The reigning theory in business has long been that “alpha” leaders make the best entrepreneurs. These are aggressive, results-driven achievers who assert control, and insist on a hierarchical organizational model. Yet I am seeing more and more success from “beta” startup cultures, like Zappos and Amazon, where the emphasis is on collaboration, curation, and communication.
Some argue that this new horizontal culture is being driven by Gen-Y, whose focus has always been more communitarian. Other business culture experts, like Dr. Dana Ardi, in her recent book “The Fall of the Alphas,” argues that the rise of the betas is really part of a broader culture change driven by the Internet, towards communities, instant communication, and collaboration.
Can you imagine the overwhelming growth of Facebook, Wikipedia, and Twitter in a culture dominated by alphas? These would never happen. I agree with Dr. Ardi’s writing, that most successful workplaces of the future need to adopt the following beta characteristics, and align themselves more with the beta leadership model:
Do away with archaic command-and-control models. Winning startups today are horizontal, not hierarchical. Everyone who works there feels they’re part of something, and moreover, that it’s the next big thing. They want to be on the cutting-edge of all the people, places and things that technology is going to propel next.
Leaders of tomorrow need to practice ego management. They should be aware of their own biases, and focus on the present as on the future. They need to manage the egos of team members, by rewarding collaborative behavior. There will always be the need for decisive leadership, particularly in times of crisis, so I’m not suggesting total democracy.
Winning contemporary startups stress innovation. Betas believe that team members need to be given an opportunity to make a difference – to give input into key decisions and to communicate their findings and learnings to one another. Encourage team-members to play to their own strengths so that the entire team and organization leads the competition.
Put a premium on collaboration and teamwork. Instead of knives-out competition, these companies thrive by building a successful community with shared values. Team members are empowered and encouraged to express themselves. The best teams are hired with collaboration in mind. The whole is thus more than the sum of the parts.
In the most winning companies, everyone shares the culture. Leadership is fluid and bend-able. Integrity and character matter a lot. Everyone knows about the culture. Everyone subscribes to the culture. Everyone recognizes both its passion and its nuance. The result looks more like a symphony orchestra and less like an advancing army.
Roles, identities and responsibilities mutate weekly, daily, and even hourly. One of the big mistakes entrepreneurs make is they don’t act quickly enough. Markets and needs change quickly. Now there is a focus on social, global and environmental responsibility. Hierarchies make it hard to adjust positions or redefine roles. The beta culture gets it done.
Temper self-esteem and confidence with empathy and compassion. Mindfulness, of self and others, by boards, executives and employees, may very well be the single most important trait of a successful company. If someone is not a good cultural fit, or is not getting it done, make the change quickly, but with sensitivity. Pain increases over time.
Every individual in the organization is a contributor. The closer everyone in the organization comes to achieving his or her singular potential, the more successful the business will be. Successful cultures encourage their employees to keep refreshing their toolkits, keep flexible, keep their stakes in the stream.
Diversity of thought, style, approach and background is key. Entrepreneurs build teams, not fill positions. Cherry-picking candidates from name-brand universities will do nothing to further an organization and may even work against it. Put aside perfectionism, don’t wait for the perfect person – he or she may not exist. Hire track record and potential.
Everyone need not be a superstar. It’s about company teams, not just the individual. In case you hadn’t noticed, superstars don’t pass the ball, they just shoot it. Not everyone wants to move up; it’s ok to move across. Become their sponsor – onboarding with training and tools is essential. Spend time listening. Give them what they need to succeed.
Savvy entrepreneurs and managers around the world are finding it more effective to lead through influence and collaboration, rather than relying on fear, authority, and competition. I believe beta is rapidly becoming the new paradigm for success in today’s challenging market. Where does your startup fit in with this new model?
Marty Zwilling
Every new entrepreneur who has not spent years in corporate life has the advantage of an unbiased look at business opportunities, but at the same time has the disadvantage of missing critical business experiences that can cost them dearly in their first startup venture. In my experience, building a successful business is more difficult than building an innovative solution.
Fortunately, despite their lack of basic business experience, the destined-to-be-great entrepreneurs never give up, following Bill Gates after his first failure with Traf-O-Data, and Jeff Bezos after early failure with his online auction site. All too many others are so discouraged or financially destroyed by their business learning experiences that they never try again.
Fortunately, I’ve had the opportunity to work and learn for many years in both the corporate environment (IBM), as well as the exploding Silicon Valley startup environment of the 90’s. As an advisor to many startups since that time, here is my list of key business growth challenges that every first-time entrepreneur may not anticipate:
It takes relationships to make a business work. An innovative solution is necessary but not sufficient to build a business. Businesses require people relationships, to find the right team, investors, contract vendors, and attract customers. As an introvert and a techy, I know well the challenges of building relationships in today’s competitive world.
Startups don’t come with formal training courses. New entrepreneurs quickly find that what they learned in business school is no substitute for real-world business experience and training. Larger enterprises let you learn as you go, with minimal risk, and they pay for leadership training, employee management, and new project management tools.
A successful business is a long-term effort. Entrepreneurs are an optimistic and passionate group, who normally expect their idea to go viral soon, and success to follow shortly thereafter. They aren’t mentally prepared for the long-term grind, with repeated tough challenges along the way. It’s a 24/7 job with no time off for vacation or fun.
Managing personal finances separate from the business. Being an entrepreneur is a lifestyle, making it hard to isolate the startup finances from family financial stability and future retirement requirements. Startups don’t come with pension, health, or 401(k) plans included. Startup setbacks can easily cost you your house and credit rating.
Building a startup is more about love than money. People with experience in big businesses have learned that you won’t be happy even if well paid, unless you enjoy the job. Entrepreneurs who love to invent new things, but hate business, need to find the right partners before embarking down the path to a new business.
Not having a predictable income is an ongoing source of stress. People don’t appreciate a regular paycheck until they don’t have one. Entrepreneurs never know when they will be hit by technology advances, new competitors, economic downturns, or loss of a major customer. Early funding is a full-time effort, and it’s no fun for anyone.
Entrepreneurs can be lonely at the top. Once you have formally established a startup with you as the CEO, all former teammates will see you in a different light as the boss. Quickly, it will be difficult to get unbiased input, and everyone will wait for you to make the final decisions. It’s hard to find someone to share your fears and challenges with.
Peer perceptions of entrepreneurs are not always positive. It’s popular today as a young entrepreneur to talk about your dreams and initiatives, and everyone seems to look up to someone running their own business. Later, colleagues with jobs in large corporations may look down on you as a person without job security or a clear career.
In all cases, I recommend to aspiring entrepreneurs that they spend some time first working for another startup, or in a corporate environment, if they aren’t absolutely certain about their lifestyle preferences. Life is too short to spend most of it in stress and pain, handling challenges you never anticipated, even if you are convinced that you can change the world.
Marty Zwilling
*** First published on Forbes on 07/18/2016 ***
If you are one of the new age of entrepreneurs who hates the thought of doing a business plan as a first step in starting your new venture you will love this message. More and more professionals agree that a better strategy is to explore and fine tune your assumptions before declaring a specific plan with financial projections based only on your dream and passion.
In the process, you may save yourself considerable re-work and money, or even decide that your dream needs more time to mature, before you commit your limited resources, or sign up with investors to a painful and unsatisfying plan.
In a recent book on this approach, “Beyond the Business Plan,” Simon Bridge and Cecilia Hegarty outline tradeoffs and recommend ten principles for every new venture explorer. Here is my edited summary of their ten principles, which I like and may convince you that you don’t need a business plan at all, or at the very least will help you write a better one later:
A new venture is a means, not an end. A new enterprise should be pursued primarily to help you achieve your goals, like providing a better life for others, satisfying a passion of yours, or enjoying the benefits of a technology you have invented. In that context, it could be a social enterprise, or even a hobby, and a business plan may not be beneficial.
Don’t start by committing more than you can afford to lose. New ventures are usually exploratory and risky in nature, so don’t let any business plan process convince you to commit more than you can risk as a person, if your exploration fails. Start with an effectual approach, which evaluates risk tolerance, and suggests more affordable means to an end.
Pick a domain where you have some experience and expertise. Don’t handicap yourself by starting something for which you have to build or acquire knowledge, skills, and connections from scratch. No business plan will save you if you are just picking ideas at random, or copying others, just because the story sounds attractive.
Carry out reality checks and make appropriate plans. Before a business plan has any validity, some work is required to validate that your technology works, a real market exists, and your assumptions for cost and price are reasonable. Don’t be totally driven by your own passions, the emotional enthusiasm of friends, or even third-party research.
The only reliable test is a real one. Market research techniques for trying to predict the market’s response to a new venture can be costly and are often unreliable. Testing for real is the assumption behind approaches such as Lean Startup. It is also what explorers do – they go and look, instead of trying to predict from a distance what they will find.
Get started and get some momentum. Too much hesitation will kill any new venture, as markets move quickly and difficulties mount. Getting started helps to generate momentum and the sense of having done something, which provides encouragement, more incentive to keep going, and can carry your startup over obstacles. Early perseverance pays off.
Accept uncertainty as the norm. You will never remove all uncertainties, so accept them, and plan your activities in an incremental fashion. Too often, a business plan is seen as a mechanism for eliminating uncertainty, lulling the Founder into complacency. Eliminate major uncertainties before the plan, and update any plan as you learn.
Look for new and best opportunities. Many useful opportunities are either created by what you do early, or are only revealed once you have started and can see out there. So keep your eyes open and respond to new customers, new markets, and new partnerships. You will also find that looking hard also eliminates opportunities that are not acceptable.
Build and use social capital. Social capital is people and connections. No entrepreneur can survive as an island. Social capital is as important as financial capital for all ventures. As with all capital, you can use only as much as you have acquired to date. If you have no social capital, no business plan will likely get you the financial capital you need.
Acquire the relevant skills. Three basic skill sets are required for successful delivery of almost every venture. These include financial management, marketing and sales, and the appropriate production ability. If you don’t have the relevant skills and knowledge, take the time to build them or find someone to partner with, before you attempt any business plan.
If you do decide after exploring these principles to continue building a conventional business, especially with investors and employees other than yourself, I’m still convinced that a business plan is a valuable exercise. You should do it yourself, to make sure you understand all the elements of the plan, and facilitate communication of the specifics to your team and to investors.
In essence, building a complete and credible plan is the final test of whether your venture has “legs,” meaning that the opportunity matches your resources, skills, opportunity, and a level of risk you are prepared to handle. The entrepreneur lifestyle is all about doing something you enjoy, without undue stress, uncertainty, and risk. Are you having fun in your venture yet?
Marty Zwilling
The most valuable assets of a new startup are the people on the team, and the most challenging task of the entrepreneur and team leaders is to spend their leadership time and energy productively. Cash isn’t always the scarcest resource startups have to invest – more often it’s the leadership capital of under-experienced and over-stretched entrepreneurs and co-founders.
Most new startup founders start out by assuming they need to spread their leadership efforts evenly across all team members. They soon find that doesn’t work, and they fall back to dedicating their efforts to the performance issue or crisis of the moment. Unfortunately this often makes them enablers of team member bad behavior, and spiraling down to a dysfunctional team.
I just perused a recent book, “Lead Inside the Box: How Smart Leaders Guide Their Teams to Exceptional Results,” by Victor Prince and Mike Figliuolo, two top thought leaders in the field of leadership development. While their experience and focus is more on large organizations, I was struck by how similar the considerations are to my experiences with startup teams.
The authors define a leadership matrix of four behavioral categories and eight team member subtypes. Every entrepreneur needs to take a hard look at their current startup team, based on the nature of each team member’s behavior, and future requirements, to assess their leadership challenge ahead:
Domain masters. One of the most desired team member types for startups is the domain expert who is satisfied with their existing position and leadership. You count on these to deliver ongoing outstanding results. They require your lowest energy investment for the highest output. The challenge is to reward them well and not lose their loyalty.
Rising stars. These team members are the ones who perform well in current roles, with minimum leadership, but they expect leaders to provide them with a stepping stone to larger roles and responsibilities. If they don’t see that happening, they are prone to leave your startup for better opportunities, or revert to a squeaky wheel or even a slacker role.
Squeaky wheels. Team members who are capable of great results, but require an inordinate amount of hand-holding are often called squeaky wheels. An entrepreneur’s challenge with these is to wean them from their dependence on the leader, while continuing to generate solid results. Any other action will drive them to a lower category.
Steamrollers. Some team members may get results, but at the high cost of damaging team morale and destroying the goodwill you and your team have accrued with others. Your challenge is to reduce the friction they are causing, while building their people skills and improving their ability to positively influence others. Their friction is usually toxic.
Joyriders. These team members are always busy, and spend an inordinate amount of time at work, but focus on tasks they want to do, not tasks you need them to do. Your leadership task is to refocus their attention on their core responsibilities, and remove any possible distractions. Make sure they get rewarded for desired results, not time spent.
Stowaways. We all know the team member who expends the bare minimum amount of effort required to keep getting paid. Stowaways need their leaders to engage them on a regular basis, and measure them against peers to make sure they are carrying their own weight. At the least, other members need to see you holding this person accountable.
Square pegs. These are people who simply don’t have the skills they need to do the required job. The leadership challenge is to find the training or mentoring to fill the skill gap, or to find a new role that is a better match for the skills they do have. The leadership capital, and other costs to support square pegs is a huge startup resource drain.
Slackers. At the bottom of the value chain are team members who have the skills to do the job, but lack the drive or motivation. The leadership challenge here is to unlock their motivation to apply themselves to their work, or remove them from your startup before they have drained the drive and energy from the rest of the team.
Effective team leadership, or leadership inside the box, is really only half the challenge that every entrepreneur faces. Equally important is leadership in the marketplace, with customers, outside partners, and industry thought drivers. The time and energy to do both is beyond most mere mortals. It’s time to take a hard look inside your box to see if you are spending leadership capital there that you can’t afford.
Marty Zwilling
In this era of accelerating change, business-as-usual is the enemy of every business, new and old. Yet it’s an easy rut to fall into, and a tough one to break out of. Every business needs to “reach for the stars” on a regular basis, in much the same way the President Kennedy challenged a nation to put a man on the moon in an impossible timeframe more than fifty years ago.
Moonshots are simply efforts that demand breakthroughs that are not possible within business-as-usual practices. In reality, that’s the definition of a successful startup these days, so every aspiring entrepreneur should take note, as well as every existing corporate executive. Elon Musk has done it with SpaceX and Tesla, and Steve Jobs did it on a regular basis at Apple.
The challenge is to do it by design like these guys, rather than by exception. I found some good guidance on the required steps in a new book, “The Moonshot Effect: Disrupting Business as Usual,” by Lisa Goldman and Kate Purmal, a couple of consultants who have made it happen. I like their seven step approach, which I have paraphrased here for entrepreneurs as follows:
Pull together a great multi-functional team. Entrepreneurs who prefer to work alone have a hard road ahead. Every moonshot starts with a team of six to eight people, rock stars in their own area, excellent collaboration skills, highly motivated, high energy, and willing to take on challenges. It takes the right people to make a breakthrough happen.
Clearly define and issue the challenge. A dream is not enough. You need to quantify measurable criteria for success, using business metrics. These could include customer penetration, revenue growth, budget guidelines, and industry visibility. For buy-in and commitment, ask for team proposals in a specific timeframe to start the process.
Select the best proposal and announce intent. Visible leadership and commitment is a pre-requisite to real breakthroughs. This is the time to create organizational structure, leader assignments, budget constraints, and timeframe milestones. The breakthrough plan has to be communicated effectively to all constituents.
Validate and quantify the business case. Team members begin by working with industry experts, advisors, and customers to validate assumptions, implementation plans, and financial parameters. If possible, the team should be assigned to a dedicated physical space and set up a “war room” for regular strategy and progress meetings.
Finalize commitment to the plan at all levels. It’s time for the executive team and advisory board to commit the necessary funds and people resources to complete the plan. For startups, this will likely require a funding effort with friends and family, or grants. Patents and other intellectual property must be secured at this point.
Move into full project execution mode. Effective progress requires a detailed project plan, milestones, resource assignments, metrics, and status meetings on a regular schedule. In a startup, the entrepreneur is the executive champion to prevent day-to-day pressures from distracting members of the team.
Announce and launch an operational product. Initial rollout may be a public beta or minimum viable product which demonstrates the solution and tests the market on a limited basis. Even if there is more work to do, it’s time to celebrate the launch both internally and externally to build momentum and commitment.
While these steps may sound familiar to many entrepreneurs, I find the necessary discipline is often missing. Business-as-usual in a startup means everyone is working hard on the latest crisis, but no one knows the status or potential impact of the overall plan. In more mature companies, business-as-usual is a focus on existing products, with only an incidental focus on new initiatives.
In any case, it’s smart to use the moonshot analogy today to disrupt your business or startup from the business-as-usual malady. The world is moving faster and faster, so you need to shoot higher to keep from falling behind. In addition, you will like the exhilaration and satisfaction that comes with a successful moonshot. It’s the best way to change the world and leave a legacy to remember.
Marty Zwilling
*** First published on Forbes on 07/15/2016 ***
In my years of working with entrepreneurs, I have heard many times the promise that their new idea will create the next Amazon or Apple, but I rarely hear the more important promise that the founder will practice all the good habits of winning entrepreneurs like Jeff Bezos and Steve Jobs. You see, I’m convinced that the entrepreneur makes the company, not the other way around.
This seemingly radical concept of people making all the difference in business has been around for a long time, perhaps most visibly in the classic book “The 7 Habits of Highly Effective People,” first published by Stephen R. Covey over 25 years ago. Yet I still see most of the focus in the startup community on creating the best technology and process, rather than practicing the most effective habits.
In that context, I’d like to restate and amplify in business terms the top attributes that I believe every entrepreneur should aspire and commit to, consistent with the seven most effective habits detailed by Covey many years ago:
Be proactive and take the initiative. Being proactive in a new business means starting with a vision of how to do things better, rather than following someone else’s success model. We have enough social network startups. Enlarge your circle of influence, and manage risk as an opportunity, not a negative. Keep commitments, with no excuses.
Make personal life goals drive the business. Begin with the end in mind – your definition of success based on your principles. You won’t be effective centering your life around someone else’s view of success, satisfaction, and happiness. Make sure you have a personal mission statement before you try to define one for your new business.
Willing to work on the business as well as in the business. Many entrepreneurs, especially technologists, relish building the product, and assume the business will build itself. Effective entrepreneurs always put first things first, expect needs to change, and manage with discipline. That means knowing when to delegate, enlist help, and say no.
Strive for win-win relationships and agreements. Successful startups are more about stakeholder win-win relationships than win-lose with competitors and vendors. In the same way, win-win performance agreements make for effective team members, partners, and investors. Win-win puts the responsibility on the entrepreneur to deliver results.
Seek first to understand, then be understood. Communication is one of the most important skills in business. With today’s interactive social media, there is no reason to assume that you know what customers want, or they know what you have. Collect their view and communicate. Don’t be an entrepreneur with a solution looking for a problem.
Build synergistic business relationships. Valuing the differences is the essence of synergy – the physical, mental, and emotional differences that might be used as stepping stones to new business and win-win opportunities. Different points of view, even healthy conflict, is the key to innovative solutions and timely required change.
Practice continuous learning and self-renewal. Renewal is the principle and the process that empowers entrepreneurs to move through an upward spiral of growth, change, and continuous improvement. This is often called sharpening the saw. It facilitates learning, committing, and doing business on an increasingly higher plane.
For many entrepreneurs adopting these habits is a paradigm shift, as challenging as the one from technologist to business professional, but it can be done and has been done by every successful entrepreneur. In addition, the power of a paradigm shift is that it opens up a new level of thinking, and a new level of power. It’s a great new asset, often more important than new funding.
Remember that investors continue to see thousands of e-commerce and computer startups, but only a few new entrepreneurs like Jeff Bezos and Steve Jobs. If you already have the effective habits I have outlined here, make those part of the story you lead with. If you don’t have them yet, now is the time to start.
Marty Zwilling
As a startup advisor and investor, I’ve met many aspiring entrepreneurs, and I often get asked the question, “I have a great idea for a startup – do you agree that it real potential?” They don’t know that most experts agree the person is more important than the idea, yet I’ve never been asked, “I have a great idea for a startup – do you agree that I have real potential as an entrepreneur?”
Nevertheless, I’ve given a good bit of thought to some questions I might ask, or you should ask yourself, to get some indication of whether you have the right stuff to succeed and be happy in the entrepreneur lifestyle. Here are ten sample questions that I believe will reveal positive indications of your potential as an entrepreneur, and also indicate that you will select good ideas:
You see creating a business as a fun challenge. Many techies and inventors I know hate the thought of running a business – their fun and challenge comes from creating the innovative solution. For these, I recommend that they find a partner first who is willing and able to run a business. “If we build it, they will come” is not a viable startup strategy.
You tend to ask for forgiveness rather than ask for permission. This attitude indicates that you are comfortable making decisions, and ready to be your own boss – a major prerequisite for succeeding in any entrepreneurial endeavor. Of course, you do need to consider how often that strategy has worked for you, and how often it backfired.
Making big money excites you, but is not your major driver. If you are dreaming of an opportunity to get rich quick, the entrepreneur route is not for you. Most great founders lived on Ramen noodles, without taking a salary, for longer than they like to remember. For them, money is a positive indicator of success, but not an end in itself.
You relish the opportunity to set your own goals and targets. Real entrepreneurs are self-motivated, and hate to be driven by someone else’s deadlines and priorities. Arbitrary rewards, like salary bonuses or vacation perks, seem to just get in the way of achieving really great results. The fun is in the journey, as well as the destination.
You treasure your breadth of interests, rather than your depth. To build a startup, you have to enjoy the broad range of challenges, from technical to marketing to sales to personnel. Big corporations need specialists, which is why most entrepreneurs move on to start their next business when their first startup gets too large.
You enjoy building relationships as well as products. A startup is no place for the Lone Ranger. An entrepreneur has to be as adept at building a team, finding the right external partners, and finding customers, as building the solution. At the very least, you need to nurture a trusting relationship with a complementary partner to get things going.
The perks of a big title and corner office are not important to you. Most startup founders are happy to work out of their garage or home office, where they can dress comfortably, have no set schedule, and interact easily with family and friends. With the Internet and easy global communication, title and offices are not competitive advantages.
You see yourself as more of a do-er than a dreamer. People who pride themselves as the “idea” person most often fail as the lead entrepreneur. Startups are rarely at a loss for ideas, but always need a good problem solver to tackle the latest challenge. Businesses are all about implementation, production, and processes, rather than dreams.
You usually keep your cool, even in tough situations. Entrepreneurs need to be passionate without being too emotional. The realities of starting a business are not all under your control, and partners and competitors with don’t always play fair. Your team and customers need to see you as a stable leader, not an unpredictable tyrant.
Not afraid to actively listen as well as talk. Good entrepreneurs have an ego, but they are able to keep it in check. Selling your idea or product requires an understanding of the view of others, and the willingness to change based on customer feedback. Even the most famous entrepreneurs, such as Bill Gates, has a trusted advisor like Warren Buffett.
If you recognize yourself positively in most of these characterizations, then I recommend the entrepreneur lifestyle for you. There is no better time, with the cost of entry being at an all-time low, and the public image of an entrepreneur at an all-time high. Startup investors and customers alike are waiting to line up behind you. And I’m already sure your idea has great potential.
Marty Zwilling
*** First published on Forbes on 07/11/2016 ***