I have a general philosophy on the evolution of the B2C and B2B relationship, one that is inspired by history. Let’s look at some examples. Money first took the form of barter, then gold, then coins, then paper, and now bits and bytes. Transport: on foot (great shoe-sales), animals (great stable-sales), cars (great garage sales), planes (great duty free sales), and finally tele-conferencing (great device sales). Books: handwritten, handprinted, printing-press, mass-media, internet, iPad / Kindle. At every turn, something was replaced, an industry was destroyed, yet it was for the purpose of evolution. Don’t get me started on evolution itself, as that is all about destructive replacement.

The point about all of these is not about destructive replacement. It’s about improving a product in the eyes of the consumer. And what enabled this improvement? Common standards, collaboration, user-feedback, guts, ruthlessness, innovation, progress, etc. Why producers don’t like to cooperate with that? Because every technology requires an investment to make it work.

Think of the poor embroiderer, which is what inspired this post (bound to get a lot of flack). It’s a funny industry. I wasn’t aware that needlework designs are being sold over the internet and thus at the risk of piracy. I suppose I always thought an embroiderer embroids, then sells their product and ships it to consumers. Instead, they seem to go to the simplest side-product of their work, the one that becomes a foundation for potential mass-production, the “design-chart,” which is then being “shipped,” via download, to customers. Interesting! It kinds of makes sense from a distribution standpoint. Customers are not willing to pay for the shipment of needlework, instead they prefer producing locally, which really is a great idea. The only problem here is the way it is distributed.

In a B2C relationship over the internet, I think, it always comes down to eliminating as many barriers as possible. When you buy from an online shop, you really want the product in your house as quickly as possible. If I could reach my arm into the screen in front of me and pull out the product that I just ordered, that would be just perfect. It’s worse when the product is digital, because the customer knows that it’s just bits & bytes really not worth anything tangible (I’m just talking about the 1s & 0s here) and it could be in the customer’s home in a millisecond. Instead, business erect as many barriers as they possibly can, whether it’s a big ‘copyrighted’ sign across a picture, an overly complex signup/payme page, or the somewhat convoluted iTunes-model, where it really is easier to pay than to pirate.

But in the light of evolution, these barriers are bound to be broken! The same reason why gold is no longer a form of payment, because it’s really heavy and annoying to handle, the world of commerce has a way of evolving towards something easier and easier and easier, until finally I pay by waving a magic wand (eh RFID chip) across a panel.

Let’s get back to embroidery. The problem is two-fold. 1. fragmentation, because any solution that I am about to propose will not get blanket acceptance. 2. the silly notion that selling designs, which seems like the most valuable thing an embroiderer has to offer (actual IP), is something that should be done in a direct B2C relationship. In the light of consumers constantly wanting to break barriers, this offering of valuable IP seems like an industry-defeating purpose.

So what are possible solutions?

• consolidation & protection. Basically the iTunes model, where everything is placed behind a secure window that can preferably only be accessed via a specific device (my personal belief is that anything bits & bytes will eventually be free as that is not where the real value lies).
• selling designs via local shops. If the problem is distribution, why not partner with local shops that keep your designs behind bars and just print out the end-product for consumers.
• selling designs via the machines that produce needlework. No idea what they are called, but they have a strong incentive to keep their machines being used and have a direct line to consumers.

I’m sure any of the above is a solution with problems, but my point is the following:

• Piracy will continue to exist and will become worse if you make it easy for people to pirate.
• Consumer products evolve in a fashion that keeps pushing out inefficiencies and piracy is one of the quickest ways online to remove these inefficiencies.
• The only way to prevent privacy is to not distribute anything that can be distributed via bits & bytes.

Case in point: the idiot that just walked into an Apple store and jailbroke every damn iPhone 4 on display.

Last point: I am not advocating piracy. I run a company myself, I have a business degree, and I believe in getting paid for your work. But I do believe silly strategies deserve to get punished. And there are plenty, plenty, plenty of them that I have mentioned on this blog over the years.

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We’ve talked to a number of investor these last months and I can classify their questions into three categories:

• Intellectual Property Protection (IPP)
• Revenues
• and Operations

Revenues is a straightforward concept and reflects market potential, market share, and business-model. Operations can also mean business-model as that clearly affects your operations, it also concerns the team, and it very much concerns *the last mile*—a very detailed understanding of how your product comes of the “factory line” and goes into a customers hands (every step and every screw has to be planned out). And IPP, well IPP is something special.

Intellectual Property Protection refers to legal and other ways that you protect the innovation and knowledge that is built within your company and its people. It is not as straightforward as simply taking out a patent, copyright, or trademark, though those are usually the first avenues that investors will pursue when talking to you about IP. IPP can just as much come from keeping information tacit—inside the heads of your team—, developing systems that spread an innovation across many parts—e.g. the way technology companies prevent copying from factories they outsource production to, by only giving them parts to produce, but not the whole—, another systematic answer could be deep vertical integration, which ensures a higher quality of products and services than can be replicated by vertically smaller competitors (a strategy pursued by Apple and Starbucks), and last but not least: speed—in some industries it pays to just scale very quickly, rather than build a protective base around IP (a contrast between e.g. web and medicine).

But let’s get real for a second. You’re an inventor, you developed something new. The most obvious path to pursue is a patent. The first issue is cost, because taking out a patent is not cheap. Basically, by filing a patent in your country, you can protect yourself for a while because there is a period, 1-2 years, I believe, where you are filing it and it can serve as a type of legal instrument to prevent other companies from filing a similar patent. But in the end, you have to shell out maybe €5000 per country to protect your invention internationally—and those costs do not cover the legal cost or protecting a patent once it’s being breached. Let’s get real x 2: you’re a startup and while your technology may be innovative, it may not be what the market needs (which can relate to actual taste, but also to cost, to regulatory issues, etc.) and that means that your patent, if you decide to take it out, may not be worth squat. Let’s get real x 3: your invention may not be unique, at least not in its current form, and pursuing a patent in that case is not even feasible.

So practically speaking, what do you do? Just to be clear, I don’t have the final answer to this, though it is something I am constantly thinking about as a potential risk in our, a technology startup. So my interpretation and approach are entirely my own, but I am writing this to start a discussion more than to give the final answer.

The answer to me is all about strategy. IP protection has to make sense in the context of a longer term business strategy, long term meaning to me longer than 2 years and preferably longer than 5 (if you have an actual patent and it has market value as well, you have over a decade of protection). And IP, just like a business, is something that can be split up to cover different areas related to supply, to the manufacturing, to the end-product, to the service, etc. So the more broad and comprehensive your way of protecting your intellectual value is, the less it can actually be replicated by your competitors.

All IP concerns aside, it is sometimes of benefit to not protect the whole value chain. This is true in our business, which I will write about some other time, where we can split up our technology into core-components that are integrated into new solutions which act as a platform for more solutions. Locking off that whole chain is perhaps of some benefit, but in some ways we would like to have people innovate in their respective areas and for us to focus on developing better products out of that. My point is that IP protection should be seen as something that can be shifted to those areas most critical to your business and that new development in your industry is not necessarily something to be scared of. In the end, we are in the product business and if we can produce superior solutions for customers that outweighs comprehensive IP solutions.

So the conclusion is, even if you are developing a product that is not entirely novel, there are places in the value chain where you can still develop an IP solution. And if you are developing novel solution, it has advantages on both the supply and the market side, to not make your IP too restrictive and thus diminish your product potential.

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In his MBA-series (that I don’t read enough, but I may not be the target audience), Fred Wilson writes about the role of sunk costs in making future decisions. As an entrepreneur, I am constantly concerned with the cost of decisions, so I was kind of happy to find out (though I do vaguely remember learning this before) that sunk costs—the costs previously incurred in an enterprise (of any kind, incl. love)—should not be an explicit factor in making (financial) decisions about the future. I remember a distinct case not too long ago, where I did include sunk costs as part of my decision-making, so here’s a few thoughts on it.

Sunk costs are part of reality. Every decision you make comes at the cost of not doing another one (opportunity cost) and as soon as you make a choice and invest in it, that money / energy is sunk / gone. The thing that counts then is to evaluate both the context under which the decision was made and the outcome of that decision. While it makes sense to not include sunk costs in a financial decision-making formula, a negative outcome does require taking pause before making new investments. Perhaps this is a European attitude to things, or a risk-averse one, but much of our thinking about forecasts is based on looking at past performance.

What matters most then is the context, and this, in a startup environment, is rather a complex affair. I’m going to draw some analogies with rocket building in the early 1900s, producing art (at any point in time), and staring at goats here. Art is, I believe, a calling that is very difficult to quantify. It is very strong amongst people that seem to be bad at everything else—just based on my own experience. In this case, you have no past performance to base future performance on. And art being a fluid craft where aberrations of the status quo seem to produce some interesting results (but also at terrible odds), it is nearly impossible to predict the future of such an enterprise. Rocket building in the early history of rocket building suffered from similar dangers, in that no one had done it before and it required cracking a great number of eggs before reaching the moon.

All of these are sunk costs that may or may not lead to greatness, and what I take issue with is to then ignore sunk costs in making future decisions. At what point is it justified to ignore sunk costs and at what point isn’t it? If the “staring at goats” division in the army spent half a century, eh, staring at goats, you could argue that it’s an investment in the future, but you could also argue that it’s a foolish enterprise—just for fun, I tried staring at the back of the heads of a few people standing in front of me in a supermarket, I did make a few scratch an (imaginary) itch themselves upon my specific mental request, but I can’t say that this “sunk cost” was a reason to invest some more energy into it.

When we made a financial plan for our startup, we didn’t give much thought to making the wrong decision, though that is a very important factor to consider at this stage. It is nearly impossible not to make a wrong decision when you’re building a rocket to go to a place no one’s gone before. What we did do were two things: 1. we researched as much as we could of the environment we were heading into and the tools & reality we had to work with. 2. Every, and I mean *every* decision that had to be made that involved a financial or time investment was scrutinised as much as possible beforehand. But… both research and execution can be flawed in that not all information may be clear—especially regulatory stuff can be a maze to travel through, as can understanding a science or technology—and execution depends on both good information and good people to execute. And the fact is, I believe with any startup, that we have incurred certain costs that can be considered sunk and gone. When we make the plan for the next stage, we will have to ignore those investments, as painful as they have been.

I’m a great believer in the lean startup. This comes from my father, whose whole life philosophy is based on a Ghandhiesque lifestyle that involves discipline, routines, and a leanness when it comes to living and working. I can’t say that this is exactly the way I want to live my life, but I do believe that the opposite, coming from an abundant lifestyle and trying to make good decisions, is more than often a formula for failure. Entrepreneurs and their startups should to a certain degree remain hungry so that the decisions they make are made with the desire to improve life. If you see the amount of hurdles that are presented to startups everywhere, you know that this attitude of keeping startups hungry is shared by many people.

A part of this leanness in decision-making is what I discussed before: scrutiny, scrutiny, scrutiny, among many a step of the way. But I have to frankly admit that this scrutiny can lead to a near bureaucratic way of doing business, which, to me, seems quite incompatible with creating great innovations that require some significant dreams. Dreams are your mind processing information in funny and interesting ways, and if there was an accountant sitting in the back of your head telling you to not dream this and that because it costs too much, it wouldn’t be much of a dream.

That brings me back to the role of sunk costs in decision making. One must be allowed to make mistakes when engaging on an enterprise. It’s quicker to learn from a mistake than to try to constantly prevent it. I’ve also been thinking quite a bit on the role of subsidies in early stage startups and the chance they present to make these mistakes. That, however, should be the topic for a future post.

My conclusion thus is that while entrepreneurship is a serious business, there can be little great ideas without some (in many cases considerable) room for experimentation. How you quantify this, I think, remains subjective. It can’t be Google’s 80-20 rule, where 20% of an employee’s time is spent on his own ideas. When you start, it should more likely be 50-50, with 50% being aimed at making good decisions and the other 50% at pursuing the dream that make those decisions have meaning.

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Starting a business, just like anything else, really is defined through personal contexts. For instance, I’m a first-time entrepreneur and my partner is a 4-5-6th (hard to keep count) entrepreneur—for him, he views starting a business very differently than me. There are other differences as well, such as age, type of education, culture, marital status, all of which affect how one views the starting of a company. I aim to not pronounce these differences, rather this is a blog post about the generalities of sending out positive signals and raising the status of a startup.

Here’s a list of signals a startup might want to send out (I will discuss these further below):

1. The quality of your idea/prototype/product (the whole range of what your startup is centred around)
2. The quality of the team
3. The quality of your associations
4. Your legal status as a company
5. Your financial situation
6. The satisfaction-quotient of your customers
7. The speed of growth, which is really a component of ‘quality’
8. Your location & office

I kind of threw a few in there, as you can perhaps tell, because for instance some signals can be bundled together into tangible vs. intangible signals, as well as technology, people, financial, legal, etc. You can of course also split op signals into external—to the outside world—and internal—to your co-workers or board.

Why does any of this matter? On a basic level, because we all care about showing signs of being good at something (and starting a business is a highly personal thing in which individuals determine the direction such a venture takes), and more practically, because startups are about bringing ideas to the world that do not exist yet.

Signals are about increasing your worth in the eyes of someone else. To go back to the list, the first one, product, should be obvious: either create a kick-ass product or find a kick-ass customer that really needs your product (the latter is more realistic).

No. 2, the team, is trickier, though still crucial. It’s about getting the right mix of people in a company; people that have different educational backgrounds, possibly different genders, different ages, different networks, etc. It’s tricky because any relationship risks becoming a liability if people don’t match (that’s a big IF). And because getting quality people doesn’t always come easy, either because you can’t afford them or because the type of quality you need cannot be measured on paper or elsewhere.

Three, associations are pretty straightforward. If I have a board-member that has a good reputation, that opens doors. If I have partners in a market that is my target market, that kicks ass. If I can stamp logos of companies on my product that already have a name, that’s great marketing. It’s not rocket-science and the only thing that is required is to make these kinds of connections happen, usually through the quality of your pitch, your product, and your team-members, each of which comes with their own network.

Four, legal status, is not so straightforward. For many companies, having LTD written next to their name is a sign that they reached a certain stage. But in of itself it means nothing, only if it actually makes sense from an accounting point of view. So this is actually something that I don’t think should be up to the entrepreneur, but to an accountant and tax-lawyer. Having LTD or equivalent next to your name is still sweet of course (though not if it costs you 1000s of dollars/euros to set up and you haven’t written your business-plan yet…). Another legal status symbol is having a patent or a trademark. Both are valuable only in certain situations and require a serious strategic analysis beforehand, not least because it is so expensive to maintain (between 6000 – 100,000s for a patent & that doesn’t include the legal cost of going to court over a dispute), but because if you haven’t done your homework, you could be spending money on protection that isn’t worth a damn. Legal signals always require the help of experts, which is why lawyers will, for better or worse, always be around.

Five, the finances, has consequences on so many things that it’s impossible to summarise it well. What kind of company do you have if you can’t pay your employees, if the effort you put into it isn’t generating any cash-flow, etc.? The answer is simply a bad one. Other positive signals here are having a high profile investor on board or, preferred by most companies, a high paying customer or 100.

Six, your customer, should really be number one. Again, what kind of company do you have if you don’t have happy customers? It’s not impossible that this is the case at the start, but there should always be room for making customers happy—interesting story about how Zappos decided to sell to Amazon because its stakeholders thought Zappos was investing too much time/money in increasing customer satisfaction. There will always be conflicts in regards to customer satisfaction vs. financial satisfaction. Another often underestimated problem is that one happy customer doesn’t translate to another. This is the topic of a little book called ‘Crossing the Chasm,’ which is about going from early adopters to the mainstream, different types of customers with very different values and expectations!

Seven, speed, is one that I don’t like, but became aware of through my studies of entrepreneurship. It’s crazy how much media-attention fast growing companies get, as well as how much government-attention. If you can grow to 20+ employees in 2-3 years, it wouldn’t surprise me if politician X gives you a call to thank you for the good you’re doing the economy. If you grow to 1000, the queen/president will probably shake your hand. On the other hand, there are plenty of situations, the internet boom & bust comes to mind, where speed is actually a detriment and it would’ve been better for the entrepreneur(s) to take better care of the foundations of the company (you know, building a profitable business), rather than focussing on the status of having a ginormous team. A debatable point, I know…

Finally, location, well who doesn’t want an office looking out at Manhattan or, in my case, some tropical beach somewhere (I don’t really need the office…)? Who doesn’t want to be able to invite clients and show them your shiny office, with plants, fountains, and beautiful people everywhere? As I hopefully made clear, sending out signals is fine and good, but it should always be weighed against what you give up and if you actually need it. Kind of the same thinking that should be employed when deciding whether to get a new Apple product or Aston Martin—will those shiny objects really make you more desirable to the opposite sex? Well, maybe a little

That was a little braindump. Hope you enjoyed it.

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Many thanks to @flapinta for pointing this one to me (french link). What a revelation !

Isaac Getz is is a professor of Idea, Involvement, and Innovation Management at ESCP Europe. He has been Visiting Professor at Cornell University, Stanford University and at the University of Massachusetts. He graduated in Computer Science, then obtained a M.Sc. in Management Science, a Doctorate in Psychology and a post-doctoral degree (HDR) in Management.

I usually don’t spend too much time providing information on the business thinkers I quote, but considering the content, I just wanted to make sure Isaac Getz is not mistaken with some kind of hippie smoking ganja on a beach in Goa.

With Liberating Leadership : How the initiative-Freeing Radical Organization Form Has Been Successfully Adopted (pdf) Isaac Getz received the accolade of French Management Union of engineers (SYNTEC) with the Academic Prize of Management (french link again).

This 26 pages essay provides us with further evidence that methods of management that arose in the 50s (Chris Argyris and Douglas McGregor), have been successfully applied by dozens of world class companies and market leaders in their area (Toyota, Southwest Airlines, USAA, Avis, WLGore, QuadGraphics, FAVI in France etc …) to foster employees engagement. The amazing thing is how they align with the management principles that are consubstantial to Enterprise 2.0.

In a time where leadership has never been so critical for businesses, some lessons to remember from this essay :

Read more »

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As Enterprise 2.0 activists, we keep on trying to sell Enterprise 2.0 as the ideal solution for your organisation.

But to be completely honest, depending on your company objectives, values and culture it may just not work.

10 principles your company may have adopted that will make Enterprise 2.0 implementation counter productive … Read more »

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Over the years, I’ve developed more and more an appreciation for Luck. It’s hard to touch, like Love, and it’s impossible to predict, like Love, but the belief in it alone can shift mountains (like…). I’ve studied the statistics over and over before starting a business and they don’t lie: whatever business you start, however good the idea or however well the execution, if luck isn’t on your side, a great deal of businesses fail in the first 2 years.

“On a sunny day in spring this year, I engaged on a journey with three other people, two of them strangers. We were here to do something important, something that had been playing for nearly two decades and had finally come to the resolution. The problem, my problem: this thing we were engaging on has been frayed with bad luck all these years. Anything that could go wrong, would go wrong, and a large part of me expected it to go wrong that day also.

The night before, I hadn’t slept well at all. Before going to sleep, there had been a lot of discussions about possible scenarios that day and one I considered significant one was that the operation would fail. But ok, (sh)it happens and it should never stop you from doing something. My real, primal concern were those two strangers. The fact that this had been playing for so long was for one reason and one reason alone: the object of our adventure was something very, very valuable and many people wanted in.

So my real fear was that I would die that day. That one or both of those strangers saw an opportunity to take control of the situation, perhaps with guns or by employing a gang of thugs to pull us over and leave us shot dead by the road. That thought dominated my dreams that night and I was more than apprehensive meeting the team for that day.

It all went well. While I couldn’t have been more nervous, I tried to hide it and act as natural as possible. I pretended confidence and while fate could’ve have still struck a negative note, somehow it didn’t.”

In a small way, I am a different man today then I was the many years being aware of a tragedy taking place.”

I write this not to write anything promoting entrepreneurship, but I feel it makes a strong point in relation to it. I do not yet know where we will be in three months, but I can see that we’ve come a long way in the three months preceding it. A large reason for this is to do with being open to change and being confident that going forward is often better than standing still. I still believe that good ideas are worth nothing without execution, but that execution is not just a matter of “doing things.” It’s about throwing your idea into the wild a little bit and seeing what “the wild” makes of it.

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Bertrand Duperrin makes an interesting analogy in his post Will Adam Smith drive business in the future ? His take :

(…) Opposing a top-down and directive model an emerging relying on the existence of an “ invisible hand” that, in the same way as Adam’s Smith theory in economics, would make people personal actions and choices contribute to a collective purpose without the need of organizing anything.

I guess the difference between the enterprise and the market is that within the former, people (ideally) are working with the clear goal of collectively creating value and making the company richer. While in the latter the goal is to individually create value to make oneself richer.

Bertrand then sets a table comparing Enterprise 1.0 (strict), 2.0 (anarchy) and Rationalized 2.0 (ideal organisation).

My take : Bertrand’s Rationalized 2.0 is Enterprise 2.0 with a strong and clear leadership. The invisible hand in Adam Smith Enterprise is the leadership. Read more »

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I’ve been struggling for a while about what to write for Tech IT Easy—things seemed to change from one day to the next and it made little sense to reflect, rather a speedy reaction felt more like the right thing to do. That hasn’t changed much, as I believe we’ve just reached a stage of development where speed outweighs thought, but my realisation of this warranted a blog post for future reference. I always imagine myself looking back at what I wrote a few months-years ago to see whether I learned a lesson that I could apply on the future.

Every startup starts great, I think. You (and your team, if applicable) feels a sense of elevation, of engaging onto a route that brings rewards, wealth, and joy to future customers (of course the entrepreneur is usually the 1st customer). This hazy phase is necessary to get the necessary adrenaline for the rest of the trajectory. It’s like a warming up, the important difference being that the more you structure your plans during that phase, the more strategically you can dedicate energy to different steps & actions.

Continuing with the analogy of a run, we have reached the marathon phase. We’re running on the limits of our “bodies,” which contain what energy we have pumped in before, what survival strategies we researched, and what supplies we managed to take with us. Both in a marathon and in a startup the vision of the destinations should be strong. It starts with much socialising with other runners, perhaps with some personal trainers during the preparation stage. But eventually, we realise two things: there are lonely routes to run during that marathon. And eventually, it’s a race too and only a selected few can win.

So what am I learning during this marathon?
I may have mentioned this before, but I envisioned my role in the company as different then it is now. I drafted a contract for myself with a set of deliverables that relate a vision outlined in our business plan. One deliverable is keeping that business-plan updated as I know that these plans hold little value as static documents. But essentially, it’s about getting our product to a certain stage and our company to a certain stage, and that’s how I phrased it in my business-plan.

As a CEO, an important part is learning to let go of the definition of a “job” (singular). A CEO must be a generalist and be able to do a number of “jobs” (plural). Not to a great depth, but enough to get each member of the team to do their job well. That means that, in my company, I have to understand how our products are built and help build them. I have to understand design and help my designers. I have to understand marketing and help my team there. In the end, there’s three things to realise about being a CEO: a good percentage of your time is spent on people management and you have to learn to delegate a lot of things. And last but not least: the final responsibility is always yours! You can fire an employee for doing a bad job, but you are always to blame for the outcome. So there’s no excuse, ever!

A runner’s most important asset is his brain. In regular intervals, he has to observe his body and his environment and make a decision about what the best actions are at that moment. Going downhill = move faster. A long road to the next water-source = conserve your supplies. A runner close to you = know his and your strengths and weaknesses and decide whether to run faster, slower, or at normal speed.

The startup’s most important asset is leadership, which fulfils the same role as the brain during a marathon: evaluate internal resources and the environment and decide what step is best to take when.

I hope to have a few more general blog posts on entrepreneurship left in me. But for now, the sun is shining and the future looks bright. But we also need to conserve our supplies to the next water source, and run at sufficient speed to meet both our milestones and reach the finish.

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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Let me start by saying that it’s hard to write about what we’re doing, particularly from a non-marketing angle. Tech IT Easy is a .Org and it doesn’t feel right to use it as a commercial medium (apart from the sponsorship banner, which I value very much and which will at some point host my company’s logo as well).

Marketing aside, it’s hard to write about something that continues to evolve. What is a permanent truth is that you get presented with a lot of information, challenging problems, and Choices (with a capital C) all the time, and I wouldn’t exchange this period for anything (except for a bit more sleep).

The Uncertainties
Today’s post will be about managing uncertainty, which is really at the core of my job description. I wrote about technology, market, people, and other risk before, which is a way to abstract what is happening.

What really is happening is that you have multiple people in a company, each has their own job, not each does it in the same (predictable/independent/insert apt term here) way. These people have to build or build upon often multiple technologies that may or may not exist yet. All of that needs to happen before the project runs out of money. You need to involve external parties who have to like what you’re doing, enough for them to give us stuff for free, invest in our stuff, and/or buy our stuff. Risks from all angles but oddly enough it feels fine.

Lilypads allround
In a draft I wrote a few days ago and don’t want to bore you with, I compared it to the following:

Entrepreneurship is different. You may love doing a certain activity more than others, but doing so may very well come at the price of success. If I were to try to describe the feeling, I would say it feels like jumping from one lilypad to the next and keeping them all floating in the same general direction. I can spend more time on one lilypad because it houses a nice frog I like or because the sun’s shining on it just right. But eventually, the pressure would push the leaf into the water and I would drown. Or something to that (slightly nightmarish) effect.

This isn’t that bad, of course, or rather if you think it’s bad, believe me: you’ll get used to it! I wasn’t prepared for this, but I knew it would be hard and now it’s just an everyday thing.

The best way to deal with all these lilypads is to learn to be efficient and to spread the love around equally.

Gut instinct vs. calculated risks
During the early days of my master in entrepreneurship which was supposed to teach me all this stuff, we tried to analyse “the entrepreneur” from the psychological, sociological, and economical perspective. The most frustrating part about it was the psychological side because every academic paper and article seemed to compare the entrepreneur to a superman. It probably didn’t help much that plenty of those articles were written during the .Com days where we all worshipped entrepreneurs many of which later turned out to sell very good smelling air.

One thing that struck me, however, was the concept of “calculated risk.” Entrepreneurship isn’t a risky venture, it is an exercise in calculated risk. I didn’t get what that meant until very recently.

As mentioned, our company is composed of several people, all of whom are different and work differently. I have people that need structure, people that hate structure, and people that seem to jump from one lilypad from the next, with me, the “boss,” chasing after them. In one way I hate it, in another way I really want people to find the best way FOR THEM to work, though of course respecting the general reality of our situation.

I am taking a risk there, but the crucial part is that I do so in a calculated manner. And that is more literal than you think. For example:

We have a very clear vision of where we want to be in several months time, but there are alternative paths to get there. One would be to build upon existing technology, which would involve a slight adaptation but at a very high financial cost. The advantage is that we have a ready to go product, the disadvantage is that we have to calculate the higher cost down to our customers. That’s ok, if it wasn’t for path no. 2.

No. 2 would require building something from the ground up that would interface with an existing technology, except that it allows us to create something much more impressive (and innovative!), as well as build a series of cheaper prototypes until we reach the mature prototype phase. Cost of production would be the same in the end, except that we can produce 10 versions of our product for the same price. The advantage is a superior product for the consumer, the disadvantage from a developmental stance is that instead of a minor adaption such as in path 1, we spend more time on this part, time we could allocate to other areas.

These are pretty much once-a-week decisions that I have to make, and a large part can already be decided by instinct. It is better to build 10 cheap prototypes than 1 expensive prototype. But how much better it is can also be calculated out in time and material cost in a simple excel sheet.

How I choose to interpret “calculated risk” is that it is actually calculated. Risk is simply uncertainty and uncertainty means that there are alternative paths to a destination and we don’t 100% know which is the right one.

You can apply this to plenty of other things, such as how to design products for different business models and how to design companies for different investors. It is amazing what clarity it brings to quickly crunch the numbers when a new idea is introduced that appears to derail the whole project. After calculating the cost of that choice (the “risk”) it may in fact bring the project to a whole new level!

I still consider myself a visual thinker where ideas are concerned, but I am becoming more and more convinced of the power of “the numbers” in turning ideas into commercial innovations. There is a risk to spending too much time in them, of course. Who hasn’t heard of forecastoritis, also known as the hockey-stick financial forecast. Life doesn’t work that way and while any forecast over a longer period of time ends up looking like starting with a large minus that turns into a larger plus, the best forecasts actually reduce the minuses to a minimum. I see a large R&D budget as the equivalent of a welfare state that just sponsors those types of people that don’t really ever want to make money: the scientists. They just want to build things and love an endless R&D budget. What they don’t realise is that when a company actually makes money, part of that money will be used for R&D anyway, which actually becomes an endless development budget! But only after you have a viable cash cow that makes it happen and only if development continues to generate continuous revenue opportunities. Ok, that last paragraph was a bit of a rant…

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. Pictures are courtesy of the great M.C. Escher and nature.

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Towers Perrin has published the results of a Global Workforce Survey they made about employees engagement. The survey has involved about 90,000 people over 18 countries. The objective was to rate the level of engagement of the people in their work.

People are split into 4 groups depending on their level of engagement :

Engaged: Those giving full discretionary effort, with high scores on all three dimensions.

Enrolled: The partly engaged, with higher scores on the rational and motivational dimensions, but less connected emotionally.

Disenchanted: The partly disengaged, with lower scores on all three components of engagement, especially the emotional connection.

Disengaged: Those who have disconnected rationally, emotionally and motivationally.

What Towers Perrin found out does not give much credit to management : only a fifth (21%) of the workforce is engaged, twice as much (41%) feels enrolled, a third (30%) feels disenchanted and almost a tenth (8%) feels disengaged.

Costs of lost engagement

This excellent study also shows the cost of lack of engagement. On a three-year study, companies with high employees engagement show a positive evolution of operating margin (+3.74%) while companies with low employee engagement show a 2% reduction of their operating margin.

In addition, it shows that this engagement strongly affects the belief people have regarding the impact they can have on the company innovation, productivity, costs, growth and customer satisfaction.

Three conclusions from this report :

1. The global workforce is not engaged — at least not to the extent that employers need their employees to be in order to drive results.
2. Engaged employees are not born, but made
3. Employees worldwide want to give more, but they also want to see a clear and measurable return for their effort.

Now : let’s see how and where Enterprise 2.0 can help in nurturing engagement …

Read more »

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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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