Here’s the rub of the funded startup

They start their life already bankrupt.

I don’t mean they are in bankruptcy, I mean that early stage funded startups are always marching towards bankruptcy — starting the first minute after that last raise.

It takes a certain type of person to accept this and be able to move on. A rare bread called the founder. Founders have the ability to see reality but are able to push it aside for a while — through sheer will — and press on as if the cliff is not close.

But it always is.

Nail your first metrics

When I was at Lyft the company was already a unicorn on its way to an IPO. Data was plentiful and KPIs were already established and cemented. As a stats geek, this was heaven. Dashboards everywhere with so much detail you could watch real life unfold in the numbers.

Early stage companies are not this data rich but nor should they be. Companies like Lyft and Uber have all the data, startups should only have the data they need.

When Trexity started we had no data displayed anywhere. Before we began creating dashboards and falling in love with vanity metrics, we needed to dig deep to understand what we should measure to get us focused.

Trexity is a data-rich company — we just needed to ask the right questions to surface the right data. This is trial and error mostly. We started with the obvious…how many deliveries we were completing every day. Seemed logical. We also started tracking our bookings and courier pay.

Then we let that sit for a while and started asking focused questions about what we needed to see that would make an impact on our merchant and courier experience. On our business.

We came up with 3 metrics:
1. Time to accept – how long it took for a courier to accept a delivery
2. Time to pick up – how long it took the courier to arrive at the pickup
3. Time to deliver – how long it took for the courier to deliver the package

These three metrics would govern our business. They were clearly focused on our customers experience and, to this day, give us insight on the health of our marketplace.

Time to accept (TTA) gives us a clear understanding of how our marketplace is balanced (i.e. do we have enough couriers on the platform).

Time to Pick Up (TTP) helps us understand the how efficient our planner is given the distribution of couriers vs merchants. This is our magic.

Time to deliver (TTD) is our gauge to how we are helping build our customers brand with their customers.

I cannot overstate the importance of getting to a point where your first data is helpful in focusing the entire company. Too much data is distracting. Too many data points will derail you. Your early team needs to be able to see how their work impacts the business and everyone needs to be talking about the same metrics.

The Hard truth about raising capital

There is but one truth that over shadows all others when it comes to raising money for your company.

The answer will be “no” until it is a “yes”.

There is nothing in between.

There may be long, great conversations that make it seem as though there is progress but the answer is still “no”.

There is a process that you will go through — introduction to the team, the pitch, the weekly investment committee meetings — but there is no investment “stage” that a founder will progress through. You won’t be able to measure it or give a closing % rate.

It is 0% until it is 100%.

My best advice is to be bold and ask the question that most founders do not want the answer to:

“Can you see your fund investing in us?”

You are looking for a fast “no” to this question. You are looking to squash any lingering hope so you can simply move on. Be insistent. If the answer is “no”, be thankful that you have been released but be curious as to why. Ask where you lost them and listen.

Raising money is not a given. Playbooks and benchmarks move overnight and the process from start to (hopefully) close will take 4X longer than you need it to. To manage your sanity you will need to pitch like an optimist but instinctively know the hard hard hard truth.

It’s a “no” until it is a “yes”.

Take the right advice

I have sought and taken advice from so many people for so many different milestones over a lifetime of being an entrepreneur and a parent.

A lot of it stuck. The rest allowed self-doubt and fear to creep into my mind — sometimes paralyzing my ability to get moving on things.

Two characteristics of worthy advice is that it comes from someone who has actually done a semblance of what you are trying to accomplish and that you are actually seeking it.

If you are about to embark on your entrepreneurial journey, seek advice and guidance from an entrepreneur (or 10) — preferably someone you’d like to model.

If you are trying to raise funding for your startup, seek advice and a system from someone that has successfully raised that type and stage of funding.

If you are starting a family, seek advice from other modern parents.

Unsolicited or unqualified advice is free but damaging. .

Seeking specific advice for specific things from specific people cuts out the ambiguity and reduces friction — all while crushing the self-doubt.

Money DOES buy happiness

Money doesn’t buy happiness is bullshit.

This lament is only ever spoken by someone who has money.

There is not a person on this planet that is destitute or struggling paycheque to paycheque who would ever say that more money would not make them happier.

Money removes the fundamental stresses of life.

No more stress about having a safe place to live.
No more stress about eating a healthy diet.
No more stress about ensuring an education for your children.
No more stress about providing for your family and friends.

Remove those stresses from anyones life and, just by default, it is MUCH happier.

Don’t wait for hindsight

When I was twelve I discovered a life-changing album in Nebraska, Springsteen’s 6th studio release sandwiched in between The River and Born in the USA. A complete departure and huge risk at that time in his career, Nebraska is as well-known for the music as it is for the legend behind it.

Springsteen recorded it in his home in Colts Neck, New Jersey by himself. After months of carrying the cassette of his recording around, trying to find the sound that did the songs justice with his band, he chose to release the album using the recording on the cassette itself. I won’t spoil the movie but the legend was created.

In hindsight, it’s easy to see that this record needed to be released as it was. No other combination that I’ve heard recorded or live captures the meaning of the songs with more impact than the originals. What struck me was the willingness to ship what was perceived at the time as an imperfect album.

Entrepreneurs and founders and creatives struggle with this type of decision all the time. We wait, we build, we stall, we add features — we do everything except ship.

Nebraska was released because it was complete from the moment the last track was recorded. It took Springsteen all that time to come to that realization and the rest is history. The album was a critical success and cemented him as one of our generation’s greatest story tellers.

So many of us wait too long to start or release. Something holds us back and it’s only in hindsight after the release or launch that we realize waiting was not necessary, that you/it were ready all along.

Set the pace

We, the people who run operations for companies, are marathon pace bunnies without the ears.

Watch any marathon and you’ll see the ears among the throngs running. They balance the adrenalin of the first bunch of miles with the long run ahead. They don’t let anyone get too far out in front of their feet too early on and don’t let them get too far behind later on. Steady.

You put trust in them. They set the pace. You follow them to hit your goal.

I think of startups and high growth companies as running successive, back-to-back marathons…without stopping…ever. There are tremendous highs and lows along the way and, at each 20 mile marker, you question why you are putting yourself through it. Every time.

This is why setting the pace is so important. Most startups jump too fast out of the blocks or think of the finish line before putting in the work — wasting essential energy on non-essential things.

Pace bunnies lead and encourage everyone around them — often with a smile on their face — but don’t forget, they are running the same marathon as everyone else. It just doesn’t seem like they are and that’s the power of pace setting in action.

Speculation kills startups

Speculation kills startups.

High growth companies need to move quickly. They also need to make quick adjustments if there is no progress. The only way to make these quick adjustments is by starting with the numbers.

Not knowing the numbers means you are speculating. If you hear (or say) “I think” or “I’m assuming” or even the word “around,” it is speculation, numbers are not known and the next decision you make could be fatal.

It only takes a moment for something to become common language. If the owner of the data voices a speculation instead of a fact, left uncontested it almost immediately turns that false data into truth.

My rule of thumb is that if you don’t know the data, don’t say anything. Don’t try to inject yourself into the conversation, don’t offer an insight and certainly don’t speculate. In any stage company one common is truth: Not knowing your business will put you out of it.

Always start with the numbers.

Execute to execute

There are two givens operating any business: You get what you can afford and what got you here, won’t get you there.

For some early employees, tenure is fleeting and only during the formative parts of a company’s existence. Those early days require broad weight bearing roles — “fine” is good and “someone” is better than no one.

In later stage companies there is a tendency to hold on to legacy at the detriment of effectiveness.

As operators, it is our job to understand when our company requirements have passed the skills and capabilities of our people in those roles.

In both givens, the consequence of no action is to allow it to become part of your DNA. When that happens it defines your culture.

Time under tension

There are 2 incredibly tough aspects of starting and running a business and they are both related to time under tension.

In my life I have not found anything more challenging or stressful than voluntarily starting a business. It is also the most rewarding — but that comes later and always seems to be fleeting before reality crashes in again.

To succeed here you need to build entrepreneurial muscle. This is not a natural act so when we start we are basically all flabby. An idea and a statement of intent does not mean you are in shape to handle the task ahead. Being an entrepreneur IS a muscle that builds over time under tension.

When you use that muscle for the first time and realize it is there, it becomes something you flex for a lifetime. Putting time under tension here is part of your long game. Baby fat be gone, you are learning how to build a business one ripped fibre at a time.

Once you are waist deep in the muck you will experience the other, more visceral, aspect of time under tension.

This is where the real development happens.

Weight lifters use the time under tension strategy to spark muscle growth by slowing down their lifts in order to keep their muscles under stress.

Entrepreneurs are subjected to time under tension as the business requirements grow and the pressure to succeed increases. We are always under a form of pressure regardless of the stage of company. It is a constant and, subjected to it long enough, that muscle grows allowing you to carry more without your legs buckling.

When you get right down to it, success or failure in startups, or entrepreneurship, or business building comes down to how long you are willing to stay under that tension.

Don’t get fat

Scaling a company does not only mean revenue growth or geographic expansion or hiring or automation. It also means process and management and product diversification.

Early on, the first group gets you leverage, the second group gets you fat.

The most important balance in the early days is to not get in your own way of growth. There are so many false/positives in earlier stage companies that when you think you should add a process, hold off until it is obvious you should have done it months ago.

2 years into my current company we had a clear vision for the product and had determined that we were in need of a product manager to guide us. We promoted from within and set them on what we thought would be the path to product success — for them and the company.

We quickly realized we were WAY too soon for this role.

We almost immediately ran into conflicting processes — we needed to still be moving at a pace that was in conflict with a product management process and methodology. We were still finding our way, our product/market fit and adding a layer and strict process slowed us down to a frustratingly slow pace.

We were not ready.

There are countless moments at this stage in company where you may think you should automate or add process or delegate. Make sure you are doing it for the right reason — to unlock or unblock growth or people.

It particular, hold off on adding fat to:

  • Email <– personalized won’t scale but it is how to establish trust. Templates are lazy at this stage.
  • Product <– no one knows your product and your customer requirements better than you. Don’t distance yourself from this too soon.
  • Marketing <– Grit and grassroots reign supreme over templated initiatives. Visit, call, email, connect instead of broadcast and hope.
  • Sales <– Lose the generic patter — you see through it and so will your own customers. Remember why your company exists and put the effort into helping your customers see how you can help them achieve their goals.

We ALL hate receiving generic responses or sales pitches or products that look and taste the same. The companies doing everything the same way have become burdened by process. Trim your fat, stop tipping to laziness and put the work in to stay that way for as long as possible.

You are a team not a family

To build a startup has no equal when it comes to pressure, strategy, proper execution and hiring (not recruiting — hiring). There simply isn’t a similar experience anywhere.

After product market fit, hiring is the next most important thing to get right because the first hires will always be unique in the history of the company. They will be asked to do things they are uncomfortable doing, they will be stretched to their stress limits, they will have to work with speed and ambiguity and do it all for the potential of a hefty upside while taking home very little actual pay.

The tendency is to paint a picture of a family coming together. The trenches have a way of seemingly creating this familial bond amongst the early team. I look at the first group of misfits at this stage as a team and here’s why:

– YOU choose the team.
– The team has specific skills your company needs.
– You may have to let someone from your team go.
– Your team is aligned with the goals of the company.
– Your team will weed out the weak links.

To go into the startup arena hardens the entire team — it creates a bond that is special in business. The sense of accomplishment and triumph pulls people together. This is part of the startup culture, the team grows together. It breaks down when the company succeeds and that familial bond can’t stretch to new team members. This ends up holding people back and causing stress on them and the company.

Most people don’t switch families every 2 years but it is common for teams to shift as people outgrow the company or gain new skills. As founders and operators our goal is always to find the right combination of people to move everything forward — imagine having that conversation with your family…

Focus.

Profound change happens in a startup one dollar at a time and it is a founders job to make sure that stays in focus.

I still wake up every day amazed at the entrepreneurial possibilities that have unfolded over the last 20 years. It’s never been easier to start something new but it’s never been harder to contain the breadth of the idea to see it through to a business.

Great operators know that a business without focus is a doomed one. There needs to be a relentless fixation on the problem they are trying to solve and for whom. I frame it as remaining as close as possible to the dollar.

Staying close to the dollar means really understanding what your ideal customer will pay for that helps them solve a real problem right now. Business is not complicated: Other companies have a problem that needs to be solved. You have devised a way to solve it for all of them.

The focus muscle comes in when you have collected that first dollar. The temptation is to branch from your core and try to solve another problem for the same customer instead of finding more customers that have the same problem. This is where startups fail.

Three really relevant examples come to mind around focus — these are things that I see companies doing too early and at their peril.

  1. Expanding too quickly into new markets (that could be new cities or new verticals)
  2. Building features that are only impactful for a small percentage of customers
  3. Spray and pray marketing initiatives

The closest path to revenue is selling your existing product to more customers. The focus and discipline it takes to do this is what differentiates great operators and companies from the rest.

Did I repeat myself? Did I repeat myself?

Nobody makes a purchase after 1 call.
It takes seven (ten? twenty?) interactions to create some sort of brand awareness.
Kids need 5 wake up calls before getting out of bed.

The hard truth is that things don’t happen by saying them once…or twice…This is as valid in business as in the rest of life.

Startups move so quickly that things often get overlooked, forgotten, deprioritized, re-evaluated or simply disregarded.

Operationally exceptional startups focus on easy to digest priorities and then set them on repeat until they are part of everyone’s conversations.

It is not good enough to write them down, talk about them once in a meeting and then assume everyone understands and will execute.

Repeat them everywhere.
Repeat them every time.
Repeat them until you hear them coming back to you from everyone.

How to get a startup into orbit

The best advice I’ve ever read about starting a company is to not over-engineer the offering.

I think of startups as rockets trying to get into orbit. The challenge is so complex that most don’t even make it to the launchpad properly ready for launch.

To get a startup 1 inch off the ground so many things need to go right. It needs to be built for purpose, proven in the market to make a different to someone, fabricated (or coded) to work, packaged, sold and shipped.

Building too much, too soon is the same as trying to move a rocket with less fuel than required.

Building too little burns out before reaching the needed velocity.

Physics and friction are constant drags on a company’s velocity and nothing is more important than getting the mix right for that first inch of motion.

Find a hole then fill it.

The hardest part of early startups is how to clearly know if you’ve found product/market fit. It’s an elusive term with even more elusive definitions — only really understood when you actually find it.

I’m so tired of trying to “be the aspirin, not the vitamin” thinking, it is killing ingenuity and innovation and the messy part of being an entrepreneur. This truth is that building a business is hard, it’s dirty, it’s lonely and every thing is stacked against you. It is unconventional to want to do this and it is next to impossible to get right.

Being perfect is not an option. Stumbling in the dark, blindfolded but finding your way is where most of us end up. But that’s ok.

I like to think of business building as looking for a hole and trying to fill it. Thinking this way means you are looking for an existing problem in need of a fix — instead of wasting time building something no one needs now. It also makes it clear that this journey will not be easy.

It’s not fancy but neither is building a business.

To lead is not to own

When a startup moves to scale up, the biggest blocker happens to be the people that actually made that happen.

Early leaders that don’t build for their future team are doomed to becoming the leader that “got them here but won’t get them there.”

Moving from a doer to a delegator means knowing that the work may not be done the way it was intended right away. The work may suffer. It may take more time. But more work will get done once the responsibility of ownership is shifted.

This transition doesn’t mean that quality should suffer long term — never settle for “ok”.
This transition doesn’t mean the abdication of responsibility — outcomes are still owned.
This transition doesn’t mean it will work with the current team — leading means monitoring and adjusting constantly.

The hardest thing to do is to trust that the work will get done without you actually doing it. The worst thing to do is make this leap and fall back to old habits because it isn’t happening fast enough or the way it was done before. Have faith in the team, give it a time limit, don’t revert and always move forward.

Stalling at this moment most certainly is the inhibitor to growth and for a company at this stage that cannot happen.

You SHOULD cry over spilled blueberries

On March 17, 1845 the elastic band was patented by Stephen Perry.

179 years later a simple use of Perry’s invention makes for a powerful example of customer service.

Have you ever bought blueberries — or any berries — from a grocery store only to get home to find them free and loose at the bottom of your grocery bin?

One of my local grocery chains has solved this with a simple elastic band, wrapped around the plastic berry container. Problem solved. No crushed berries, no spillage.

This small attention to detail at checkout won’t change the world but focusing on things like this will change your business.

The law of balance in a startup

Balance in a startup has nothing to do with work or life.

Balance is the time between an ask and an answer.
Balance is the moment between realizing a strategy isn’t working and what’s next.
Balance is knowing when a person is not a fit and having that conversation.

Balance in a startup has everything to do with progress and action.

What’s your death date?

Do you know when you are going to die? To most of us, the answer is no (unless you’ve been to the crossroads like Jimi Hendrix, Kurt Cobain and Jim Morrison).

For startups the answer needs to be yes.

A startup has one foot in the grave the day it is born — and it stays that way until it graduates to becoming a business or the other foot drops.

At the startup stage a precise death date is easy to figure out: Take what’s in the bank, what’s coming into the bank, and subtract what’s leaving the bank. That gives a simple runway and when the runway runs out, so does the startup.

Personally, I like to share this date with the entire team for 2 simple reasons: (1) It level-sets to where/what we are as a group. (2) It (should) motivate the team to focus on the most important/impactful things.

No one in a startup should be surprised if things don’t go as expected. A death date brings unbelievable and ruthless focus — also known as the discipline a startup needs.

You CAN’T do it alone

His wife was a week away from giving birth, she was unemployed and I had to lay him off because I didn’t see the obvious.

It was 2009 and I was the CEO of a small software company and we were starting to feel the effects of the banking crisis. Our top customer was a bank and they were slowing their spend, reducing their team and that was hurting my business.

I thought, like many inexperienced younger CEOs, that it was my responsibility to shoulder and shield. Shoulder the weight of the crisis and shield the team from the reality. The opposite is true. By keeping anything from the team it robbed them of their ability to make any decisions — especially about their own future.

When I finally explained our situation to the team it was too late to save 7 employees, including the soon-to-be father. After the dust settled and the wounds were healing, the remaining company took me to task for not letting them be a part of the solution. They were there for a reason. They believed. They just needed to be included in the good and the bad.

Laying people off because of something out of your control is one thing. Doing it because you didn’t adjust is something completely different. It took me until that day in 2009 to realize that business is not a solo mission.

Startups are NOT businesses

There is a misconception that you work FOR a startup. This gives it a persona as though it is a real business — one with process and hierarchy and a cadence that allows everyone to breathe. This is simply not true.

To be a part of a startup you need to think of yourself as a group of renegades trying to prove that the idea — whatever it may be as the sands shift beneath everyone — is something WORTHY of becoming a company.

You don’t work FOR a startup, you work ON a startup.

Tech layoffs and baseball

The business of baseball and the business of technology are, in many ways, alike. Both types of organization are trying to assemble a balanced but elite team that ultimately dominates their industry. Each pays the “appropriate” amount for the talent that could get them there. The simple difference is the number of humans that can hit an 84MPH curveball after seeing a 100MPH fastball or throw that 100MPH fastball are scarce. That makes them a sought-after prize. Where else can you get paid an average annual salary of $4.41 million?

Compare those elite 975 employees that play for the 30 Major League Baseball teams to the millions of tech workers on the planet. At one point, their skills were needed – necessary even — and they were swallowed up into companies like DoorDash, Twitter, Facebook and Shopify. Assembled into teams, paid well in cash and options and sent on their way to help contribute to the success of the company.

The biggest difference is their approach to winning:

Baseball organizations — for all their faults — have a recruiting process that mostly works. It limits the number of players in the pool and, each year, forces ball players to be better and better to achieve stardom. Tech casts a wide net, over-hires and hopes.

Baseball nurtures their talent if you make the cut. Tech cuts the talent when times are rough.

Baseball builds teams with a cause but are only allowed a certain number of people per team. Tech hires everyone and hopes.

Baseball doesn’t lay off their team during an economic downturn. Salaries don’t go down. Ex team mates don’t share condolences on LinkedIn for other players who have been fired. No docs circulate with “great and talented” people for consideration.

You see where I’m going here — it may be far-fetched to compare baseball teams and tech companies but how can we be ok with 10’s of thousands of people being considered “extra” to their companies and being laid off? Without remorse. Without penalties. When a baseball team fails to live up to their promise, the leaders get fired. How do we not hold up our tech leaders to this standard? While it isn’t criminal to hire too many people, it is a complete failure on the management that did this. Think of all the wasted time, money and effort (and more money on gracious exit compensation) all for zero value to the company?!?

Over hiring can happen but if you have to fire over 88000 people collectively in one moment to correct it, that is not over-hiring, that is bad management.

Can you imagine your favourite team, in any sport, reading the Wall Street Journal and then deciding to fire 13% of their team like Facebook did in 1 day? Nope. The behaviour of boom and bust that we’ve become accustomed to in tech is NOT normal but we’ve normalized it. How can we accept that humans have become the collateral damage of bad management?

We shouldn’t.

Seizing momentum

I always take a window seat when I travel on an airplane — even if it means denying my kids that very joy. I love seeing the grind of the plane as it rolls down the runway, lifts off the runway and barrels towards the heavens as the earth gets instantly smaller. It is never lost on me — the miracle of flying is so cool.

There are those days, tho, when the plane is sitting in the middle of a rain or snow storm and the windows are thick with precipitation and it’s cold and dark. These ascents are the bumpy ones and I always think “this is what’s it’s like to be in an early stage company.” <– really, I do.

Let me explain.

Early stage is hard. Not just notionally hard, I mean physically, emotionally challenging. The kind of stress on the system that is unique and acute. Going through those early days/months/years is akin to that plane barreling down the runway in a rain storm. Every bump felt, every drop hitting getting harder and harder. With every meter movement forward the stress gets worse and worse. Getting off the ground takes absolute power, strength, planning, commitment and, in the case of a startup, great timing and tremendous pain.

Then come the thick blanket of storm clouds that the plane rolls through. Turbulence. There’s a reason you keep your seatbelt on during ascent. The plane bounces and heaves as it makes its way up, up, up. For a startup, once off the ground, the real work begins. It is this real work, through those storm clouds and gravity trying to bring you back down to earth, that makes or breaks it.

Once the plane cracks the plain of the cloud cover it becomes a different world. The sun is shining, the air is clear, no more storms, no more bumps, just miles of visibility. It almost feels like there is nothing else up there but the airplane. This is where great companies end up when they’ve hit product/market fit, built the right technology that solves that elusive problem for the right customer, lined up the right financing, built the right team and are growing in the right way. You have the wind at your back and momentum in your favour.

When a startup is in that rarified air it can do no wrong. It is the talk of the town, the media is glowing, the CEO is everywhere, investors want in, people want to work there, customers refer customers because that startup at that moment owns the air. Owns the conversation. Owns the momentum. As a startup, this is what you’ve fought for the entire ride.

The problem is that, just like being in an airplane, all things must land.

As with every trip, eventually the plane must descend back through the clouds and land. The momentum for startups is fleeting and It is this brief time that good companies become great companies by leveraging momentum and bad companies listen to their own press and miss their moment.

To make momentum work is hard work. Harder yet is to use the momentum to turn the startup into an actual company.

The Fast No

There is nothing that beats a fast “no”. Doesn’t matter what language, what circumstance, what context — a fast “no” is the greatest gift to receive.

Don’t mistake a fast no with every other type of “no” that is used. There is the “no, but” <– NOT a fast no. What about “not now”? Nope. Not a fast no. Anything without a concrete, 2-letter, hard end or anything remotely sounding optimistic is absolutely, 100% NOT a fast no.

So why is a fast no such a gift? How can that little word, usually the first one out of toddlers mouth or the thing you yell at your dog to stop bitting strangers, be a good thing?

Two reasons.

The first is obvious. It’s the end of a line of conversation. If you’ve ever tried to raise any kind of venture financing you know that VCs are notoriously vague with their answers. Only the good VCs that know and follow their investment thesis say no quickly. The rest string you along for fear of missing something — anything — that pops. They want to keep their options open. Often you’ll hear “let us know when you find a lead” <– that’s a “no”. Or, you’ll hear “circle back with me in a month” <– NO! The fear of that little word is real and sometimes you need it to move on.

The second reason is not so obvious. A fast no is sometimes the real start of the conversation. If someone can say “no” it means they have a line and you are on the other side of that line. A fast no means they can define why “no” makes sense for them. This is glorious. It means you can ask why they said no. It there truly isn’t a fit you are liberated. You are free to move on. There is no more baggage, no follow ups, no awkward emails or calls. But sometimes there IS a fit and the “no” helps clear up any confusion or misconception. Yup, “no” can be a conversation starter. I’ve seen it happen. Often.

Getting to a fast no takes courage from you. YOU need to be able to give the other side the permission to say it. At the end of every optimistic investment pitch or sales call I like to ask a variation of the “asshole” question (nicely, of course): Do you see a fit here? Can we work together? Does this fit your business/investment requirements? We often don’t want to hear no so we avoid asking for it.

Getting to a “no” is a gift — often AS valuable as a “yes” — but anything in between is pure anguish.

Close the loop

Pandemic supply-chain issues aside, closing the loop is the ENTIRE goal of e-commerce: To enable customers to find and purchase product. Dollars spent in building, promoting, staffing, warehousing and fulfilling are directed to one thing: Closing the sale. Here’s a tale of two e-commerce experiences that show both sides of closing the commerce loop — I’m not sure which is worse…

The “we’ll take your money” approach

Do you want to buy those Edmund dining room chairs? No problem. Expected delivery date is 3 weeks? Sounds good. Just pay now.

This is a grab. Those chairs were ordered in March, delivered in August. Not 3 weeks. Not even close. The delivery date simply kept on slipping. No note or apology from the merchant until a text came letting me know that my blessed day had arrived. 3 weeks to 6 months in incremental time increases plays on the sunk cost fallacy because if they had said 6 months from the onset, the likelihood of an order would have been 0%.

The “we won’t take your money” approach

Do you want that Lindbyn mirror? Sorry, out of stock. Can’t have it. Can’t order it. Can’t preorder it and certainly can’t have it shipped from another store that has it in stock. It MUST come from your city.

This is the other extreme. Those companies that have inventory elsewhere but don’t seem to have unified logistics or simply don’t have inventory at the moment. Even if they anticipate inventory in the coming weeks, we the people cannot reserve or pay for it. Just a “please come back later” note and be off.

Two extremes: We’ll take your money and you’ll eventually get the product (capture) or we won’t take your money but please please please come back and check regularly (release). Both fail to close the loop.

Office…schmoffice…

Corporate America is about to be tested.

There is a revolution that is underway that will challenge even the most financially secure companies in a way that has never before been seen.

The fundamentals of how and where work gets done is changing.

For the first time since office buildings, foosball and free snacks emerged, the fight is on to leave all that behind and work from home.

This may be a new normal for some but for most of us it is something we’ve embraced for many years already. What is new is having to be patient at the learning curve of others that haven’t done this before. It has been comical. It has been frustrating. It has been rewarding and eye opening to see how quickly humans adapt. It has also been all of those things to everyone who was opposed to it prior to the pandemic who now think a work from home balance can exist.

We discovered that humans aren’t the problem here. We can change and adapt and we have over the last 100 days. Work has been done. Governments have been run.

There is, however, a clash between how humans operate and the rigid “rules” of business that have evolved over the last 150 years.

THAT’S the problem.

We’ve built an infrastructure in business that follows the same path with very few deviations. A company fights for survival, finds an office, hires employees to work in that office, competes for new employees by adding perks and incentives (loosely called “culture”), and then adds more office space, a slide, a stacked beer fridge, comfy chairs, hidden rooms, a wood burning oven for personal pizzas, themed boardrooms, more employees, more floors, scooters to get around, spaceship campuses, dorms, massages, and the list goes on. The cycle is what happens to companies. All based on a physical address.

Then the pandemic and the only food around is whatever is in your refrigerator. No more lattes, no more prepared lunches — only the coffee and stale Cheerios in your cupboard. Yet we’ve survived.

This is the new corporate America. One that shuns the ridiculously high burden that office space has put on a company’s bottom line. One that focuses on the value of the work and attracts employees who are willing to fight for the cause — even without unlimited bagels. One that trusts its employees to get the work done regardless of their location. One that builds a culture based on the values of the company and what it is trying to achieve because when you strip away all the perks that’s what is left.

Many organizations will be faced with this new reality and thrive. Others will need to take a hard look in the mirror and determine how they can rethink what they do to inspire and attract the right people that share the same vision. They will need to break years of doing things the way “they’ve always been done” and embrace new methods that are more inline with the way businesses should be run.

Perhaps we’ve swung too far to one side and the “work from home movement first” movement decisions were knee-jerk reactions to a weird moment in time. It’s possible that we end up somewhere a little towards the middle on this but it certainly won’t settle back to where we were. What took 150 years to build up has been stripped away in 100 days and it would be corporately irresponsible to go back to the way it was.

The upheaval is here. The only way to make it work is to embrace it and instead of focusing on the perks of the office, focus on building a values-based company that people will want to contribute to. The showroom shouldn’t be the reason employees are there, the mission must be. Build that and the rest will come.

*photo is my office

Be unique or be gone

We’ve all heard the story of Billy Bean by now. The GM of the Oakland A’s who was immortalized in the Michael Lewis book Moneyball and had Brad Pitt play him in the movie adaptation. As a baseball fan and stats geek, this book was one of the most accessible on the subject for everyone. It is also stacked full of lessons about leadership, management and focusing on the important things — which may not be the popular things.

Baseball is business

Despite the fact that Bean operates a Major League Baseball team, he has many of the business constraints that you and I do. First off, his team is not the Yankees, he doesn’t have a seemingly endless budget, he can’t simply buy his lineup. His management team was old school, they measure things the same way they’ve been doing it since baseball began. They prayed to the alter of power and speed and batting averages and ERA — the same way each and every other team in the league did it, including the rich teams. The A’s are not rich so Bean needed to adopt a different approach in order to build a competitive team. He needed to think differently to compete.

So do you

This describes the majority of the companies that operate today. We are in this odd time in innovation history. Most of the heavy lifting was done 25-30 years ago and companies today are refining that technology and building non-disruptive businesses on top of that layer. 20 years ago the commercial Internet was born and we are still refining it. 30 years ago cellular technology emerged with feature phones and we are still refining it today. The companies that laid the foundation for both these disruptive technologies are mostly dead and gone but their technology still enables the companies of today to build upon them. The thing is, there is so much duplication in industry today that it is very hard to differentiate between them if you are an investor or, more importantly, a potential customer.

Generally, companies today all look the same, feel the same and act the same. They also all look at data the same and are judged the same. With so much sameness, it takes a Billy Bean like character to be bold enough to change it up. To stop focusing on following a similar narrative and break the mold by looking at the data through a different lens.

“Not everything that counts can be counted and not everything that can be counted counts.”

Albert Einstein

There is competition in every business category and most businesses look and taste similar to each other. Those that are truly on the edge and innovating face the different challenge of waiting for the market to catch up to them. That is, of course, provided they’ve made the right bet and aren’t too far ahead of the curve (think Magic Leap). For the rest of us, we need to start thinking about what the right thing to focus on is in order to build our businesses.

In a stats-rich environment like professional sports, owners and managers have spent most of their history focused on what we would call today vanity metrics. Batting averages, homeruns, RBIs are all personal stats that increase a players contract value but don’t necessary propel the team forward unless all the players excel in those categories. The focus was on the wrong metrics and so were expectations. When the worst team in the league can have a player win the MVP award at the end of the season there is something wrong with the way we rank that data. If the goal is to win the World Series, is having an MVP on a last place team a victory?

When Bean focused on underused metrics like OPS (on-base plus slugging percentage) and WAR (wins above replacement) he transformed his team — until the rest of the league caught on. He had a momentary advantage. Most of the companies out there are still focused on vanity metrics — their “batting average” — to define their business. If that’s the case they will be lumped in with the rest of the carnage that will happen when one of their competitors or a startup ends up disrupting them with a different approach.

If Google and Facebook were baseball teams

Put this lens to the business models of some of the largest companies in the world today and it’s pretty clear they aren’t innovating. Facebook earns the majority of their revenue from advertising. They have refined it and with the data they have on all of us and have probably made it as close to perfect as possible. It is still a 100 year old model and still a single source of the majority of their revenue. As soon as we get smart about protecting our data and protecting democracy that business is ripe for renewal. A rethinking.

Google’s value has always been as an innovative search tool. There is no denying that their approach to indexing the internet was the greatest breakthrough for search ever. It humanized the use of the platform and left the early search companies in their wake. Now they are an intent company matching, yup, ads, to requests. Another company relying on a 100-year old business model in order to earn.

Both Google and Facebook gather data from their various platforms (including Google’s Android OS + Chrome browser + Google Maps) to serve ads. Hardly innovative. Hardly democratic. Both companies have subsumed industries and it is most likely that your company has an unhealthy reliance on one or both of them to find an audience.

Then Amazon are the Yankees

Amazon seems to be the only company of the big three that has been able to continuously innovate and earn. It started in commerce but quickly identified other business models to build out (AWS, memberships, streaming) and even have been able to pull advertising revenue from Google and Facebook while those two haven’t been able to do the same in capturing any significant ecommerce revenue from Amazon. Amazon earned roughly $3.9 billion (5% of total revenue) in advertising in Q1 2020 while Facebook pulled in a paltry $300 million (less than 2% of total revenue) from commerce in the same period.

Baseball is doing a better job at adopting data from technology to better their production. The book MVP Machine by Ben Lindbergh and Travis Sawchik dives into how coaches are pushing camera technology to create ball players. If there is a hint of natural ability can the proper use of technology be applied to creating technique that turns that hint into a career. If so, it means that the way and types of players that are drafted changes and the game evolves yet again. Nothing is too small to focus on — even counting the number of spins the ball makes after the pitch is thrown. Think about that, they count the number of times the stitching rotates and focus on increasing that number…that is precise and measurable and makes a huge difference.

Under Billy Bean, the Oakland A’s never won the World Series. His approach was quickly adopted and perfected by many of the rest of the teams in the league and it set in motion a new wave of thinking. In a sport that imbues tradition, the constraints put on Billy Bean forced him to rethink how things were done.

Some people don’t consider baseball a sport really but if a bunch of tobacco chewing luddite baseball GMs can adopt a new approach to their business what’s stopping you?

Privacy vs Utility

“Can I get your postal code?”

We’ve all had this question as we check out of our grocery store or local Ikea. Companies looking for our data to help them service us better. The optimist in me hopes that retailers ask for your postal code to better understand what parts of the city their customers are coming from in order to better serve them. The realist knows that they can merge this data with my credit card information and find out my name and address. Whichever you subscribe to, giving up even something so innocuous as a postal code means giving up a small piece of privacy for little to no personal benefit. Why do we do that?

There is a considerable fight going on right now that is important for our kids as they emerge fully ensconced in the digital age. They will only know a world with social media, streaming video and online shopping. They, and the generation that follows, will also be comfortable in trading a little bit of their privacy for little to no value.

Privacy has become the new global exchange of currency and the value of that currency depends on the companies that are collecting it.

Social Currency

This is where the now old slogan “you are the product” hails from. Social media and search companies use personal data to sell highly targeted display ads. Visitors are measured in CPM and the value of each click depends on the amount of personal data that has been collected for each person. Give more data, click on more links, like more posts and get more “relevant” and tailored ads.

For social media companies your data is their lifeline. Something to think about as Facebook and similar companies start introducing services for children under 13 and home video conferencing products…

Utility

The postal code is a simple example of data as a utility. Understanding how to service customers better/faster/cheaper does a number of things that benefit everyone. In the case of online shopping, giving up a little data could help with finding the right product. Giving up your location for services like Uber, Lyft or DoorDash could help find your ride or local restaurants that you’ll like faster.

By giving up data to utility companies the goal is a transaction of some sort. Value for the customer in the form of a product or service that they are seeking. Utility companies don’t necessarily use your data as the product but as a means to improve theirs.

Blurred Lines

There used to be two camps. One that focused on selling ads, the other focused on selling product. That isn’t true anymore. Social media companies whose business has traditionally been selling ads are now moving into online stores while Amazon now derives 5% of their revenue from selling ads. This is where it gets tricky for consumers and businesses that use social and e-commerce companies to reach them.

They who control the data

Giving up small bytes of our privacy for value doesn’t seem that bad — provided that the use of that data is for the intended purpose. For example, we’ve all become accustomed to giving up our general location to see if our local Home Depot has inventory. This is much easier and faster than getting in your car, driving the 10KM to the store to find out the product you want is out of stock. Temporarily giving up a little bit of privacy currency eliminates the uncertainty. This is a value transaction. Focusing on the utility of using the data for the purpose of actually helping moves customers to share more. Keeping the “utility gained vs privacy lost” value high on the utility scale will guide the decisions needed to make a deeper customer connection.

The data exchange

If every bit of data has a value to some company, there needs to be a fair market exchange that happens when it is given up. Or at least there needs to be an option for that. In the same way that stocks are priced based on demand, perhaps data should be priced that way as well. We set the price of our data, we determine its value to us as it relates to its use. The social media services and retailers can then decide if the price is right to ask for it, to pay for it in cash or additional services. Can you see a day where Ikea asks for a postal code and in exchange offers up free assembly?

This isn’t a call to arms — you do with your data what you want to. We just need to get smarter about the amount and the value of the information that we freely throw out with no expectations of return. We take great care in managing every other aspect of our lives that provide a return — our homes, our jobs, our investments, our credit scores — but when it comes to our identity we give it away often and for free. What is your privacy score?

The next time the cashier asks for your postal code ask what you’ll get in return. A blank stare of discontent is my guess…and that isn’t enough for me.

Photo by ev on Unsplash

The REAL Innovators Dilemma

Do something different. Challenge the status quo. Don’t build something that already exists. Stop building features, build products that move people. Be innovative. Be first. Be unique. This is the pressure and scrutiny of every single idea that gets floated by every single entrepreneur in the world. It is a lot to ask yet there are some that succeed in breaking through by making something new and make us wonder how we ever lived without it.

There are lots of entrepreneurs that have done this and along the way they’ve faced incredible criticism and ridicule because of their ideas. As someone who has started businesses I understand this acutely. Seeing things slightly or radically different than everyone else makes people uneasy. Change is difficult to see and to rationalize but it happens all the time.

The real innovator’s dilemma isn’t limited to disruptive technologies that dethrone incumbents — you have to get to that point first. It is in the criticism that casts self doubt on something that is different and derails the confidence of the entrepreneur before an idea is fully expressed.

Remember when experts wondered why anyone would ever need a computer on their desk? Remember when no one would ever sign up for streaming music services? Remember when the same was said for streaming video services? Think back to when no one would ever submit their credit card information online or when the idea of renting someone else’s home for a night or getting in a car with a stranger was insane. The ideas were revolutions. The criticism was based on the conventional approach. All you have to do is look at where we are to understand how those “radical” ideas turned out. They are accepted and imprinted on us and are now normal behaviours. Not so crazy after all.

If the founders of each of these companies had listened to the pundits talk about their businesses they would have given up and gone off to work in the government. Ours would be a mundane world of bureaucrats and paper work not missions to Mars. Change makes people uncomfortable, it also makes them critics.

Everyone’s a critic.

People see things differently and upending normal will bring detractors and naysayers. Entrepreneurs need to remain resolute on their path and ignore the critics. If the idea is worthy, if it truly does alter our path, those critics will come around. This is easy in practice but those that think differently are often those that also suffer from self doubt and imposter syndrome. How many revolutions have been quashed by a parent or friend saying that an ideas was dumb or that it will never work. Crushing.

Not every idea is great.

That’s not to say that every idea turns into a unicorn. The fact is that even revolutionary ideas need hard work and 10 years to get anywhere. The great ones that manage to do so will be scrutinized every step of the way. They will be the crazy ones, then the darlings, then chastised for their successes and then ostracized for their monopolistic tendencies. That’s if the idea is an elite idea. Most are not but who are we to destroy dreams by offering our commentary on someone else’s vision?

Future mud pie entrepreneur (age 4)

If you have kids you understand the balance between encouragement and reality. The unfettered and unbridled imagination of children are a perfect example of wild swings. What do you say to them when they detail their next greatest invention? When my son says he’s going to sell mud pies for a living did I immediately crush his dreams at age 4? Nope. I encouraged the thinking. The idea wasn’t great (who am I to say?!?) but the fact he had that idea was.

Ideas are plentiful. Some change the world, some don’t.

But the courage to come forth with one is the thing that needs to be celebrated. I had a professor in college that would always ask for ideas. Students were tentative and would all start their explanation by saying “this is a dumb idea but…” and Professor Knowles would stop them dead in their tracks to say “there is no such thing as a dumb idea.”

So to all the critics and dream dashers and soul crushers out there that think destroying ideas builds you up and demonstrates your superiority I mean this with all sincerity — STFU.