Back to Basics

Back to basics

Sometimes, you have to get back to basics. It is too easy to get caught up in the size of the opportunity, an open IPO window or high expectations. 

Great companies are built with an intense focus on customers and problems. Great businesses are built by maintaining an intense focus on the metrics that matter – revenue growth, churn, net promoter, cost of goods sold and customer acquisition costs. 

Great engineering organizations build systems that solve customer problems – without creating new ones.

Great customer success organizations are laser focused on making customers successful.

Great product organizations are obsessed with the market, customers and – ultimately – fall in love with the problem they solve and commit themselves 100% to solving that problem… again, again and again.

When you strip everything else away and get back to basics – prioritize what really matters – you achieve clarity of purpose and message.

Sizing Up Your Business

Last night I spoke at the Gilbert FastTrac GrowthVenture meeting. It was a pleasure to see so many founders and entrepreneurs in a room sharing knowledge, insights and experiences.

I’m willing to bet any one of them could have stood up and shared their thoughts with all of us and we would have learned as much (or probably more) than we did by listening to me for 40 minutes.

The thing is, it takes a community, an ecosystem to create a thriving entrepreneurial economy – and while that is a topic for a different post – I was thrilled to see entrepreneurs coming together.

I’m including the slides below, and I hope you find them helpful – but the real value was in the richness of the dialoge.

View more presentations from Brian Roy.

Arizona – Entrepreneurship Is NOT the Problem

People make a lot of noise about what is wrong with Arizona – and specifically our ability to start and sustain technology companies. Most of it is pointless blather and pompous windbaggery – here is why:

The problem is we have too many people who want to be the expert, advance their point of view or prove how freaking smart they are instead of doing one of the only three things that will change it:

  • Found a Technology company in Arizona
  • Invest in an Arizona Technology Company
  • Engage in making changes in our Public (because that’s all we’ve got) education system

Everything else is noise.

I admit I have not read the entire report from the Milken Institute entitled Charting a Course for Arizona’s Technology-Based Economic Development but I’m willing to bet the phrase “creative class” never appears once. You know what does?

Arizona actually ranks 3rd in the country for number of business starts per 100,000 people; it also places 12th for the percentage of business births in the high-tech sector. But too many high-tech firms fold or leave the state, and Arizona has only five firms ranked in Deloitte and Touche’s Fast 500 company list. Addressing human capital concerns and increasing access to venture capital would jumpstart the right kind of long-term development.

I’ll bet you didn’t see that one coming. How about:

Perhaps the single greatest threat to Arizona’s high-tech future is the fact that the state does not develop and retain enough skilled technicians, scientists, and engineers. In terms of sheer numbers, Arizona seems to produce sufficient graduates in science and engineering, but many are foreign-born and therefore more likely to return home, either due to preference or to a limited number of available work visas.

Shocking – our Universities actually produce “sufficient graduates”. Or my personal favorite:

Arizona will clearly be on the right track when it achieves solid gains in the indicators measuring whether local high-tech growth outpaces the national average; in recent years, it has fallen behind in these measures.

I defy anyone to tell me they are shocked by this or fundamentally disagree with that finding.

The problems, and their solutions, have been obvious for years:

  • We need a robust public/private R&D partnership
    • We get private organizations and companies openly bashing our Educators and Institutions without making any attempt to partner with them and create systemic change.
    • We get Universities who blatantly attempt leverage “incubators” as a source of revenue.
  • We need an active investor class
    • We get realestate investors who have no affinity with technology looking for a guaranteed 4% (to replace their realestate investments).
    • We get pay to pitch events, endless gatekeeper organizations, and every imaginable mechanism possible to keep actual investors from talking to actual founders.
  • We need jobs for the quality Math, Science and Engineering students our Universities churn out.
    • We get organizations who complain about how much our Higher Education System sucks – and watch the best and brightest they turn out go to CA, UT, OR and NM
    • We get a legislature that thinks shipping in University students from overseas/out of state is a great way to reduce education costs borne by the state.

We are failing – across the board, by any measure EXCEPT our ability to plan events, talk, point fingers and sit on the sidelines doing nothing.

We don’t have an entrepreneurship problem – we are 3rd in the nation for new companies and 12th for technology companies – we have an attitude problem.

It is time to drop the “it happens my way or I’m not playing” attitude and start engaging – across organizational, belief, strategy and ideological lines to generate results.

Because I swear to you – as a Founder of a Arizona based Technology Company – the next organization that spouts off about how “we’ve got it all right and everyone else is stupid” will earn my wrath.

Found, Invest, Engage or Shut Up.

Why Healthcare for Profit Sucks

shop.pngAfter 15 years working large corporations I’m now self employed. I’ve decided to be one of those people Conservatives so love to hold up as the example of all they try to protect – the American Small Business Owner.

During my 20’s and 30’s I paid (and paid) into the private insurance industry and took very little back out. Sure, there was the occasional sinus infection or table saw accident, but all things considered I used a tiny fraction of what I paid in to the “system”. Knowing my entrepreneurial aspirations I saved more than 30% of my (really our – my wife Kelly is in this as deeply as I am) income. We set aside the money we would need to fund a startup and support our family.

Short version – we are the kind of Americans the Conservatives love to point at as the example of everything that is right. The irony is, it is their insanity that is killing everything we are doing that the claim to value so highly.

Here is the thing – I can afford the insane price of health insurance (for a while). I can even deal with the fact that it isn’t nearly as good as what I had when I was willing to sell my work to a Fortune 100 software company. What I can’t deal with is that there is virtually no point in having insurance if you have to buy it on the open (free) market.

Last year I had a Kidney Stone. I had no idea what was causing the severe pain – so I did what you are supposed to do, I went to the emergency room. They gave me a CT Scan and diagnosed me with Kidney Stones. Now, I know they are there. My primary care doctor knows they are there. I have a standing order for a days worth of pain medication and if they come back I can fill it and suck it up until it passes.

The problem is, no Insurance Company will cover me for Kidney Stones. Oh, they will sell me Insurance, but they won’t cover ANYTHING having to do with Kidney Stones. I’ll have insurance, but for the only thing at all likely to happen, I‘ve got nothing.

As a businessman, their decision makes perfect sense. Why would they cover me for a potentially recurring affliction? It wouldn’t be profitable. Since, in the free market, businesses make decisions based on profit their decision is not only reasonable but laudable. After all, who would invest in an Insurance Company that repeatedly insured people who were sick?

It isn’t a big leap to imagine what happens next… what happens when you have insurance and get sick? Sure, they’ll pay for the colds, bumps and bruises – but what makes you think they will pay when it gets serious? After all, as good capitalists and free market business people they seek profit – and sick people aren’t profitable. So the game becomes, how do they avoid covering you?

  • Did you fail to disclose something (not something big, but ANYTHING, like an old knee injury)?
  • Did you lie (in a vain attempt to get coverage for Kidney Stones)?
  • Did you make a mistake (make sure you get your kid’s social security numbers right)?

imgres.jpg Trust me, when they are facing hundreds of thousands of dollars costs they have to pay they will get very, very thorough. I know, I would. As would any other business person facing a contract that suddenly is going to cost them hundreds of thousands of dollars.

Listen, I’m not suggesting insurance company employees are bad people – any more than I am for trying to make as much money as possible with my business – what I’m suggesting is that there are things which don’t function well in a profit based system. As hard as that might be to accept – it is just plain true.

Sadly, the Republicans (I’m not talking about Conservatives here, but the Republican Political Party) lost their way. Instead of a rational debate about the role of Government – one which focuses on questions like:

  • Is Healthcare best accomplished within the free-market private sector?
  • What mechanisms can the Government employ to balance profit and the well being of society?

we get a debate about bogey men and death panels. We get ideology and dogma.

I’m no left wing nut job – I’m a capitalist trying to build my own business, and I freely admit I don’t know everything, but I know this:

My healthcare shouldn’t be about profit. Neither should yours.

I’m no fan of government control, but I’m not desperately afraid of it either. Where profit isn’t a good motive the government is as good an option as any other. Frankly, if you’ve got a better suggestion I’d love to hear it, but if you just want to scare me about how awful my healthcare will be when the government runs it – you can forget it – I’m scared enough right now dealing with private health insurance.

The Entrepreneur Game

I’m getting concerned about the state of entrepreneurship – and not for the reasons you might think. The fashionable complaint is that we don’t have enough entrepreneurs, but I’m beginning to wonder if quantity is a red herring.

It seems to me there are an awful lot of people out there calling themselves entrepreneurs. It also seems to me that there is absolutely no agreement amongst all those entrepreneurs about the fundamental goal of entrepreneurship. The result is that there are many kinds of self identified entrepreneurs (argue amongst yourself about which really are and are not). More importantly the “competition” amongst the kinds has created a game… and winning depends entirely on the kind of entrepreneur you are.

The entrepreneur game has three kinds of players:

  1. The Promoter
  2. The Glory Seeker
  3. The Architect

The Promoter is the prototypical freelancer. They practice a form of entrepreneurship that involves creating products/services that are – in effect – marketing material for their skills. Essentially, their “startups” form a portfolio of work they use to demonstrate their skills to prospective clients. They are far more interested in selling themselves (as expert, consultant, speaker, etc) than with the fundamentals of the business model of any product they produce as part of their portfolio. They hope that one of the portfolio products will “be the next Twitter” in much the same way your or I might hope we win the lottery – with long odds, little effort and a lot of luck.

The Glory Seeker is primarily interested in his/her proximity to “the elite” of one kind or another. For the Glory Seeker, being written up by TechCrunch or Mashable is the primary goal. They simply want to see their names on the marque and be spoken of/to by those they consider important/influential. If you’ve ever written some code and and pestered Scoble for a mention – this is you. The Glory Seeker does not waste precious cycles considering things like EBITDA, Operating Income, Revenue Generation or Profit and Loss statements. Their sole calculation regarding any product or service is the likelihood it will garner them personal attention versus the effort required to create it.

The Architect is the person who has the grand plan. The scheme to create a company, and the will to shape a strategy which will not only result in products and services people will want to buy, but which can be delivered profitably. They have no interest in building “loss-leaders” to promote themselves, instead they focus on creating something worth paying for. Their primary goal is the realization of their vision – a vision which is often completely at odds with conventional wisdom. They are the first to admit they lack critical skills required to realize the vision. They understand that the realization of their vision will only occur if they can first find people willing to share it. That is why they annoy you at Social Media Club or AZ Tech Council events by asking what you think and if you’d be willing to help. They annoy the crap out of the Promoters because the Promoter seeks – first and foremost – to get paid for his/her work. They annoy the crap out of the Glory Seekers because what they are doing is both hard and unlikely to get any notice from Scoble.

Here is the problem. From the outside it is very difficult to determine if you are dealing with a Promoter, Glory Seeker or Architect. The Promoter and Glory Seeker will act an awful lot like an Architect if they believe it gets them what they want. The problem is, they are very unlikely to be able to sustain Architect behaviors.

The Promoter begat the Glory Seeker – and together they went forth and killed the Architect.

What concerns me about this trend is that I’m seeing fewer and fewer Architects. The vast majority of those I know are either going “back inside” to lead new product lines or innovation at established companies or becoming consultants specializing in helping Promoters and Glory Seekers once they (or the people who chose to fund them) realize they’ve gotten themselves in over their head.

The behavior of these Architects is perfectly understandable. They realize that in a market flooded with free offerings it will be nearly impossible to generate profit and build a functioning company. They understand that if you can’t charge for it, it isn’t worth investing their effort and money in. The environment is only conducive to business plans that start with large amounts of capital – because you are going to have to give it away until you can outlast or acquire the Promoters and Glory Seekers. This is “freemium”… and it isn’t very attractive when you understand what it really is.

The only winners in this environment are the ones with capital (yep, that’s right, the VC’s). In a Freemium marketplace you need them a lot more than they need you; because in a freemium market the pay as you go startup can’t happen.

I won’t pretend to know how this plays out… but something fundamental is changing in the way we start companies… and I’m not entirely sure it will be a good thing.

Innovation & Academia? – ASU Startup Weekend

There is a certain pleasure in pointing out how poor a job academic institutions do instilling the kind of innovative/entrepreneurial thinking required in their graduates. But here is the million dollar question:

Beyond pointing at the problem, what exactly are YOU going to do to fix it.

Photo courtesy of lumaxart: http://www.lumaxart.com/
Photo courtesy of lumaxart: http://www.lumaxart.com/

For many the answer is a resounding “not my problem” or “it can’t be fixed”.

You may be a student, member of faculty, a member of “industry”, or just a part of the larger community – regardless of your place in this there are a few things you need to know. Here they are.

First, it is on you. No one is going to do it for you, you can’t wait on someone else to make it happen. If you want more innovative and entrepreneurial thinking from the graduates of your school or your local university you must get involved.

No one gets an opt out. There is no pass that allows the business community to sit back and wait for the Academics to deliver the results. If you do, it will cost you money and time to develop these graduates into what you need.

Students don’t get to sit back and wait on their teachers/professors to make it a required part of the curriculum. The old song “it wasn’t on the syllabus” just won’t cut it.

Professors and teachers can’t wait for standardized tests and acceptable best practices to begin instilling innovation and entrepreneurship into their classrooms. You want your students to be more innovative – innovate!

This isn’t about checking the box. And it certainly isn’t about getting a diploma. That is – frankly – the easy part. Take the right classes, show up every day, take notes, do some occasional studying and you’ll get your diploma. You’ll have checked the box. It isn’t about graduation rates either – and here is why.

Second, it isn’t optional. Innovation and entrepreneurship are not optional. The world has changed. You are not going to graduate and get a job at Intel, work there 30 years and retire with a fat 401k, pension, and health benefits. Odds are you’ll change careers at least 5 times. More than likely you’ll be looking for a new job every 3 years or so. And by the time you are on your 3rd job (about 8 years or so out of college) no one (and I really mean NO ONE) is going to care that you have your diploma – you’ll have to have it, but it won’t make even the smallest difference in weather or not you get or keep the gig. Why? Because anyone can show up and check the box.

I’ve hired a lot of people over my 15 years in business (and technology), and I’ve never said to myself “I’m looking for someone who can check the box.” If what you are selling is showing up every day and checking the box, I’m not interested.

In the last 15 years I’ve seen a transformation – from employees who show up and do the basics being valued to those same employees being “managed out”. They aren’t wanted. We want the employees who are able to see outside the what is and look for what could be. We are looking for the innovators.

In this new world where you are either getting a gig, improving your gig, or getting the next gig you had better understand a thing or two about entrepreneurship. You are your own company – and it will be up to you to run You LLC effectively. Everything from deciding what the product is (what skills are you learning), to choosing the right partnerships (who are my mentors), to selling your product (getting a gig), to maximizing revenues (negotiating salaries) is your responsibility. You are an entrepreneur – like it or not.

This is the environment we are preparing graduates for. This is their reality.

Third, do something – TODAY.

You should be doing something about this every day. Weather you are in the business community, a member of faculty, or a student. You need to ask yourself every single day. How am I preparing myself and helping prepare others for this reality?

I suggest you start here. Go – right now – to the ASU Startup Weekend site. If you are an ASU Student register right now. If you are a member of the business community, volunteer to mentor the student startup teams by emailing Dr. Kevin Gary (kgary at asu.edu). If you are a member of ASU faculty get the flyer and hang it up in your classroom; offer you students extra credit for participating.

I’ll see you there, April 24th and 25th. Come find me and we’ll talk.