Hey! Are You Trying To Be Some Kinda Why’s Guy?

why-simon-sinek

As a CEO will you continue to articulate your “WHY” as effectively as you did when you were merely a Founder?

You may already be familiar with Simon Sinek’s perspective on the fundamental reason why some companies succeed and some companies fail. If you are not, you’re missing an important business thought and I’m here to help…here is a link to a 5-minute abridged version of his TEDTalk, though I encourage you to view his fuller 18-minute version.

He suggests, in short, that great companies are able to find, understand and communicate the fundamental reason for their existence…their “Why” of existence.  The problem for all the not-great companies is that articulating this “Why” becomes muddled when companies become more internally focused and get all wrapped around the axles of their internal operating processes (their “how”) and too focused on product configurations and extensions (their product “what”).  If that doesn’t make sense, you probably didn’t pause to watch the 5:00 minute video, did you?  It’s worth it…I’m just sayin’. If you didn’t, the graphic above helps boil the idea down even further.

This imagery gives those of us who work with startups a new way of explaining why “market-focused” founders beat “technology-focused” founders pretty much every time.  What Sinek doesn’t suggest, but I will, is that most startups must start with a “why”.  Most founders I meet and work with have a passion and a vision for solving a big hairy market problem.  The best founders start with this market problem and devise a product or solution to solve it. They already have, or go out and get, primary customer understanding.  They may rough-draft some solution (the “what”) so they can probe around a bit, but their venture starts with a big, passionate why:  “We’re going to change the way college students get jobs after college”; “We’re going to improve heart valve repair for thousands”; “We think we can help cancer patients receive better outcomes.”  And so on.  They need these easy-to-convey messages because their constituents, (i.e., investors, customers, partners, employees, etc.) are in a chaotic mess. As a startup grows, especially if growth is rapid, organizational and operational issues can add layers of complication to an otherwise clear and passionate “why”.  Whereas Sinek encourages companies to get back to their “why”, I encourage startups to begin with and keep centered on their “why” from the beginning.  Bake it into the culture and organization DNA. Revisit it frequently…make sure every new hire expresses it.

Some founders we meet do not start with a “why”.  Instead, some invent their way to some cool technology and then decide that they have a problem to solve…after trying to find one.  Those founders are not starting with the “why”.  They are starting with the “what” of their technology and work their way to the “how do we improve this technology” before even figuring out how the chaos of some marketplace will perceive their reason for existence. When they try to describe their business plan to me, it is usually a disorganized series of statements that is more than bad storytelling…it is a lack of the “why” that is at the center of Sinek’s golden circle that keeps you from organizing your company and team for success.

It is one thing when a company loses it’s “why” in a surrounding pool of how’s and what’s. A large company with resources at its disposal at least has a chance to re-find it’s center and core mission…think Apple here.  Sinek points out that Steve Jobs was able to continually communicate Apple’s “why” through the products they developed.  As they got big, needed to compete in multiple markets and lost Jobs to cancer, they found themselves in the wide open space of head-to-head product competition.  However, with the right people, Apple could find it’s way back.  A startup with 3 people and a founder focused on their technology “what” hasn’t got a chance to find their market “why”. (Interestingly, while drafting this post, this article popped up in which Jobs complained that his staff was doing “too much stuff”…aka, not focusing on the “why”!)

Clarity of message follows clarity of thought, and clarity of message makes it easier land investors, attract top employees and secure customers. So, always remember that wise founders should start, and remain, “why’s guys”.

Posted in Business Planning, Entrepreneurial Advice, Innovation and the World, Technology and Society | Tagged , , , , , , , | 2 Comments

American Independence…The Greatest Entrepreneurial Venture Ever (reprise)

I want you to think about something.

It is July 3, 1774.  You own about 600 acres of farmland.  You essentially run a medium -sized agricultural business and employ some 60 people.  You have 4 children and a pregnant wife.  Massachusetts, Pennsylvania, New Jersey, Virginia and others are discussing a multi-colony gathering to consider making a unified statement on behalf of all the colonies.  It’s basically illegal.  Some in your area are talking about joining them.  A friend tells you that your name was mentioned at a meeting last night.  The meeting was about organizing a local group of neighbors to be quickly alerted and prepared in the event of an armed attack by the British.

You’re a business man for Heaven’s sake.  You’ve got supplies to buy.  You’ve got buildings to build and fences to repair.  And crops!?  You’re a farmer after all…the only entrepreneurial venture where not only is your product commoditized and prices are completely out of your control and all your neighbors plant the same things you do, but even the insects and the rain and the heat and the cold and the dry work against you in ways you can’t possibly control.

But, the stamp act was expensive for you.  It was completely unreasonable, frankly, and hit at a time you were buying land and promoting your goods.  It added 15% to your costs and the British were finding ways to cope without buying as much from you.  The talk in Phelps Tavern was that you should organize a group of the area’s farmers and tradesmen to share news and information with each other about other potential taxes being considered by Parliament.  There was considerable consensus that YOU should consider becoming a Connecticut representative to the Continental Congress in Philadelphia to make sure that your and your neighbors voices were included in opposition to recent British decisions regarding port and commercial activity.

Because of your business success, you had always been consulted on issues of commerce and governance in your area.  But leaving for Philadelphia when your business needed you most in the summer is not well-advised.  And there is your wife saying, “Of course, it is flattering that they’d ask you, but I’m just glad you’re not considering it.” :)

Certainly, she’s right.   I mean, after all, it’s one thing to evaluate whether a new stone bridge across the Farmington River would make sense for the community.  But you’re needed here.  And it’s basically illegal to discuss ignoring laws from Parliament.

Now think about Independence Day, 2014.  This is as good a day as any to look at yourself in the mirror.  As an entrepreneur, you make 100 decisions every day that have an impact on your business, employees and your family.  Clearly you need to make decisions that are in the best interest of your business.  But what would you do if you were confronted with the dilemma of 1774?  Is it possible that sometimes the long-term interest of your neighbors and countrymen become the best interest of you and your business? Remember, outright insurrection like occurred in Boston Harbor could get you arrested.  It could get you shot!  Or hanged!  Then how would your farmstead and family fare?

Still, it seems reasonable to be prepared to defend the town, perhaps even from mischievous local boys.  And a few weeks away in Philadelphia would provide a better perspective on what’s happening outside this colony.  Perhaps there will be a chance to exchange ideas for seeds.  Or new techniques…new markets.

It was an enormous decision among dozens of other enormous decisions that many colonists made in those years.  I think it is important on Independence Day to remember that those decisions weren’t just some abstract theoretical points of debate.  They were decisions made by individuals that would change their lives and their businesses regardless of what outcome occurred…good or bad.  Enormous sacrifices for an unknown outcome.  Perhaps, it is reasonable then, to consider the push for American Independence the biggest entrepreneurial undertaking ever, before or since.

Happy Independence Day!  Huzzah!

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Build Your Companies…With Good Boards

Each board is different...choose carefully and use correctly

Each board is different…choose carefully and use correctly

Most of the new founders I’ve ever met roll their eyes when I suggest that they form an advisory board.  One of the main reasons people found their own companies is to have supreme magisterial control over their empire.  They certainly don’t want the obligation of reporting to and taking advice from some outsiders.  They certainly don’t want the extra work and commitment that would be required  for an effective use of a board.  However, this weekend I decided that from now on,  when a founder rolls their eyes at my suggestion, I’m pretty sure I’ll say “Bully for you!  Best of luck with your venture! I’m sorry I’m not interested in helping you and I’m certainly not going to consider funding you.” I mean it.  From now on, my clients are gonna form an advisory board of some type and we’re going to use them. I’m not suggesting that you let some other people run your company…I’m not talking about a Board of Directors with fiduciary responsibilities to the shareholders of your company.  Occasionally, those shareholder-responsibilities can run counter to founder-responsibilities.  I’m simply talking about a group of 3-5 people that are willing to spend 3 hours with you 4 times a year and provide feedback and advice and connections and an occasional smack with a 2×4 upside your head (of course, that is a different kind of board). Here are some quick thoughts about creating an effective and legit advisory board:

TechonomicMan Advisory Board Rule #1: Do NOT simply collect advisors. It’s not impressive that you list 17 names on a slide in a powerpoint titled “ADVISORS”.  Some faculty member that once told you ” you have a great idea, there” is not an advisor…it’s a person being polite.  An advisory board is also not a group of people scattered all over the world that never gets together in person or, at a poor 2nd best, via video call.  Making a phone call to an advisor who is expert in some area of your business 3 or 4 times a year on that subject is not an effective use of their time.  By keeping advisors in one-on-one conversations only, forces them to miss valuable context and prevents deeper discussion that would be gained from having that person in a room with several others.  And you may miss the very best of their experience by not allowing them to feed off the ideas of others. Bring the group together regularly for maximum effect.

TechonomicMan Advisory Board Rule #2: Do NOT call an advisory board meeting only when there is a crisis. If you are down to 2 weeks of cash for payroll and haven’t spoken to someone you’d consider an “advisor” for nine months…you are not only a bad entrepreneur, you are a jerk.  A smart entrepreneur doesn’t “use” an advisory board, she “engages” it.  Treat the people you consider to be professional advisors in a, you know, professional way.  It isn’t hard: A) Put meetings on a calendar 1-2 months in advance; B) Send update material to your advisors 1 week in advance; C) Have a high level agenda for the 3-hour meeting to touch on major aspects of your business (eg. sales/marketing and pipeline; product development; organization and staffing; financials and capital).  This professional approach not only makes you a better founder, but it is more likely to get the best out of your advisors.

TechonomicMan Advisory Board Rule #3: Speaking of getting the best out of your advisors, yes you should provide some form of remuneration to the advisors.  If they are not already shareholders, they should be provided with at least a token amount of equity.  Nothing dramatic, just a few hundred to a few thousand dollars worth is appropriate, depending on your situation. If you do bring them together in person once or twice a year (and meet online the other times), and there is travel or overnight stay involved to make the visit possible, offer a small amount of expense reimbursement.  This is probably $100 if you are bootstrapping and pre- or very early revenue.  It is probably closer to full expense reimbursement if you are up and running and more of a going concern.  Talk to your attorney or accountant for the best way to establish these policies.

You’re making dozens of tiny and several large decisions every week as the founder/CEO of your company.  And, I’m guessing that as a founder of tech company, you have a hard time staying focused on the mission at hand.  This combination of accumulated decision-making and a hyperactive and creative mind, make you a perfect candidate for an advisory board.  A well run, healthy advisory board not only provides a way to help you gut-check some of the more important specific decisions in your company, but it will also help you  recalibrate your company strategy and mission a few times during the year. “Measure twice, cut once” is the old woodworkers adage regarding boards. For the tech entrepreneur, I hereby declare the mantra to be “the cut of your company can be measured by the effectiveness of your advisory board”.  Or something like that.

Posted in Business Planning, Entrepreneurial Advice, Seed/Venture Capital | Tagged , , , , , | 1 Comment

The Four Seasons of Your Start-Up Begin in the Spring

The inner dynamics of a start up…like sands through the hourglass.

In case you hadn’t noticed, it’s been about 9 months since I posted anything…time to get busy! While I’m working on some new stuff, I thought I’d re-post this since it’s, well…you know, Spring.

I spend a lot of time with start up companies.   To be specific, I spend more time with start up companies than I spend with my wife.  That is actually true and explains why despite 22+ years of marriage, I think I understand start up companies better than I understand women.  With that in mind, I’ve observed and want to share my thoughts about the evolutionary stages that start ups go through as a framework for understanding them better.  I think this matters for you as a start up company or, perhaps even more importantly, for you as an advisor to start up companies.

My view is that start up companies, to achieve success, will progress through 4 major stages before departing “early stage” or “start up” status.  As with any good rule, no individual company actually follows all these stages, and yet somehow, they all do.  I’m calling the four stages the “Four Seasons” because it obviously possesses more flair and lends itself more to a potential book deal.  I arrived at the framework for these seasons, as I listened to “The Boston Consulting Group on Strategy” audiobook in my car.  I’d actually recommend you get the print version and read it sitting still because concentrating on complex business strategy concepts while working through traffic at 80 mph does tend to challenge the senses…especially while also keeping one ear on your smartphone…DID THAT JUST BUZZ?!  Stay calm…here are the seasons your start up will flow through:

Spring     =     Experimentation

Summer =     Tactical Execution

Autumn =      Operational Organization

Winter   =     Strategic Maneuvering

We’ll probably take care of these in a couple of separate blog posts.  Let’s start with the spring when all is fresh and new, and pollen covered and allergic-reaction-inducing.  In terms of a start-up, the spring is the beginning and clearly an experimentation stage.

The Spring of Your Start-Up…Experimentation

When founders found a company, they usually do so, based on several critically flawed notions. The trouble is, you never know which of their assumptions are critically flawed. What we know is that the percentage of your glass that is filled with uncertainties is larger than the percentage filled with certainties.  In the spring of your start-up, founders are and should be, probing the boundaries of their assumptions.  They are probing their assumptions with regard to technology veracity, customer-base validity and management team, um, virility.  I don’t have a clue how long the spring will last for your business.  And while spring on planet earth signals warmer mornings and brilliant sunny days, spring in your start up can feel like the winter of your discontent.  Customers can inexplicably evaporate. Production costs are twice as high and take twice as long as you hoped. Your business partner decides that full-time wages beats full-time no-wages. You are probing…probing.  And you should be.  And you should plan for this potentially long season.  Spring in a start up can last for years and, like some species of life on earth, start ups can die in the flowering stage.

But the probing goes on for those that last.  Elation associated with spring often emerges with the signing of a customer.  And then, maybe, another customer.  Maybe a third who hires you more for consulting than your product…and in a different industry than the other two, but its a customer.  And, OK, so the purchase decision by one of the three was made by a former college roommate who happens to be the VP of something at a business in an industry not targeted by you. But it is real revenue!  The beautiful aroma of spring is in the air!  Your idea is validated!  Several other relationship-based sales prospects are favorably evolving.  This all proves your technology has some value.  It does NOT prove that you know how to build a business.  This is why so many “seed stage” investors really don’t invest in your business until you’ve started securing a series of non-relationship-based sales.  They want evidence that your SALES PROCESS works, not just your technology.

The good news is that buds are on the vine.  The family members who took a lot of convincing are starting to make eye contact with you again!  You’re no longer introducing yourself as a “consultant”, but as a “founder” at Thanksgiving gatherings.  Your start up finally got, say, $250,000 in total revenue after 18 hard months!  But alas, as with spring on earth, spring in start ups tends to bring with it…rain.  It is going to rain.  There are a lot of opportunities flowing in…some prospects are finding YOU!  Unfortunately, you don’t really know why.  What did they search on? What are they searching for? What are they expecting? So much probing and experimenting yet to do. Different messages, different contact approaches, different pricing packages…probe, probe, probe.  This is life during spring in  a high tech start up.

Put a system in place that allows you to evaluate the successes and failures of your customer probes.  I know, this might just be a weekly meeting with your sales person.  Not exactly some complex methodology, but build the discipline.  Look for trends.  Be objective.  Be critical.  Ask your sales guy to keep better notes and look for trends.  Ask your incubator manager what she thinks about the trends you think you see.  Probe, probe, probe.  Spring is when you begin converting your business concept into a business plan.  Summer is coming…in the next post.

Posted in Business Planning, Entrepreneurial Advice, Tech Based Economic Development | Tagged , , , , , | 1 Comment

Assessing Your Competitive Landscape…It’s a Forest Out There

It's easier to find the path when you see the whole forest.

It’s easier to find the path when you see the whole forest.

I’m finally going to get a business plan pet peeve off my chest and onto your shoulders.  I’ve decided that I’ve read my last business plan with a “Competition” section that blithely lists a few direct competitors and a factoid or two about them.  Statements like “We compete with Blackboard, a large, global, $600 million educational software company.  We feel they are too large to focus on our niche.” will no longer be tolerated in my office.

When I want to know about your competition, I don’t really want to know about individual trees.  I want to know about the whole forest ecosystem in which you’ll be competing.

There are several ways in which entrepreneurs fail to accurately describe and, therefore fail to understand, the nature of the market forest they’ll be facing at launch.  Most common among these is an inadequate understanding of their actual market segment.  You cannot understand your market segment by reading a market study.  My experience is that market studies prepared to cover large segments…data security, for example…are too oblique to have relevance for a teeny-tiny start-up.  The fact that a $6 billion market exists is good.  Knowing that it is generally growing at 11% per year is a little more meaningful.  But for the most part, I don’t care.  What I want to hear is the classic “bottom up” understanding of your target customer.  After all, data security is not a market, it’s a task that needs to be solved by a market. Markets consist of groups of customers that share certain characteristics; certain needs.  Banks have different data security problems than hospitals do.  Large hospital networks have different data security problems than small hospitals do. Small hospital finance departments have different data security problems than small hospital patient safety departments do.  And so on. The point is you can’t possibly know your competition until you have drawn a circle around the appropriate group of companies with similar needs and characteristics.

Telling me that Cisco is a competitor in the data security industry tells me nothing about how you should approach your target customer base.  It does not help YOU understand how to organize your sales process, operational structure, staff, product development roadmap, etc. to compete to win the first small hospital customer.  Or the tenth, or hundredth.

If you are going to tell me about individual company competitors in a market segment, be sure to tell me about the value propositions and benefits they offer to customers in your target segments.  Tell me about the customers with which you’ve already been in communication and what data security providers are doing for them now.  If you don’t already have first-hand knowledge of the your target customer segments…get some!  If you’re not already selling in a market, and even if you are, you had better have a serious depth of understanding how your target segment makes purchasing decisions and a compelling story of how you’ve built your product offering to address the specific priority needs they have.

The companies that you will have to compete with in your target market segment will only be understood if you are accurate in identifying and describing and quantifying your specific target market segment.  Existing competitors in that target market segment have had success there for a certain set of reasons.  Cisco isn’t successful in it’s markets simply because it is large…it is large because it is successful at competing for customers.

The final mistake that about 20% of new founders make when assessing their competition is the dreaded “we don’t have any competitors.”  You’ve lost my interest at that point.  When you tell me that, you’re saying “I don’t know what my customers are doing to solve data security now, and I probably don’t even understand who my customer is really, but no one else offers them my particular product configuration.”  From that point on, I’m probably spending most of my meeting with you challenging every one of your other assumptions about your business. Your product configuration is irrelevant unless it has been intentionally created to address a customer segment’s needs…and they are probably doing something to solve their problems now.  It may be suboptimal compared to your vision of the future, but some sort of competitor is currently doing enough to get their attention and money.

Be aware that your competition may not be a particular competitor at all, but rather a confluence of solutions that emerge from the competitive landscape.  Simply put, be sure to spend a lot of time focusing on current solutions being provided and less time telling me about how some giant competitor is to big to be agile.

Certain trees thrive in certain forests and not in others.  Most industries have market crevices where your new, little business tree has a chance to take hold, even next to the oldest old-growth tree there is.  To understand your competition is not to understand the competitors, but the ground on which they compete.

Posted in Business Planning, Entrepreneurial Advice, Seed/Venture Capital | Tagged , , , , , , , , , | 5 Comments

Please Do Not Take This Advice

Advice is cheap...remember that the next time you're given some.

Advice is cheap…remember that the next time you’re given some.

As a start up founder, you have a responsibility to yourself, your co-founders and your fledgling company to seek out the best advice you can about how to grow and manage your venture.

I would advise you to not follow any of it.

Well, I would follow that particular piece of advice…I mean, if you don’t follow advice that says don’t follow advice…I guess you’d be following it. Right?  Let’s try this again.

If you’re a smart founder, you will seek out, and you will find, lots of good advice for how to grow and manage your venture.  Just be careful as to what advice you take.

You may have noticed that as you’ve started your tech company, you’re missing a few things. Capital? Probably don’t have enough of that, right? People? You’re certainly missing access to enough human capital.  Access to customers! Yeah, you’ll never get enough of that.  However, notwithstanding your lack of all these ingredients, the thing you’re going to need more of than anything else is entrepreneurial skill.  Entrepreneurial skill is that combination of brain smarts and gut smarts that allows you to assess the stuff you’ve got control over and the stuff you don’t.  Entrepreneurial skill is what you use to figure out the best ways to get what you don’t have, mix it with what you do have, and then arrange it all in ways that make your business grow.  Put that way, it sounds kind of complicated.  And it is.  It sounds like you’re gonna need some help.  The good news is that there are hundreds of books on founding companies.  Maybe you should read a few of those books, or apply to one of the dozens and dozens of fancy 12-week accelerators and get all the advice you need to sort this all out.

Sounds logical, but my experience tells me it is more complicated than that.  I’ve actually had clients come and tell me how excited they were after a meeting with a potential supplier or vendor who is well-known in their industry. The important thing to remember is that without the context of knowing some details about your business,  advice from these strangers might be interesting…but should not be taken seriously!  You should consider listening to advice from advisors if ALL of the the following elements are present:

1) The advisor has a track record of success.  The advisor does not need to have launched, grown and exited a business to be a good advisor, although that history certainly helps.  The advisor may only be a successful investor or successful corporate executive or attorney/accountant.  Or incubator manager!  What matters is a depth of experience and track record of helping companies launch.

2) The advisor needs to know your business.  Getting a question answered on Quora by Steve Blank or David Rose does not necessarily make it good advice. It might be good advice, but it might also simply be 80% advice…that is advice that is probably good in 80% of the situations…and the chances of your business being in that 80% is only…what? Like 80%? Not 100%.  No matter how experienced the advisor, it is difficult to provide good specific advice if the advisor is not familiar with things like your balance sheet, your sales pipeline composition, the capabilities of your team (i.e., both your dedicated team and those team members you think are dedicated but may actually not be), etc., etc. etc.  I don’t believe any advice from a single one-hour meeting should be taken all that seriously…especially if the meeting came about from you asking something from the advisor…like advice from a VC with whom you’ve had your first meeting.  I can’t tell you how many clients have come back from that first meeting with a VC and tell me “They told me I’m not raising enough money”.  For the record, this is probably true…you probably aren’t raising enough money, but that has little to do with how much money you SHOULD raise!

3)  The advisor begins making his or her network open to you.  In my experience, when someone who fits #1 above, and begins establishing a relationship with you along the lines of #2 above, and THEN makes an earnest introduction to someone else in their network, that advisor is making a longer term commitment in you and your venture.  This is a sign that this advisor is not just thinking about the 80% advice, but is really thinking about your business and how this advice lays into it.

Good advice comes from good advisors who have at least an intellectual commitment to your business.  The smart entrepreneur knows how to sift through good advice, bad advice, well-intentioned advice and contextually relevant advice.  An entrepreneurial skill that can’t really be taught is how to mix all those together and pull out the threads of relevant actions for you to take.  After all the advice…actions are all up to you!

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Venture Tips Update….Make Your Business About Your Customers, Not Your Technology

It's your customers!

It’s your customers!

I originally published the majority of this post back in January, 2012, but I was reminded of the issue again today…twice.  So I updated the post on why you should think of your business in their terms.

A founder came to see me yesterday to give me an update on how 2011 went and to bounce some ideas off of me for where to take the company next.  The company is a small business that is approaching $1 million in revenue.  Their software serves a very narrow market niche currently and has generally been an installed piece of software until the last 12 months or so when they offered up a web-based version.  In looking at their market and segments within it, we figured they’d probably landed about 10% of the target customers.  And they’ve sold the boxed version of the software to about 3,000 customers and the online version has now been sold to about 200 more.

Their software application, with a bit of investment and a new hire or two, could be adapted to a couple of other niche industries.  And the founders love their little application.  Their potential new market niches seemed to get the founders pretty excited and they had basically defined their fundraising needs so that they could build the new product and start marketing it to the new customer base. A customer base they know nothing about.

I asked him why he would want to do that.  He said it was because “the application is just so darned flexible.”  I told him that I thought his 3,000+ customers deserve more from him than that, and so do the next 3,000 customers!

Now I’ll be honest.  Many of the clients I work with have, well, zero clients.  So my rather dull eyes immediately focused on all those shiny customers.  I felt it was obvious that he was in danger of ignoring the most important asset his business had accumulated over the years…his customers!  The first version of the software he built was built on an ancient platform and very difficult to use, as evidenced by the support document which was a 500 page, photocopied, ring-bound tome. And this unsophisticated mess was released not 20 years ago, but in 2003!  And guess what…?  People were buying it!  And now he has managed to begin converting his customer base to the online version of the site, which they’ll have to visit every single day their businesses are open.  He landed one of the largest companies in the industry as a client at the end of 2011.  And yet, somehow, he was fixated on the other potential markets for the software and not the customers.

There are certainly opportunities to pursue the development of other market applications with their platform.  However, these should be opportunistic at best and will not likely involve his company directly, but perhaps through some licensed version of the code.  Without a doubt, for some other companies, pursuing new niches is a good idea strategically…especially when your current niche ain’t buyin’.  So every company is different.  But when you’re having the kind of success mining a mountain that this company is having, and you’ve only mined 10% of the gems, why would you go looking for a new mountain?

Another client and I had a conversation today about a strategic decision he is facing. His business has entered a bit of growth phase and has been approached by a foreign company about a strategic relationship…possibly an investment to allow the foreign company to enter the US market with a line of products that are similar and complementary to my client’s products.  For a variety of reasons, it is a tempting option, but one with risk. We spent about an hour discussing the other company and its product line and finally we got around to discussing the target market of my client where he is beginning to gain increased traction. I said “have there been companies in your targeted industry and size range that you lost but might have won by including this foreign company’s products?” When he said “maybe, but probably not,” the decision regarding the foreign company got easy.  If you think in terms of your customers and not your technology, it becomes easier to make clear decisions with no regrets.  There is always the chance that the road not chosen could have led you to the promised land.  But you have to play the percentages…and I’d bet on my existing customers every time.

Also today, I met with a brand new start-up and we were going over their investor deck.  It was pretty good, but just didn’t sit well, overall, with me until we went back to slide 3 where the company had their one-sentence elevator pitch.  It said something like “Our company is a cloud-based, crowdsourced platform that generates new sources of funding by leveraging…something, something, something…for medium sized companies in the publishing industry”.  When we went back to that, I realized what was wrong…the first words they used to describe themselves were about their technology, NOT their customers! PEOPLE! If you want to develop cool technology, go to a hackathon.  If you want to build a business, solve a customer problem!

The outcome for all of these companies is still uncertain.   But my advice to you as you build your business is the following:

1) If you are a relatively small business (<$5 million in revenue) and can evaluate your customer base and see that a meaningful majority of it can be described in a certain way (eg., medium-sized US clinical laboratories) and you haven’t even landed half the businesses in that segment…go dominate that segment! Don’t start changing your product or service to chase an unknown segment yet. 2) If you’re starting to penetrate an easy to define market segment, evaluate every strategic decision about product development, partnerships, new hires, etc. with the eyes of that customer segment in mind. “How will this help me dominate this customer segment?”  3) If you’re just starting out and don’t have any customers yet, pick a target and define your business as one that serves that target, not as one with a particular type of technology.

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