worms starting a company can be and it is vital that it does not interfere with the single most important thing that you must do as a human being: be healthy! Health is part sleep, part exercise, part food, part love. There is no yin without yang and vice versa. Thus forget everything I said about personal life being no. 2. The best is if it reinforces what you do in your work. Health leads to happiness and happiness leads to optimism: a key-quality in entrepreneurship if there ever was one.

So the responsibilities of an entrepreneur summarised:

• 100: keep your eye on both sides of the court: the goal & the resources needed to get to that goal
• 101: align Product development with Business development
• 102: always validate your market data by staying close to your customers
• 103: be an authority on the tasks that need carrying out or have access to one
• 104: stay healthy and happy.

This was written in a single session with minimal editing. I hope it kind of makes sense. Part 3 of my e’diary will be on the topic of: can you prepare for entrepreneurship? As I have a master in entrepreneurship, I thought it might make for an interesting perspective. All my entrepreneurial diary posts can be followed under the tag ‘Vincent’s eDiary.’ By choice, I’m being mysterious about my company. If you have questions, feel free to comment or write to me via the email address on the right.

Picture courtesy of Be The Dream.

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I’m reposting this comment I wrote in response to Eric Ries’s stimulating blog post on Harvard Business Review online, with the title “Is Entrepreneurship a Management Science?” Feel free to share your thoughts on it there as I think it’s worth thinking about whether Entrepreneurship can eventually learned or whether it is an art-form. My thoughts on that are below.

Having both studied a Master of Science in Entrepreneurship and working in my 3rd startup (trying to apply the lean techniques that Lessons Learned made me aware of), I can say that my ideal is that entrepreneurship is a science. In reality, it’s a collection of Sciences as well as the act of Imagination AND Guts AND Agility, none of which are particularly scientific.

It’s a collection of sciences because no entrepreneur or team of entrepreneurs is undertaking just one activity, he, she, or they are doing many in parallel, some of which are business related and some of which are technological. Both have scientific foundations behind them.

Why the Business of Entrepreneurship is scientific is simple to explain. Businesses, starting or existing, can’t operate in a vacuum (for long). We have to obey financial restrictions, sell the idea to our investors, who themselves employ scientific means to measure whether the return on their investment justified, communicate to the market in effective ways, study the market, and project manage all the activities and people in the company. For most of these “wheels” already exist, so there isn’t always a need to reinvent them.

BUT, there is no replacement or science for guts, imagination, and agility in starting a business. You have to ignore many rules, you have to play dirty, and you have to be quick & flexible if you want to succeed. Maybe a management scientist can eventually plug those dirty variables in a formula somewhere. But I doubt it can be applied to any two startups successfully.

Vincent

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Dear everyone,

I am extremely happy to start off this new year by introducing a fresh face on Tech IT Easy, Anand Kishore Raju, who will be blogging with us in 2010. His main areas of focus as a blogger will be greening the internet, carbon footprints, energy and power figures of the internet and web2.0.

Anand is currently working as a Research Engineer at Telecom ParisTech (ENST). His area of research focuses on the Energy aspects of the Internet, what the scientific community calls “Green Networking”. His efforts are directed towards making Computer Network Science aware that processing, moving and storing bits has a cost in terms of energy and in terms of the Carbon Emission Footprint.

In the past, Anand had also worked at Collaborative Systems Group (ColSys) at Bilkent University, Turkey, where he developed a taxonomy for user properties, influence factors for feedback quality in web 2.0, existing and novel models for deviation types and their detection. He also holds a degree in Computer Science and Engineering and aspires to join HEC in near future.

Anand joins a smart team of collaborators, some of which also work in green computing and many of which share an interest in this important topic for sure. As such, please join us in welcoming Anand to the team and I hope you enjoy reading his words on Tech IT Easy!

Happy New Year,

The Tech IT Easy team

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I’m always fascinated by business models, i.e. at how entrepreneurs and companies put together services in order to make money from them. I’d call it the source code of business if I hadn’t seen the other source code in Luxembourg —legal and accounting—but arguably that’s more like binary code, i.e. 99% unintelligible.

Sarah Lacy writes about SMSONE, a ultra-local news provider in India similar to Outside.IN, a Union Square Ventures funded US-only company that provides news updates via the web. SMSONE does it, as the name suggests, via SMS. And it spreads through a franchising model, working with local entrepreneurs that pay a franchise fee and also collect a share of the advertising revenue from locally focussed businesses. It is able to do this because of something that apparently doesn’t exist in the US (but does in Europe): receiving an SMS in India doesn’t cost the recipient anything.

When reading about this, I was immediately reminded of a similar business model employed by a Dutch entrepreneur in Russia, Ms. Annemarie van Gaal, founder of Independent Media, a company that distributed Russian versions of magazines like Cosmopolitan, Marie Claire en Good Housekeeping (source). When she spoke at the Star entrepreneurial seminar in Rotterdam a year ago, she told us about how she differentiated herself from the competition (paraphrased as I haven’t got my notes with me):

The trouble with getting your magazines distributed in Russia was that you had to pay quite a lot of money (some would call it bribes) to companies that would then take care of it… badly. Instead van Gaal decided to do it differently. She would hire street kids to distribute her magazines, similar to the gold days of newspapers: the newspaper boy.

If you read Sarah Lacy’s account on Techcrunch, you’ll see that SMSONE does it similarly, hiring local kids, often without much education, to take care of distribution. Doing it via official channels is likely a nightmare over there, and centralising distribution kind of defeats the purpose of micro-news.

It’s a different way of thinking, which many of us westerners don’t have. I mean, would you entrust your products to a beggar on the street or to a street musician? Not only is it probably against the law (except if the government does it), we pride ourselves on our super-organised infrastructure, where anything from temp-workers to interns are there to provide companies with a flexible workforce, and anything from printing presses to mobile internet exists to produce and distribute your stuff.

Of course, I wouldn’t just leave you with these two examples. In the beginning of 2008, Boston Consulting Group published a study of “local dynamos”— domestically focussed companies, which use creative business models to capture value from emerging markets that are filled with challenges, like lacking infrastructure and low-income consumers. The map below shows how widespread these companies are.

Some very interesting examples are mentioned, like:

• Shanda, a Chinese gaming-company, that, in order to combat software-piracy, focusses on providing interactive services through gaming, services that are impossible to pirate. And to overcome a lack of a financial infrastructure to pay for online services, they work with pre-paid cards.
• Indian CavinKare, which sells cheap sachets of shampoo through small local retailers, while using educational marketing to teach customers how to use their products.
• Goodbaby, which targets the many 1-child families in China, who are both willing to spend more on their child than multi-child families would, but are also in need of education.
• Amul, an Indian food-and-beverage-marketing-organisation, which collects and pays for milk locally, while tracking all operations via satellite and uses ERP solutions to make analysis based on the data and gauge whether future supply needs to be increased or decreased.
• Wimm-Bill-Dann Foods (Russia), which works extensively with local partners, and has devised leasing schemes for expensive machinery to boost their production and is able to serve 280 million consumers nation-wide.

The BCG, of course, takes the stance of its customers, Western companies, and the study is mainly aimed at how multinational companies (MNCs) can replicate 6 of these dynamo’s advantages, in order to compete with them. They are:

1. Customising to local needs – which involves first understanding these needs, and then meeting them.
2. Devising innovative business models that overcome local challenges – a logical follow-up to the last point, how to make money from the info you gained.
3. Leveraging the latest technologies – meaning that these emerging economies are less burdened with traditional infrastructure and quicker on the uptake of more affordable, newer, and easier-to-spread technology, e.g. mobiles.
4. Benefiting from low-cost labor and overcoming shortages of skilled labor – there’s two ways to look at this; a local workforce will be better equipped to interact on a local level, a highly-trained workforce will be better equipped to run a business. Tough call.
5. Scaling up fast – Russia, India, China, Brazil, etc. are all giants with the promise of huge rewards when you capture them. Many of these dynamos grow quickly through both through acquisitions and building up their network of suppliers and distributors.
6. Sustaining long-term hypergrowth without imploding – this kind of follows on to the last point

Some of the Western companies mentioned, which have managed to compete on a local level, include:

• General Motors, which has adapted its luxury-liners to meet the demands of its Chinese customers, who are usually sitting in the back;
• LG, in China, which has learned that the audio-quality of its televisions is more valued by its customers, who often reside in noisy environments;
• Carrefour, which has started to work with local municipal governments in China, as these don’t meddle in their operations like local dept. stores would, and are able to provide access to prime locations;
• Perfetti Van Melle, in India, a candle/chewing-gum manufacturer, which has found local means to advertise, interacts frequently with local partners, and has adapted its products to local tastes;
• and Yum! Brands, which owns Pizza Hut and KFC, and has adapted its menus to meet local Chinese tastes, started a new food-chain aimed specifically at the market, and uses its international expertise to integrate IT, lean supply chains, and a higher level of food standards into their offering.

It shows the value of out of the box thinking in terms of reaching people, and I believe that traditional “Western” thinking should long ago have been thrown out the door anyway, particularly in light of the troubles that media-, automotive, and financial industries are going through. We are in the flux of disruptive innovation and only those quickest to grasp new technologies and ways of thinking are able to survive another day.

No shortage of lessons on that from entrepreneurs in emerging economies…

Vincent out

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As is usual when I take a long break from writing, my blog posts end up becoming insanely long. Take it as you will, but I’ve tried to make it as coherent a post as possible. P.S. this is a post written under de cover of my “leave of absence,” which means I still write, but less frequently. – - Vincent.

A good friend of mine, Zihni Ozdil from the Netherlands / Turkey, Historian Extraordinaire, is now publishing his wisdom online. If history, politics, and culture (“beyond the superficial”) is something you find interesting, I encourage you to check it out. On his site, I found an article entitled ‘the real Evil Empire,’ which, ignoring the provocative title, deals with the interesting topic of the cold war and the ‘demonification’ of Russia and communism at that time.

Yesterday, I had an interesting discussion with some Canadian Swedes that moved to Florida with their kids and had trouble finding a school. The only way, it seemed, to guarantee that their kid ended up in a good one is to have an A-class school in your district (which you can find via a website that profiles attendees according to race and economic background… wow…) and to have paid your electricity bills. It worked out well for them, but clearly suggests the underlying problem of a long-term selection bias.

Last night, meeting the Canadian Swedes, where I was also in the company of a Russian and a Japanese, I noted that it was strange that while both Russia and Japan, being superpowers in their own right, have infamously challenging education systems, which result in some pretty smart people graduating from either country, the US does not seem to follow that pattern, at least not at the high school level, and certainly not across all demographics. Yet, by all accounts, the US is a superpower, if not the superpower of this and the last century.

My post today is not about comparing countries’ education systems, it’s more about the strategic purpose of education. Many people don’t know this about me, but I don’t vote and I don’t generally care about (regional) politics. To me, our planet should be one country, where anyone can move and work anywhere, and services don’t have to be moved just because you physically moved  XX km/miles to another country. But I do recognise the power of competition and how that can lead to excellence. Versus a ‘group think’-like mediocrity where everyone just tries to be like everyone else and no one exceeds. So, in a way, I endorse a system of divided regions, because I think it leads to competition and thus excellence.

Education plays a strong role on the competitive advantage of nations, as it does in certain companies. Last year, applying to a lot of consultancy companies and working as one myself, I was struck at the importance that the accumulation of knowledge plays in this industry. If I were to start my own consultancy, continuous education of the staff would most certainly be a cornerstone of the business strategy, because knowledge is your product as a consultant.

I know that this thinking plays a strong part in government circles as well: how to make your/our country as strong as possible, not (just) in military terms, but in the sense of knowledge, mostly measured by the no. of graduates and the no. of patents that are published every year (as well the commercialisation thereof, which doesn’t go quite as smoothly).

I know that the no. of graduates coming out of Chinese universities is tremendous, and the no. of patents coming out of US ones is among the highest in the world also. So clearly, the US, superpower extraordinaire, is doing something right. I don’t however entirely understand why the primary/secondary school system is so abysmal then in the US. My only explanation is that, in academic circles, there are no national boundaries, and a Russian researcher can just as well (if not better) produce patents in the US as anywhere else.

There are other dimensions to the US superpower status as well, of course. It’s a military superpower, it is a cultural superpower (in terms of films, music, and literature), it has a large consumer-base. These three dimensions—safety through military strength, an easily adopted culture, a consumer’s paradise—also have the effect that they serve as an attraction point for outside academic or other talent. And while other countries may have strong educational bases, the other aspects are perhaps ignored just a little too much, still making the US a prime export location for knowlegde.

In the strategic literature, there is the concept of the resource-based view, which stipulates that company strategies are nothing more than a collection of resources, some of which are internalised and some that are not. I think that in the context of the US and education, the resources that must be internalised are those that lead to the commercial exploitation of technological advantage, which sounds abstract, but basically means making sure that the best technology/knowledge is produced in-house and generates economic benefits in-house as well.

But there other resources that must most certainly not be held onto in-house. These include standards, which facilitate the assimilation of knowledge. In education, the standards that we use are the bachelor-master-phd system, which can easily be studied in different combinations and locations. And text-books, which as many students know, are often from US-origins.

In many ways, the cultural exports from the US—movies, music, literature—are nothing more than the spreading of a standard, that of a language and a way of thinking, which makes assimilation of outside talent easier. And as long as that outside talent is used for the benefit of the US, in the form of patent exploitation, the US benefits, even if their own primary/secondary education system is quite uneven.

As mentioned, I don’t care about politics, country-differences, or governments. But if my logic is correct, I wonder if a metaphor exists for commercial superpowers, i.e. companies that are market leaders and remain so by attracting the greatest talent and finding ways to turn that into economic benefits.

Organisations are not complete economies like governments are and also have the benefit of being mobile—by law they are considered single persons, which have residence, pay taxes, etc. just like everyone else. So, as long as they obey the law, they can choose where they stay and choose to ignore local conditions, much like, I theorise, some governments do, instead focussing on the bottom-line: attracting excellence and turning that into profit, while keeping ‘unnecessary’ expenses as low as possible. Well, at least that is the stereotype of an organisation, while pressures have certainly lead some to adopt a more socially-responsible attitude.

Clearly, the question of talent, whether attracting or training it, remains a vital one for both countries and organisations. But I don’t think there is necessarily a correlation between talent and local conditions.. at all.. though local conditions do play a part in the quality of life, or lack thereof, which affects the talent’s in question desire for a certain location.

Vincent out.

(Picture courtesy of thehindubusinessline.com)

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I hate breaks in anything I do, blogging, work, sports, love, etc., because it’s always harder to return back into the zone. Similarly, I already knew subconsciously that it would be hard to return back to blogging after the proposed hiatus. Routines are good and when they are moved aside, they get replaced by something else.

The human body is a machine and everything, from hours in the day, to food and exercise, to making money, to relationships, are all pieces in the machine of life. There’s only so many hours in the day is a well-familiar phrase to most of us and reflects the difficulty in balancing different activities and responsibilities, with some just falling off the map.

I am not saying that I plan to stop blogging, but I do think that we all need to make choices in our lives which will affect other, previous ones, like domino blocks.

Dynamics…

I just bookmarked a blog post on delicious on forming sales teams in a startup. It’s a good one and you should all read it. As I tagged and bookmarked however, I immediately thought, hey, I’m pretty sure no one on my company will read it. Why? Maybe because we already figured it out… Maybe because we figure stuff out as we are doing it… Your choice.

Blogging or any kind of writing for public purposes brings several complications to business people:

• it is public knowledge, meaning that the competitive advantages are slim: I don’t think this is a major factor, as most innovations are combinations of different ingredients that may or may not be public knowledge. Great artists steal, as they say.
• Writing is processed explicit knowledge from something that was previously implicit and needs to be made implicit again by the reader for it to be useful in a practical context: I’ve written about the knowledge-generating company and the knowledge spiral twice before. Another phrase, “You can’t help yourself, because your *self* sucks!” also comes to mind.

It’s the latter that represents the greatest challenge to authors and consumers of their work. I’ve also previously written about the benefit of formal education, which, I think, tries to recreate the knowledge spiral, turning explicit knowledge into the implicit kind, to be used by students in their work later on.

The dynamics of business is that there are expenses—YOU, the team, the office, etc.—which need to be recuperated by your work—the work you do for customers, after which they pay you. It leaves very little time for reflection, e.g. through blogging, etc., and for making things explicit, e.g. through blogging, etc.

I’m still a big fan of Michael Gerber’s E-myth revisited, which is really about writing that franchise manual for your business, so you can both understand the processes happening in your company, and expand on those, by more easily passing on knowledge. It’s Taylorism, of course, or Scientific Management, or any of the other management methodologies that followed in the past century.

But these activities require time, time which people inside organisations usually do not have, and hence prefer to outsource to outside consultants, who then need to make their knowledge explicit and again implicit in the minds and methods of their clients’ organisation.

It’s a real nightmare for people (like me) who think to much and always aim for something higher. And who want to blog. And who want to do good business…

Thoughts?
Vincent

(Picture courtesy of Fisica & Psychica)

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It’s been a while since I wrote about food and retail, an area that I still like (and actually find much more interesting than tech or simple business), but which I’ve put on the backburner for now. I don’t like Starbucks as a business nor as a coffee, for a number of reasons that I will elaborate on in this post, but I do like that the company, back under the helm of Schultz, is undertaking some new initiatives.

Reasons why Starbucks bothers me include, most of all, that it is not a coffeeshop with a European target-audience. We Europeans have plenty of choice and tradition in terms of coffee, and I have no problem finding a place of atmosphere with some kickin’ coffee at half the price of one of those Americanos (which, btw. taste terrible). The only attraction of Starbucks is for me as a take-away place, but that was not really the aim of the business, as described in Schultz’s book.

Starbucks was meant to be a “3rd Place,” a place where people can temporarily reside that is not their office or their home, and that is where Starbucks, in my opinion, fails. It should also not seen in isolation from other chains, like McDonalds, Subways, and the many “CloneBucks’s” that have arisen since the writing of Schultz’s book—it is basically a manual for how to start your very own Starbucks and, apart from its partnerships, it’s a low-tech business. Right now, when you enter a Starbucks in say, Cologne, Germany, it will look exactly the same as the one in Paris, France, and that act of replication already devalues the concept in my eyes. All Starbucks Cafés are very clean-looking, unlike a Hard Rock Café for instance, which doesn’t make them all that much better than a McDonalds (Café), which serves coffee equally well.

End complaints about Starbucks, a chain I had all but given up on.

The most depressing part of this business is the ease at which McDonalds managed to replicate its basic features, ……… but let’s not forget that the Starbucks people aren’t stupid and learning goes both ways. Clearly, McDonalds (another business, I’m a fan of) has strong process-advantages, which are also quite apparent to the observer and can be benefitted from by outsiders. Something that, it turns out, Starbucks exploited and will hopefully lead to a more efficient machine of a business, while (hopefully) placing the focus back on the “3rd Place” idea.

And now, it has been revealed, Starbucks is trying to get back into that game with its “community coffeeshops initiative.” While I don’t think that this will drastically improve the Starbucks offering, I do hope that it allows for more creativity and individuality down the road.

That said, there is still a lot of room for “3rd Places,” also in terms of building chains of them, they just need to be better designed to actually be a 3rd place. From books, to music, to zen-gardens, people like me are still looking for the equivalent of what was before probably known as the “gentlemen’s club,” by I mean, in an entirely un-sexist way, a place where you can go and relax, alone or with friends.

Starbucks seems to have gotten lost on the path and retreated down to the level of commoditization. It make me wonder if perhaps these types of qualitative initiatives simply cannot be undertaken quantitatively, without losing too much in the process.

Vincent

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Read today about a new service in the Netherlands that is doing very well. It’s called doehetzelfnotaris.nl, which translates roughly as ‘Do-it-yourself Notary,” and has already attracted 13,000 visitors since it launched 2 weeks ago (for NL, that’s a big deal). By allowing you to automatise certain services, like preparing the contracts and wills, it claims to save you 30% of the price of having a notary take care of these things. Needless to say that during these financial troubles, people like it when they can save some money.

At our financial trust, I’m currently filling out a pretty long survey from the Luxemborg statistical office (STATEC) regarding our level of “internetisation.” It’s not easy being digital in a world where you often deal with highly sensitive data, sometimes coming from individuals who do not like dealing with you through digital means. The very word “Trust” in our company description, already forces you to ask the question: can clients trust us using digital communication?

The answer is in most cases No. Go to any bank and try to get significant things done and they want you to sign for it. Same with notaries (and doehetzelfnotaris.nl does not automatise the signing part). The financial sector is particularly stuck in what I would call “the old world,” though not, I would say, without good reasons.

My question to you is:

• is there such a thing as fool-proof communication, which cannot be falsified by any means?
• Is there a surrogate for being there in person and signing your name?

I don’t know of any, but I always assume that our readers are smarter than me.

Chime in, if you can.

Vincent
(Picture of a Robot Accountant. Waah!?)

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I once asked a friend how one of my clients should improve their sales technique for a technical product, knowing that his company is very successful at what it does. He, himself a “sales engineer” (i.e. a technical sales guy), found the question very difficult to answer.

I had to reshape the question to “so, how do you guys sell your technical products?” And then he was able, with full vigour, to tell me how they do it. It should be mentioned that market plays a strong role here; my friend works in a very niche business, while my client suffers from powerful competition.

I’m starting to loose my naiveté, as far as crowd-sourcing is concerned. This easy-to-communicate world we live in, sometimes makes me forget that, just because we can ask, doesn’t necessarily mean that we should. Technology may have changed, but people’s brains, psychology, and business principles have not, at least not at that rate.

My general stance these days is that, no matter what context you talk in with people, you should always assume a complete lack of imagination. Instead, by either spelling it out, or better, by asking the best interview-question in the world “tell me about YOU!,” and then extracting what you need from that, is much more effective.

It’s as Jeremy advised me to blog when I started here, Keep It Simple & Stupid (K.I.S.S.). Even though I have ignored that lesson at times, it’s a good one to follow in this all-too-unsimple world.

Apart from crowd-sourcing, the same, incidentally, applies to:

• selling people stuff: spell them out exactly how your product/service benefits them!
• applying for a job: spell them out exactly how you will make them money!
• and everything else.

Want to make the world a better place? K.I.S.S. it!

Vincent

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