Showing posts with label business. Show all posts
Showing posts with label business. Show all posts
Thursday, 8 April 2010
People, Passion, Perseverance: You've Got Entrepreneurship
People, passion, perseverance. Former AOL CEO and Chairman Steve Case describes these words as the bedrock of successful entrepreneurship. Heading into what may be a "golden era of entrepreneurship," he says that he relies on the "three p's" as assessment tools to help guide his direction and goals. When all of the three parts are in balance, an entrepreneur can achieve success like that of AOL; when they aren't, you get the failure of the AOL-Time Warner merger.
Friday, 19 March 2010
Be Like the Internet
Be Like the Internet - 8 steps to success in a post 2.0 world
View more presentations from Thor.
- Let Go: 8 Steps to Success Go! 2.0 World Let in a post 8 Steps to Success in a post 2.0 World
- Letting Go: Letting Go 8 Steps to Success in a post 2.0 World 8 Steps to Success in a post 2.0 World
- Losing Control: 8 Steps to SuccessControl Losing in a post 2.0 World 8 Steps to Success in a post 2.0 World
- Why are some companies so overwhelmingly successful on the network? (While others seem to be killing themselves off)
- Or, what makes Google Google?
- We’ve seen a fundamental shift in how value is created 1. Collapse in the cost of creation 2. The network changes everything
- We used to focus on building core competencies
- Cheap coordination allows value to be created on the edges
- We're moving from an industrial age...
- ...to a networked one.
- Industrial age assumptions still rule.
- But the networked world doesn’t work that way
- The way for a business to thrive in the networked world is to adapt to the network (not the other way around)
- Be Like the Internet 8 Steps to Success in a post 2.0 World
- That leads to two questions: 1. Um, what? 2. Ok, but how?
- Basically, get used to it being out of your control
- Most of what matters to your business is happening outside your business
- And it’s happening faster and faster
- YOU ARE A NODE
- YOU ARE A NODE you
- YOU ARE A NODE y
- Your new home page
- Ok, sure, but practically what does this mean?
- 8 ways in which you* can change to... BE LIKE THE INTERNET
- 1. From control to chaos
- Adapting to chaos: we’re naturals “They walk fast and they walk adroitly. They give and they take, at once aggressive and accomodating. With the subtlest of motions they signal their intention to one another.” William Whyte, City (1969)
- Unpredictability requires new ways to plan
- Iteration Iteration Iteration Iteration Iteration Iteration Iteration Iteration
- Yelp: customers lead the conversation
- Disney’s image in the hands of passersby
- 2. From convention to instinct
- From red oceans to blue oceans
- Southwest: ignoring sacred cows
- Starbucks: coffee becomes a lifestyle
- American Apparel: upstart with an attitude
- 3. From process to flow
- The industrial model: Hierarchies and procedures
- The network model: Fluid dynamics
- As seen in the brain’s synapses...
- As see in a colony of ants...
- What is Flow? Flow is the mental state of operation in which the person is fully immersed in what he or she is doing, characterized by a feeling of energized focus, full involvement, and success in the process of the activity. Flow, is also another name for "flux" in physics, which is the rate at which something travels through a given cross section
- Product development teams are adapting to manage the speed and uncertainty of the network
- Abandoning the waterfall for the washing machine
- Improvising directly with customers Example: 30 Boxes
- 4. From documentation to collaboration
- If the goal is to get into flow and avoid top-heavy process, how?
- Whiteboard sessions
- Cocktail napkin collaboration
- Rapid prototyping
- Bioteams that leverage short messaging
- Pixar’s approach to movie development
- “Make it OK for people to challenge an idea or two, the good ideas can withstand it and the weaker ideas fall away and make room for something [better].” -Brad Bird, Writer/Director of the Incredibles
- 5. From fear to confidence
- Fear of competition
- There’s nowhere to hide anymore
- Embrace critics and whistleblowers
- vs. Kaiser Permanente
- The truth about the Digg revolt
- Jetblue apologizes via Youtube
- 6. From ownership to stewardship
- In service of a higher purpose
- Ted Rheinold of Dogster “About week 3 I realized I wasn’t in charge anymore.”
- It’s true for individual practitioners as well
- Google aims to be a steward for the Internet’s decentralized nature, its core social good.
- 7. From walls to openness
- It’s not clear where you interests end and others begin
- Secrecy is obsolete
- Boundaries are optional
- Create ecosystems around your business
- Measure success by the meaningful connections in your own network
- 8. From inside to outside
- There’s a lot more going on outside your business
- How do you need to change to BE LIKE THE INTERNET?
- Develop a practice of valuing ideas on their merits and their connections
- Beliketheinternet.pbwiki.com Come by our wiki to share stories about to put these principles into practice
The New Paradigm of Advantage - 20th vs 21st century
The past of advantage was extractive and protective.
The future of advantage, on the other hand, is allocative and creative.
20th century
21st century
The future of advantage is radically different from the past for a simple reason: because it's economically better.
20th century
Extractive. Over two decades, Microsoft has honed its extractive edge, coming up with cleverer and cleverer ways to extract profits from customers and suppliers. But Microsoft's just a flea on Wall St's elephant — who mastered extractive advantage by finding ways to, ultimately, extract trillions from you, me, and our grandkids. Extractive advantage asks: how can we transfer value from stakeholders to us, 10x or 100x better than our rivals?
Protective. Think Microsoft's the master of 20th century advantage? Think again. Monsanto's Round-up Ready strategy protects genetically modified crops with proprietary herbicide that crops need to flourish. The result? A protective advantage: Monsanto's made sure that farmers are locked in to Monsanto as tightly as possible. Protective advantage asks: are buyers and suppliers locked in to dealing with us, 10x or 100x more tightly than to rivals?
Protective. Think Microsoft's the master of 20th century advantage? Think again. Monsanto's Round-up Ready strategy protects genetically modified crops with proprietary herbicide that crops need to flourish. The result? A protective advantage: Monsanto's made sure that farmers are locked in to Monsanto as tightly as possible. Protective advantage asks: are buyers and suppliers locked in to dealing with us, 10x or 100x more tightly than to rivals?
21st century
Allocative. Google's advantage was built on allocating attention to content and ads better than its rivals. Google's real secret? Relevance, media's measure of how efficiently attention is allocated. Match.com is building an allocative advantage in, well, matching people with partners. Allocative advantage asks: are we able to match people with what makes them durably, tangibly better off — and can we do it 10x or 100x better than our rivals?
Creative. Apple's advantage is, of course, radically creative: built on creating insanely great stuff that turns entire industries upside down. Next month, the iPad promises to do what the iPhone and iPod did before it. The power's in the creativity, not just the technology: Apple's thinking different yet again. Creative advantage asks: is our strategic imagination 10x or 100x richer, faster, and deeper than our rivals?
Creative. Apple's advantage is, of course, radically creative: built on creating insanely great stuff that turns entire industries upside down. Next month, the iPad promises to do what the iPhone and iPod did before it. The power's in the creativity, not just the technology: Apple's thinking different yet again. Creative advantage asks: is our strategic imagination 10x or 100x richer, faster, and deeper than our rivals?
The future of advantage is radically different from the past for a simple reason: because it's economically better.
20th century advantage focuses firms on simply extracting resources from people, communities and society — and then protecting what they extract.
21st century advantage focuses firms on creating new resources, and allocating them better.
The former is useful only to shareholders and managers — but the latter is useful to people, communities, and society. The old Microsoft was useful to shareholders, but a lot less useful to society — and that's exactly how Google and Apple attacked it, and won.
An economy built on extractive and protective advantage is a giant, endless Ponziconomy. Value is transferred from one party to the next — but little is created anew. That's what we're finding out the hard way.
An economy built on extractive and protective advantage is a giant, endless Ponziconomy. Value is transferred from one party to the next — but little is created anew. That's what we're finding out the hard way.
Only through creative and allocative advantage can we rebuild a more meaningful economy.
Via: blogs.hbr.org
Via: blogs.hbr.org
Thursday, 4 March 2010
Andrea Pontremoli : La forza del sogno
"La forza del sogno è quella di disegnare qualcosa dove agli altri vogliono essere" Andrea Pontremoli
Tuesday, 23 February 2010
Unlearn Your MBA
David Heineimeier Hansson (@dhh), the creator of Ruby on Rails and partner at 37signals in Chicago, says that planning is guessing, and for a start-up, the focus must be on today and not on tomorrow. He argues that constraints--fiscal, temporal, or otherwise--drive innovation and effective problem-solving. The most important thing, Hansson believes, is to make a dent in the universe with your company.
Friday, 4 December 2009
Does every startup need a Steve Jobs?
What does Steve Jobs really do for Apple?
I had a recent conversation on Apple’s incredible design culture and what it would take to create that in a startup. In many ways, it seems like an insurmountably difficult challenge to play the role of Steve Jobs, with his god-like sense of product aesthetics and interactions.
And yet, Apple has hundreds of products and experiences – hardware, software, HR materials, commercials, etc. Steve Jobs certainly doesn’t have time to work on the design of every Apple product, and of course has 35,000 employees to manage. So what does Steve Jobs really do, to create the amazing design culture at Apple?
And more importantly, can a startup hope to even start to capture the same kind of culture?
Well, let me give you my best guess
IDEO’s product framework for Desirability, Feasibility, and Viability
First, let’s take a quick detour and talk about IDEO’s perspective on new product development – this is documented as part of their 100+ PDF on human centered design, but also recounted to me by my patient girlfriend who works there.
The idea is that all products ultimately come from an epic struggle between three perspectives: Desirability, Feasibility, and Viability. IDEO focuses on new products from the desirability side, which means they think about how to make sexy products with clear value propositions, and think technology and business goals flow from that. Most of their Fortune 500 clients do not act this way, of course, which is why they have to hire IDEO.
Here’s the diagram included in their HCD toolkit:
The way this was retold to me is that these factors map into functional parts of a business:
Viability = Business focus (marketing, finance)
Feasibility = Engineering focus (technologies, agile process, etc.)
Desirability = Design focus (customers, aesthetics, etc.)
Business-focused product perspective: Viability
For business-oriented products, the focus might be on any of the following:
“hot markets”
making money
funding potential
distribution
metrics
The idea there is that you get to a product via one of these first-order items. A business-oriented entrepreneur might identify a market, then try to come up with a product within the market – for example, “wow, Zynga is making $250M/year, and fish games are big. I should come up with a social gaming product too.”
I would also argue that “corporate” thinking (including MBAs and biz plan competitions) fundamentally revolve around this approach – the most important thing becomes the analytical discussion around the business, rather than the core user experience itself. Financial metrics and market sizes become the dominating point of discussion – I would argue also that most venture capitalists fall into this bucket.
The big “religions” in this perspective are frameworks like Built to Last, Crossing the Chasm, Customer Development, Blue Ocean Strategy, even Efficient Market Hypothesis. You might also count Six Sigma, all the stuff in McKinsey quarterlies, etc.
Engineering-focused product perspective: Feasibility
For technology-oriented products, the focus might be on the following:
programming language and development stack
cool technologies or libraries
engineering processes (agile or otherwise)
For people who use this as a first-order filter, you might end up with a line of thinking like, “BitTorrent is really cool, how do we build a business around it?”
I would also put engineering processes like agile into this, because that can easily become a first-order item in how to build a product as well. Agile won’t work for every team, for every product, in every situation, and yet it’s viewed as an all-purpose hammer – does that really make sense?
The big “religions” in this perspective are frameworks are agile, scrum, open source, etc. I might also count the “ecosystems” like Rails as a unique culture with its own set of beliefs and conventions. Frameworks like “Lean Startups” ultimately combine both Business and Engineering goals, via Customer Development plus Agile.
Design-focused product perspective: Desirability
For design-focused products, the focus might be on:
context, culture, and goals
customer goals and product experience
design aesthetics and interactions
The first-order filter in this case might be “Sick people go to hospitals and have a terrible experience – how do we improve that?” The tools employed at this initial stage might include user research, development of personas and user goals, and rapid prototyping to explore many product concepts.
The big “religions” here are led by Apple and their aesthetics and standards. And of course folks like IDEO and their “design thinking” ideas.
How business and engineering goals encroach on the desirability of a product
Reading through the above, perhaps you have identified yourself as prioritizing one versus the other. And in general, the prioritization of the three different goals drives what kinds of product experiences you can build.
From the perspective of making a sexy, highly desirable product, you’ll find lots of objections from business or engineering:
“spending money on visual design is too expensive”
“polishing a product will make the process too slow”
“this product is boring to implement”
“can you redesign this product so we can build it in 1 week sprints?”
“this target user is great, but we want the product to be more powerful and support more audiences”
“but Zynga doesn’t do this, can you just copy them?”
“why build so many prototypes that get thrown away? That’s costly and slow”
“if you added X to this product, it would put us into strategic market Y”
etc.
How do you handle questions like the above?
All of them are great questions, and of course the right answer means you have to find a balance in the approach. But what is the expense towards the core of your product experience?
Back to Steve Jobs – what does he really do?
Long story short, my hypothesis is that Steve Jobs is one of the rare CEOs who is very focused on product desirability. In battles with the business and technology goals, desirability will almost always win out.
So his role isn’t that of a designer, but rather Chief Design Advocate. This means:
he makes it clear that products should be “insanely great”
he recruits a top design team, and protects them from competing goals
he is willing to spend money, adjust technology processes, all for the goal of highly desirable products
he convinces financial analysts, industry pundits, etc. that product design is very important
To me, the amazing part about this is: Any company can do it.
Maybe not as good as Jobs, but they can decide to make it a priority – but few companies do. With the pressure of quarterly earnings, what competitors are doing, and employee aspirational desires, the focus moves off of killer experiences for customers – that’s no good.
If the above is true, then any of us can be the Steve Jobs of our team. Start by prioritizing design and desirability, and place it on a better footing relative to engineering and business goals. Learn the tools, develop your own religion, and start building great product experiences.
It almost sounds so easy!
http://andrewchenblog.com/2009/12/04/does-every-startup-need-a-steve-jobs/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+AndrewChensBlog+(Andrew+Chen+(@andrew_chen))&utm_content=Twitter
I had a recent conversation on Apple’s incredible design culture and what it would take to create that in a startup. In many ways, it seems like an insurmountably difficult challenge to play the role of Steve Jobs, with his god-like sense of product aesthetics and interactions.
And yet, Apple has hundreds of products and experiences – hardware, software, HR materials, commercials, etc. Steve Jobs certainly doesn’t have time to work on the design of every Apple product, and of course has 35,000 employees to manage. So what does Steve Jobs really do, to create the amazing design culture at Apple?
And more importantly, can a startup hope to even start to capture the same kind of culture?
Well, let me give you my best guess
IDEO’s product framework for Desirability, Feasibility, and Viability
First, let’s take a quick detour and talk about IDEO’s perspective on new product development – this is documented as part of their 100+ PDF on human centered design, but also recounted to me by my patient girlfriend who works there.
The idea is that all products ultimately come from an epic struggle between three perspectives: Desirability, Feasibility, and Viability. IDEO focuses on new products from the desirability side, which means they think about how to make sexy products with clear value propositions, and think technology and business goals flow from that. Most of their Fortune 500 clients do not act this way, of course, which is why they have to hire IDEO.
Here’s the diagram included in their HCD toolkit:
The way this was retold to me is that these factors map into functional parts of a business:
Viability = Business focus (marketing, finance)
Feasibility = Engineering focus (technologies, agile process, etc.)
Desirability = Design focus (customers, aesthetics, etc.)
Business-focused product perspective: Viability
For business-oriented products, the focus might be on any of the following:
“hot markets”
making money
funding potential
distribution
metrics
The idea there is that you get to a product via one of these first-order items. A business-oriented entrepreneur might identify a market, then try to come up with a product within the market – for example, “wow, Zynga is making $250M/year, and fish games are big. I should come up with a social gaming product too.”
I would also argue that “corporate” thinking (including MBAs and biz plan competitions) fundamentally revolve around this approach – the most important thing becomes the analytical discussion around the business, rather than the core user experience itself. Financial metrics and market sizes become the dominating point of discussion – I would argue also that most venture capitalists fall into this bucket.
The big “religions” in this perspective are frameworks like Built to Last, Crossing the Chasm, Customer Development, Blue Ocean Strategy, even Efficient Market Hypothesis. You might also count Six Sigma, all the stuff in McKinsey quarterlies, etc.
Engineering-focused product perspective: Feasibility
For technology-oriented products, the focus might be on the following:
programming language and development stack
cool technologies or libraries
engineering processes (agile or otherwise)
For people who use this as a first-order filter, you might end up with a line of thinking like, “BitTorrent is really cool, how do we build a business around it?”
I would also put engineering processes like agile into this, because that can easily become a first-order item in how to build a product as well. Agile won’t work for every team, for every product, in every situation, and yet it’s viewed as an all-purpose hammer – does that really make sense?
The big “religions” in this perspective are frameworks are agile, scrum, open source, etc. I might also count the “ecosystems” like Rails as a unique culture with its own set of beliefs and conventions. Frameworks like “Lean Startups” ultimately combine both Business and Engineering goals, via Customer Development plus Agile.
Design-focused product perspective: Desirability
For design-focused products, the focus might be on:
context, culture, and goals
customer goals and product experience
design aesthetics and interactions
The first-order filter in this case might be “Sick people go to hospitals and have a terrible experience – how do we improve that?” The tools employed at this initial stage might include user research, development of personas and user goals, and rapid prototyping to explore many product concepts.
The big “religions” here are led by Apple and their aesthetics and standards. And of course folks like IDEO and their “design thinking” ideas.
How business and engineering goals encroach on the desirability of a product
Reading through the above, perhaps you have identified yourself as prioritizing one versus the other. And in general, the prioritization of the three different goals drives what kinds of product experiences you can build.
From the perspective of making a sexy, highly desirable product, you’ll find lots of objections from business or engineering:
“spending money on visual design is too expensive”
“polishing a product will make the process too slow”
“this product is boring to implement”
“can you redesign this product so we can build it in 1 week sprints?”
“this target user is great, but we want the product to be more powerful and support more audiences”
“but Zynga doesn’t do this, can you just copy them?”
“why build so many prototypes that get thrown away? That’s costly and slow”
“if you added X to this product, it would put us into strategic market Y”
etc.
How do you handle questions like the above?
All of them are great questions, and of course the right answer means you have to find a balance in the approach. But what is the expense towards the core of your product experience?
Back to Steve Jobs – what does he really do?
Long story short, my hypothesis is that Steve Jobs is one of the rare CEOs who is very focused on product desirability. In battles with the business and technology goals, desirability will almost always win out.
So his role isn’t that of a designer, but rather Chief Design Advocate. This means:
he makes it clear that products should be “insanely great”
he recruits a top design team, and protects them from competing goals
he is willing to spend money, adjust technology processes, all for the goal of highly desirable products
he convinces financial analysts, industry pundits, etc. that product design is very important
To me, the amazing part about this is: Any company can do it.
Maybe not as good as Jobs, but they can decide to make it a priority – but few companies do. With the pressure of quarterly earnings, what competitors are doing, and employee aspirational desires, the focus moves off of killer experiences for customers – that’s no good.
If the above is true, then any of us can be the Steve Jobs of our team. Start by prioritizing design and desirability, and place it on a better footing relative to engineering and business goals. Learn the tools, develop your own religion, and start building great product experiences.
It almost sounds so easy!
http://andrewchenblog.com/2009/12/04/does-every-startup-need-a-steve-jobs/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+AndrewChensBlog+(Andrew+Chen+(@andrew_chen))&utm_content=Twitter
Friday, 18 September 2009
Silicon Mind
Studenti che gestiscono milioni di dollari, scienziati visionari e finanzieri coraggiosi, in due parole: Venture Capital. Un viaggio nel mondo del capitale di rischio, in quella Silicon valley dove i milioni sposano le idee e creano il futuro.
Video
Video
Sunday, 30 August 2009
The 7 Most Overrated Businesses
1. Restaurants. Dining out and cooking are among Americans' favorite pastimes. But "restaurants are among the toughest businesses to run," says Donna Ettenson, vice president of the Association of Small Business Development Centers in Burke, Va.
Far too many people assume their culinary abilities will lead to success in the restaurant business. Instead, about 60% of restaurants close in the first three years, according to a 2003 study at Ohio State University. That's quite a bit higher than the roughly half of all start-ups that close in the first five years.
The reason: Restaurants typically have low profit margins and need strong managers who can run an ultra-tight ship through seasonal fluctuations and other struggles. Most people don't have that kind of intense managerial ability to pull it off. By the way, the pitfalls are quite similar for restaurants' cousin – the catering business. In other words, Chef Emptor.
2. Direct Sales. It's a tempting pitch: Work from home and earn commissions by selling cosmetics, kitchen knives or cleaning products. But companies that recruit independent sales reps tend to attract new team members by pointing to the success of their highest earners.
A harder look shows that those high earners are making big money in large part by recruiting new reps into the organization and getting bonuses or a cut of their recruits' commissions, says Ken Yancey, chief executive of SCORE, a Herndon, Va., organization of current and retired business executives who volunteer time counseling entrepreneurs. The new reps then have a much harder job because they need to recruit more people on top of selling product even though the number of reps out there is increasing.
The result, Yancey says: "Most of them wind up with a bunch of jewelry or kitchen equipment sitting in their basement that they can't sell."
3. Online Retail. By far, one of the easiest businesses to start is selling items through online marketplaces such as eBay or Amazon. But as online commerce ages and these sites fill up with more established retailers, it's much harder for new, small sellers to compete for attention and generate a viable income.
"A lot of people are thinking it's the Web of five or 10 years ago and you stand out simply because you're on the Web," says Rieva Lesonsky, chief executive of GrowBiz Media, a content and consulting company for small businesses based in Irvine, Calif.
Instead, successful online retailers today must have a handle on sourcing their products at a low enough price, then layering on clever online marketing and fine-tuned logistics. These businesses won't generate much income if they can't be easily found in searches, maintain a good reputation among buyers or add enough value so that sellers can build profit margins high enough to take on bigger players and physical stores.
4. High-End Retail. Many people dream of opening a day spa, luxury jewelry store or designer clothing boutique – businesses they feel good patronizing. But specialty retail businesses close at higher rates than non-specialty stores, according to the Small Business Administration's Office of Advocacy, and are even riskier now that consumer discretionary spending has dried up and people are no longer spending money on little luxuries.
"It's going to be a long time before we return to the days of conspicuous consumption," says Ms. Lesonsky of GrowBiz Media. High-end retailers often suffer from poor locations and lack of understanding of how to source and market their products in an effective way. In today's economy and in coming years, she says, retail entrepreneurs should be looking to sell non-discretionary consumer goods or offer items at a value rather than high-end products.
5. Independent Consulting. Common advice for aspiring entrepreneurs is to stick with industries they know. So, for many looking to escape the corporate treadmill that means turning their professional expertise into a one-person consulting firm.
It seems practical – more companies are indeed relying on independent contractors and freelancers these days – but it's not as easy to pull off as many imagine, says Dennis Ceru, an entrepreneurship professor at Babson College in Babson Park, Mass. Many consultants struggle with time management problems, spending so much time scouting work that it's very difficult to earn steady income. "The difficulty many face is they go through peaks and valleys of having work," says Prof. Ceru. "When the engagement ends, they are frantically looking for work," which may take weeks or months.
A possible solution: "A successful consulting firm needs people to find the work, grind out the work and mind the work. Unless you know you can do all three yourself, you potentially expose your business to great risk."
6. Franchise Ownership. The idea of being handed a proven business plan without the uncertainties and headaches that come with building a business from scratch is understandably alluring. But too many people don't understand the risks associated with franchising and sign restrictive franchise agreements without thoroughly researching their franchisor and their contractual obligations, says SCORE's Yancey.
Some franchisors, for instance, allow franchisees to open stores too close together, oversaturating the market. Or they simply require their franchisees pay so much in royalties and fees or other operational costs that it's very difficult to be profitable. Beyond that, when a franchisee fails, a franchisor may make it extremely difficult and costly to get out of its contract.
It's a myth that franchises are far more successful than independent businesses. A 1995 study by a researcher at Wayne State University found that 62% of franchises were open for business after four years, compared with 68% of independent businesses. And franchises were also found to be less profitable in those early years.
7. Traffic-Driven Web Sites. Everybody has witnessed the success of social-networking sites like Facebook and popular blogs that generate all their revenue off advertising. But as the Internet ages, that's much harder to accomplish, says Martin Zwilling, a start-up consultant in Fountain Hills, Ariz., who specializes in helping entrepreneurs find angel investors.
Zwilling says he hears pitches for new social-networking sites about once a week, but actively deters people from starting them. "I say, skip it," he says. "You need to invest $50 million to get any presence" in the social-networking space right now and it's very difficult to get people to leave established sites. What's more, he says, the amount of traffic needed to build a lucrative traffic-driven Web site is far more than most new Web entrepreneurs realize: "Until you get to the point where you have a million page views a day, you're nowhere."
Far too many people assume their culinary abilities will lead to success in the restaurant business. Instead, about 60% of restaurants close in the first three years, according to a 2003 study at Ohio State University. That's quite a bit higher than the roughly half of all start-ups that close in the first five years.
The reason: Restaurants typically have low profit margins and need strong managers who can run an ultra-tight ship through seasonal fluctuations and other struggles. Most people don't have that kind of intense managerial ability to pull it off. By the way, the pitfalls are quite similar for restaurants' cousin – the catering business. In other words, Chef Emptor.
2. Direct Sales. It's a tempting pitch: Work from home and earn commissions by selling cosmetics, kitchen knives or cleaning products. But companies that recruit independent sales reps tend to attract new team members by pointing to the success of their highest earners.
A harder look shows that those high earners are making big money in large part by recruiting new reps into the organization and getting bonuses or a cut of their recruits' commissions, says Ken Yancey, chief executive of SCORE, a Herndon, Va., organization of current and retired business executives who volunteer time counseling entrepreneurs. The new reps then have a much harder job because they need to recruit more people on top of selling product even though the number of reps out there is increasing.
The result, Yancey says: "Most of them wind up with a bunch of jewelry or kitchen equipment sitting in their basement that they can't sell."
3. Online Retail. By far, one of the easiest businesses to start is selling items through online marketplaces such as eBay or Amazon. But as online commerce ages and these sites fill up with more established retailers, it's much harder for new, small sellers to compete for attention and generate a viable income.
"A lot of people are thinking it's the Web of five or 10 years ago and you stand out simply because you're on the Web," says Rieva Lesonsky, chief executive of GrowBiz Media, a content and consulting company for small businesses based in Irvine, Calif.
Instead, successful online retailers today must have a handle on sourcing their products at a low enough price, then layering on clever online marketing and fine-tuned logistics. These businesses won't generate much income if they can't be easily found in searches, maintain a good reputation among buyers or add enough value so that sellers can build profit margins high enough to take on bigger players and physical stores.
4. High-End Retail. Many people dream of opening a day spa, luxury jewelry store or designer clothing boutique – businesses they feel good patronizing. But specialty retail businesses close at higher rates than non-specialty stores, according to the Small Business Administration's Office of Advocacy, and are even riskier now that consumer discretionary spending has dried up and people are no longer spending money on little luxuries.
"It's going to be a long time before we return to the days of conspicuous consumption," says Ms. Lesonsky of GrowBiz Media. High-end retailers often suffer from poor locations and lack of understanding of how to source and market their products in an effective way. In today's economy and in coming years, she says, retail entrepreneurs should be looking to sell non-discretionary consumer goods or offer items at a value rather than high-end products.
5. Independent Consulting. Common advice for aspiring entrepreneurs is to stick with industries they know. So, for many looking to escape the corporate treadmill that means turning their professional expertise into a one-person consulting firm.
It seems practical – more companies are indeed relying on independent contractors and freelancers these days – but it's not as easy to pull off as many imagine, says Dennis Ceru, an entrepreneurship professor at Babson College in Babson Park, Mass. Many consultants struggle with time management problems, spending so much time scouting work that it's very difficult to earn steady income. "The difficulty many face is they go through peaks and valleys of having work," says Prof. Ceru. "When the engagement ends, they are frantically looking for work," which may take weeks or months.
A possible solution: "A successful consulting firm needs people to find the work, grind out the work and mind the work. Unless you know you can do all three yourself, you potentially expose your business to great risk."
6. Franchise Ownership. The idea of being handed a proven business plan without the uncertainties and headaches that come with building a business from scratch is understandably alluring. But too many people don't understand the risks associated with franchising and sign restrictive franchise agreements without thoroughly researching their franchisor and their contractual obligations, says SCORE's Yancey.
Some franchisors, for instance, allow franchisees to open stores too close together, oversaturating the market. Or they simply require their franchisees pay so much in royalties and fees or other operational costs that it's very difficult to be profitable. Beyond that, when a franchisee fails, a franchisor may make it extremely difficult and costly to get out of its contract.
It's a myth that franchises are far more successful than independent businesses. A 1995 study by a researcher at Wayne State University found that 62% of franchises were open for business after four years, compared with 68% of independent businesses. And franchises were also found to be less profitable in those early years.
7. Traffic-Driven Web Sites. Everybody has witnessed the success of social-networking sites like Facebook and popular blogs that generate all their revenue off advertising. But as the Internet ages, that's much harder to accomplish, says Martin Zwilling, a start-up consultant in Fountain Hills, Ariz., who specializes in helping entrepreneurs find angel investors.
Zwilling says he hears pitches for new social-networking sites about once a week, but actively deters people from starting them. "I say, skip it," he says. "You need to invest $50 million to get any presence" in the social-networking space right now and it's very difficult to get people to leave established sites. What's more, he says, the amount of traffic needed to build a lucrative traffic-driven Web site is far more than most new Web entrepreneurs realize: "Until you get to the point where you have a million page views a day, you're nowhere."
Via: smallbusinessanswers
Friday, 24 July 2009
Family Business Management and the Drucker's Rules
INTRODUCTION: THE FAMILY BUSINESS IN PERSPECTIVE
Of the 13.2 million businesses in the United States, 90 percent are family owned and managed. These companies employ more than 77 million people, or about six out of every 10 workers in the United States, pay 65 percent of all wages, and generate 55 percent of the nation s gross domestic product. Between 1977 and 1990, family businesses created eight out of every 10 new jobs in the United States.
Not All Family Businesses Are Small
Contrary to popular belief, not all family businesses are small like the husband-and-wife team running the local restaurant. About 200 of the Fortune 500 companies are family owned. There are also large Chinese family-owned businesses. As an example, 40 percent of the Hong Kongs market capitalization is controlled by 15 Chinese family groups. In Taiwan, 16 of the top 20 companies in terms of total assets are family-owned and family controlled. In Indonesia, nine out of the top 10 businesses are owned by Chinese families, and in Thailand, Chinese families own four of the countrys largest banks.
Family Business and Size
According to Drucker," There is little doubt that beyond a certain size, a business can no longer reserve management to family members and remain viable. Beyond a certain size, that management burden increasingly has to be borne by professional managers."
This article presents Drucker s Rules for family business management and the role of the family and non-family professional managers in the family business. The Chinese family business may differ considerably from family businesses found in the West, and the Chinese family business owner will have to determine which, if any, of Druckers Rules apply.
DRUCKER'S RULES
Functional vs. Management Work
There is really no difference, says Drucker, between professional management and family-managed businesses when it comes to functional work research, marketing or accounting. On the other hand, when it comes to management of the family business, different rules are required. Without them, the family business will not survive or prosper.
Rules for Family Members in the Business
Family members should not be allowed to work in the family business unless they are as capable as non-family employees. They should only be allowed to stay in the business if they qualify on merit, not because they are family members.
Respect is a critical dimension of the family member working in the business. If the family member does not command professional respect, they should not be in the company. Dr. Swaim sights a case: the son of a founder was CEO of the company, but did not enjoy the respect of the non-family professional management team marketing, finance, operations, and managers. The lack of direction hurt morale and the company performance waned. Dr. Swaim arranged for a management buyout of the son and the company is now doing very well managed by non-family professional managers. The major issue: Lack of respect.
A family member who is not willing to work, no matter what their educational background and capabilities, should not be allowed in the family business. Also, if the family member is not of top-management caliber, with the potential to take over leadership of the company, they should actually be paid a stipend to stay away from the business. Some analysts also suggest that family members not be allowed into entry level positions. Ideally, they should have spent several years gaining practical experience working in another business before joining the family firm.
With respect to promotions, family members should never be given preference if there is a more qualified and better performing non-family member in management. Finally, over time, family members will elect not to enter the business and the company will eventually become totally professionally managed by non-family members.
Rules for Non-Family Managers
The non-family members in top management should be given rewards and incentives that make them feel like owners or as Drucker says, they need full citizenship in the firm. After all, it is their commitment to the family business that allows the business to grow and continue to be successful. These rewards can be stock options, stock bonus plans, phantom stock or other creative incentives to retain the commitment and motivation of a non-family manager. Without these incentives, there is danger the non-family manager or managers will become frustrated, elect to start their own business and end up becoming a competitor. With respect to top management, Drucker suggests at least one senior management position always be filled by a non-family professional manager such as the COO, finance manager or marketing manager. For a humorous example, Drucker cites the Mafia, where the second in command to the Godfather , the consigliore, is not a member of the family and may not even be a Sicilian.
Unless the family business is small, key staff positions should also be filled by non-family members research, marketing, finance and human resources management. Family members cannot have all the knowledge and expertise required for all of these areas.
Another important rule for the non-family manager is: Dont mix business with family. If the non-family manager attempts to become too close to the family, there is a danger of losing perspective on the business. Therefore, the non-family manager should generally avoid family social gatherings unless it is a special event to which he or she has been invited. Summer barbecues, for example, do not qualify as such a special event.
Succession Planning
Who will take over the leadership of the family business is a critical decision. It shouldn t be left until the day after the founder dies. Drucker advises this decision be trusted to an outside advisor who is neither part of the family, nor part of the business. We will deal with succession planning and family business exit strategies in more detail in part two of this article in next months edition.
Summary and Plan for Change
The family business needs to plan for its eventual change in character. Drucker estimates that after two generations, the family will only be the beneficiaries of the business, not the bosses. As an example, studies have shown that 80 percent of family businesses never get to the second generation.
Finally, opportunities for family members should be available to those who are able and desire to pursue a career in the business. On the other hand, those who do not fit these requirements should stay out of the business and remain investors.
--------------------
Research on Owners of Private Businesses
Several years ago, a leading accounting and consulting firm conducted a study of owners of private and family-owned businesses and discovered the following.
They don t know the businesss value: 65 percent of business owners do not know what their company is worth. In other words, they are unaware of the fair market value of their business and what they could get for the business if selling the business is an exit strategy alternative they might consider. Knowing the value of the business is also important if the owner is considering other exit strategy alternatives, such as passing the business on to family members.
They have no exit strategy or succession plan: 85 percent of business owners have no exit strategy or succession plan. The owner has not given any consideration to how or when they will eventually retire and who will take over the management of the business. This is often attributed to their reluctance to accept their own mortality they will live forever, and the fact that their personal identity is intertwined with the business they lose their identity if and when they leave their business. Also, many owners are unable to give up their baby, similar to the father s concerns when their daughter gets married and he must give the bride away at the wedding ceremony.
The majority of the owners net worth is in the business: 75 percent of the business owners net worth is tied up in their business. There is a prudent rule that suggests that not more than 20 percent of an individual s personal wealth should be tied up in any one investment. Obviously, most business owners have disregarded this rule. Having equity in the business is all well and good, but how does one convert this into cash for ones retirement?
They have no personal financial and estate planning: 25 percent of senior generation owners have not done any estate planning to minimize their taxes or worked out how to convert the equity they have in their businesses into personal wealth and liquidity. It is one thing to pass the family business on to a son or daughter, but in so doing, how does the father get compensated for the work he put into starting and growing the business over the years?
Six Exit Strategies
"You develop an exit strategy the day you start the business."
-Richard Rodnick,
founder, former chairman, Geneva Companies
Richard Rodnick, founder and former chairman of Geneva Companies, a merger and acquisition firm in the United States, has a rule that the time to develop an exit strategy is the day you start the business.
As an example of practicing this rule, Rodnick had an exit strategy that he would sell Geneva Companies five years after he started it. He sold the company to the Chemical Bank of New York for in excess of $30 million.
Some would argue that this rule does not allow the owner to get full value for the company-that if he held on to the company for several more years, he might get considerably more money for the business.
To counter this argument, there is another interesting quotation. When Bernard Baruch, an individual who amassed a personal fortune in the mid 1900s was asked how he became so wealthy? he replied," I always sold too soon."
Drucker also stresses that succession planning should not be left to the last minute, such as right after the owner-founder passes away and was buried yesterday. Therefore, let us briefly review the various exit strategies available to the business owner and then deal with succession planning as part on of the exit strategy alternatives.
Six Exit Strategy Alternatives
There are six main exit strategy alternatives available to the business owner to consider, excluding liquidation of the business. The first five deal with strategies to consider when there are no family members qualified or interested in taking over the management of the business, and the last strategy deals with succession planning where there are family members who potentially could take over. Actually, there are situations in the first five strategies where family members may still continue to manage the day-to-day operations of the company, but will no longer have a significant percentage of its ownership.
1. Selling to outsiders
This exit strategy involves selling the business to outsiders through a direct sale or possibly a merger where the other party gains a majority interest in the new business combination. Although it may be called a merger, usually for the owners ego we merged with the multinational giant 100 times our size most of these transactions are actually acquisitions.
Selling a privately owned business is more complicated then it may seem and the process of selling a business is too lengthy to include in this article. For additional insight on mergers and acquisitions, check out Drucker on mergers and acquisition in Business Beijing of March 2002 Issue 68.
2. Sell to insiders management, employees
Selling the business to its non-family member management and employees is another strategy usually considered. Oftentimes, management may be disenchanted with the lack of direction in the company when the owner-founder loses his energy and enthusiasm for growing the business. The owner-founder continues to lead a good life in terms of his or her personal compensation and perks, but has become conservative and averse to taking unnecessary risks. Thus, the company ages poorly, often resulting in loss of market share.
Management may feel new leadership can turn the situation around. The problem with considering this exit strategy however, is how will management and employees raise the financing required to acquire the business? Passing the hat around, so to speak, and asking management and the employees to contribute some of their personal savings to acquire the company generally will not even raise enough money for a downpayment on the acquisition.
3. Selling to a partner or other shareholders
If the owner-founder has other partners or shareholders he might consider selling his interest in the business. Two issues arise here that need to be dealt with to implement this strategy. First, what is the value of the shares to be sold and do all shareholders agree on the value? This typically can be resolved by using an outside professional business valuation firm to establish the fair market value of the business and value of the shares. Second, as in the case of selling to management and employees, how will the other shareholders raise the financing to acquire the owner-founders shares? Agreeing to be paid out of future profits is a typical method. However, this leaves the owner-founder at considerable risk if the new management makes poor business decisions. Ideally, the shareholders should borrow the money to cash out the owner-founder and repay the lending institution from the future profits of the business.
4. Sales to equity funds, private investor groups
Equity Funds and Private Investment Groups (PIGs) can be an attractive exit strategy. In fact, this is one of the best strategies to consider. In investment banking industry terminology, this is called a re-capitalization or recap. Equity Funds and PIGs typically invest in a portfolio of businesses that meet their investment criteria (type of business, industry, geographic location, size in revenues) and will usually acquire a 60-80 percent ownership percentage, sometimes higher, in the business.
One of the major criteria of Equity Funds and PIGs is that there must be a strong management team in place in the business as they are typically not interested in running the day-to-day operations of the business, but only in providing strategic direction at the board level. There should also be a certain degree of synergy with their existing portfolio of businesses such as same or related industry, market served, technology used.
If there are family members who are capable of, and interested in managing the business, this is an excellent way to meet the personal and business objectives of the owner-founder by allowing him to receive a significant payment while management and the remaining percentage of ownership in the business can be transferred to the next generation.
5. Selling to the public: Initial Public Offering
Although there are some very large family businesses as mentioned in Part One of this article, the typical family owned business is generally too small to seriously consider an IPO as an exit strategy alternative. We will not discuss the IPO in detail other than to mention it is a time consuming and expensive process.
6. Transfer ownership to other family members-the succession plan
Succession planning is essential to ensure the future continuity of management of the business, particularly if there are other family members interested in, and capable of managing the business.
The quotation at the beginning of this article illustrates the importance succession planning has on the future of the business The average life expectancy of the family business is 25 years.
Succession planning when there is single heir, son or daughter, is the least complicated model, if he or she desires to enter the business, and has the ability to eventually run the business. The models get more complicated when there are multiple heirs, older vs. younger children, sons vs. daughters, inactive family members, the spouse of the dead owner-founder, a second spouse, a son-in-law, and unrelated (non-family member) successors.
In the case where there are multiple heirs, succession planning should involve two entities in the planning process: a family council and an outside advisor. The role of the family council is to first define the responsibilities and qualifications required for the successor in terms of knowledge, skills and experience. Some suggest the following criteria be considered when identifying potential successors:
3-5 years employment in a job or jobs that have depended on competence, skill, and sustained performance, rather than on family-based relationships. Many also suggest that this experience should have been gained outside of the family business.
Experience in directing the activities of others.
Recognition for proven competence on the job.
Evidence and ability to manage relationships, both with peers and with supervisors.
Evidence of the ability and willingness to take initiative on the job.
Evidence of having been a valued employee with legitimate contributions to make.
The next step for the family council is to then identify possible successors, either family members or non-family professional managers, but not to make the selection themselves.
This should be left, as Drucker suggests, to an outside, non-family advisor who can provide an objective perspective and eliminate the chance of potential conflict among the family members. As part of the selection process, it is also important to make it clear to everyone involved that they are not required to join the family business.
With respect to the spouse eventually becoming a successor if the owner-founder passes away, this depends on how much involvement she or he had in the business prior to the death. If there is another business partner, or business partners, they may not want the spouse involved in the business.
This potential problem can be resolved with a buy-sell agreement established between the partners at the time of the formation of the business outlining how a partner s share in the business can be purchased in the future.
Once the successor has been identified, it is important to have a developmental plan for the individual to gain the necessary knowledge and experience to take over the management of the business. The extent of the developmental plan will obviously vary depending on the age and experience of the potential successor.
The son or daughter entering the business after working elsewhere in their first job will require considerable more development as compared to a non-family professional manager who is already performing in a key management position as suggested by Drucker in our first article.
Summary
The first article outlined Druckers Rules for managing and growing the family business and this part with how to ensure continuity through succession planning.
Various exit strategies available to the owner-founder when there are no apparent family members interested in eventually managing the business were briefly discussed.
We conclude with Drucker s two key points relative to succession planning and exit strategies don t leave this important task until the last minute, and use objective, non-family advisors to assist in the selection process. Finally, no attempt was made to compare how the concepts presented in these articles relate or do not relate to Chinese family businesses. Although we feel many of these concepts would relate, history, tradition, and culture would most likely and unfortunately, cause these concepts to fall on deaf ears.
Of the 13.2 million businesses in the United States, 90 percent are family owned and managed. These companies employ more than 77 million people, or about six out of every 10 workers in the United States, pay 65 percent of all wages, and generate 55 percent of the nation s gross domestic product. Between 1977 and 1990, family businesses created eight out of every 10 new jobs in the United States.
Not All Family Businesses Are Small
Contrary to popular belief, not all family businesses are small like the husband-and-wife team running the local restaurant. About 200 of the Fortune 500 companies are family owned. There are also large Chinese family-owned businesses. As an example, 40 percent of the Hong Kongs market capitalization is controlled by 15 Chinese family groups. In Taiwan, 16 of the top 20 companies in terms of total assets are family-owned and family controlled. In Indonesia, nine out of the top 10 businesses are owned by Chinese families, and in Thailand, Chinese families own four of the countrys largest banks.
Family Business and Size
According to Drucker," There is little doubt that beyond a certain size, a business can no longer reserve management to family members and remain viable. Beyond a certain size, that management burden increasingly has to be borne by professional managers."
This article presents Drucker s Rules for family business management and the role of the family and non-family professional managers in the family business. The Chinese family business may differ considerably from family businesses found in the West, and the Chinese family business owner will have to determine which, if any, of Druckers Rules apply.
DRUCKER'S RULES
Functional vs. Management Work
There is really no difference, says Drucker, between professional management and family-managed businesses when it comes to functional work research, marketing or accounting. On the other hand, when it comes to management of the family business, different rules are required. Without them, the family business will not survive or prosper.
Rules for Family Members in the Business
Family members should not be allowed to work in the family business unless they are as capable as non-family employees. They should only be allowed to stay in the business if they qualify on merit, not because they are family members.
Respect is a critical dimension of the family member working in the business. If the family member does not command professional respect, they should not be in the company. Dr. Swaim sights a case: the son of a founder was CEO of the company, but did not enjoy the respect of the non-family professional management team marketing, finance, operations, and managers. The lack of direction hurt morale and the company performance waned. Dr. Swaim arranged for a management buyout of the son and the company is now doing very well managed by non-family professional managers. The major issue: Lack of respect.
A family member who is not willing to work, no matter what their educational background and capabilities, should not be allowed in the family business. Also, if the family member is not of top-management caliber, with the potential to take over leadership of the company, they should actually be paid a stipend to stay away from the business. Some analysts also suggest that family members not be allowed into entry level positions. Ideally, they should have spent several years gaining practical experience working in another business before joining the family firm.
With respect to promotions, family members should never be given preference if there is a more qualified and better performing non-family member in management. Finally, over time, family members will elect not to enter the business and the company will eventually become totally professionally managed by non-family members.
Rules for Non-Family Managers
The non-family members in top management should be given rewards and incentives that make them feel like owners or as Drucker says, they need full citizenship in the firm. After all, it is their commitment to the family business that allows the business to grow and continue to be successful. These rewards can be stock options, stock bonus plans, phantom stock or other creative incentives to retain the commitment and motivation of a non-family manager. Without these incentives, there is danger the non-family manager or managers will become frustrated, elect to start their own business and end up becoming a competitor. With respect to top management, Drucker suggests at least one senior management position always be filled by a non-family professional manager such as the COO, finance manager or marketing manager. For a humorous example, Drucker cites the Mafia, where the second in command to the Godfather , the consigliore, is not a member of the family and may not even be a Sicilian.
Unless the family business is small, key staff positions should also be filled by non-family members research, marketing, finance and human resources management. Family members cannot have all the knowledge and expertise required for all of these areas.
Another important rule for the non-family manager is: Dont mix business with family. If the non-family manager attempts to become too close to the family, there is a danger of losing perspective on the business. Therefore, the non-family manager should generally avoid family social gatherings unless it is a special event to which he or she has been invited. Summer barbecues, for example, do not qualify as such a special event.
Succession Planning
Who will take over the leadership of the family business is a critical decision. It shouldn t be left until the day after the founder dies. Drucker advises this decision be trusted to an outside advisor who is neither part of the family, nor part of the business. We will deal with succession planning and family business exit strategies in more detail in part two of this article in next months edition.
Summary and Plan for Change
The family business needs to plan for its eventual change in character. Drucker estimates that after two generations, the family will only be the beneficiaries of the business, not the bosses. As an example, studies have shown that 80 percent of family businesses never get to the second generation.
Finally, opportunities for family members should be available to those who are able and desire to pursue a career in the business. On the other hand, those who do not fit these requirements should stay out of the business and remain investors.
--------------------
Research on Owners of Private Businesses
Several years ago, a leading accounting and consulting firm conducted a study of owners of private and family-owned businesses and discovered the following.
They don t know the businesss value: 65 percent of business owners do not know what their company is worth. In other words, they are unaware of the fair market value of their business and what they could get for the business if selling the business is an exit strategy alternative they might consider. Knowing the value of the business is also important if the owner is considering other exit strategy alternatives, such as passing the business on to family members.
They have no exit strategy or succession plan: 85 percent of business owners have no exit strategy or succession plan. The owner has not given any consideration to how or when they will eventually retire and who will take over the management of the business. This is often attributed to their reluctance to accept their own mortality they will live forever, and the fact that their personal identity is intertwined with the business they lose their identity if and when they leave their business. Also, many owners are unable to give up their baby, similar to the father s concerns when their daughter gets married and he must give the bride away at the wedding ceremony.
The majority of the owners net worth is in the business: 75 percent of the business owners net worth is tied up in their business. There is a prudent rule that suggests that not more than 20 percent of an individual s personal wealth should be tied up in any one investment. Obviously, most business owners have disregarded this rule. Having equity in the business is all well and good, but how does one convert this into cash for ones retirement?
They have no personal financial and estate planning: 25 percent of senior generation owners have not done any estate planning to minimize their taxes or worked out how to convert the equity they have in their businesses into personal wealth and liquidity. It is one thing to pass the family business on to a son or daughter, but in so doing, how does the father get compensated for the work he put into starting and growing the business over the years?
Six Exit Strategies
"You develop an exit strategy the day you start the business."
-Richard Rodnick,
founder, former chairman, Geneva Companies
Richard Rodnick, founder and former chairman of Geneva Companies, a merger and acquisition firm in the United States, has a rule that the time to develop an exit strategy is the day you start the business.
As an example of practicing this rule, Rodnick had an exit strategy that he would sell Geneva Companies five years after he started it. He sold the company to the Chemical Bank of New York for in excess of $30 million.
Some would argue that this rule does not allow the owner to get full value for the company-that if he held on to the company for several more years, he might get considerably more money for the business.
To counter this argument, there is another interesting quotation. When Bernard Baruch, an individual who amassed a personal fortune in the mid 1900s was asked how he became so wealthy? he replied," I always sold too soon."
Drucker also stresses that succession planning should not be left to the last minute, such as right after the owner-founder passes away and was buried yesterday. Therefore, let us briefly review the various exit strategies available to the business owner and then deal with succession planning as part on of the exit strategy alternatives.
Six Exit Strategy Alternatives
There are six main exit strategy alternatives available to the business owner to consider, excluding liquidation of the business. The first five deal with strategies to consider when there are no family members qualified or interested in taking over the management of the business, and the last strategy deals with succession planning where there are family members who potentially could take over. Actually, there are situations in the first five strategies where family members may still continue to manage the day-to-day operations of the company, but will no longer have a significant percentage of its ownership.
1. Selling to outsiders
This exit strategy involves selling the business to outsiders through a direct sale or possibly a merger where the other party gains a majority interest in the new business combination. Although it may be called a merger, usually for the owners ego we merged with the multinational giant 100 times our size most of these transactions are actually acquisitions.
Selling a privately owned business is more complicated then it may seem and the process of selling a business is too lengthy to include in this article. For additional insight on mergers and acquisitions, check out Drucker on mergers and acquisition in Business Beijing of March 2002 Issue 68.
2. Sell to insiders management, employees
Selling the business to its non-family member management and employees is another strategy usually considered. Oftentimes, management may be disenchanted with the lack of direction in the company when the owner-founder loses his energy and enthusiasm for growing the business. The owner-founder continues to lead a good life in terms of his or her personal compensation and perks, but has become conservative and averse to taking unnecessary risks. Thus, the company ages poorly, often resulting in loss of market share.
Management may feel new leadership can turn the situation around. The problem with considering this exit strategy however, is how will management and employees raise the financing required to acquire the business? Passing the hat around, so to speak, and asking management and the employees to contribute some of their personal savings to acquire the company generally will not even raise enough money for a downpayment on the acquisition.
3. Selling to a partner or other shareholders
If the owner-founder has other partners or shareholders he might consider selling his interest in the business. Two issues arise here that need to be dealt with to implement this strategy. First, what is the value of the shares to be sold and do all shareholders agree on the value? This typically can be resolved by using an outside professional business valuation firm to establish the fair market value of the business and value of the shares. Second, as in the case of selling to management and employees, how will the other shareholders raise the financing to acquire the owner-founders shares? Agreeing to be paid out of future profits is a typical method. However, this leaves the owner-founder at considerable risk if the new management makes poor business decisions. Ideally, the shareholders should borrow the money to cash out the owner-founder and repay the lending institution from the future profits of the business.
4. Sales to equity funds, private investor groups
Equity Funds and Private Investment Groups (PIGs) can be an attractive exit strategy. In fact, this is one of the best strategies to consider. In investment banking industry terminology, this is called a re-capitalization or recap. Equity Funds and PIGs typically invest in a portfolio of businesses that meet their investment criteria (type of business, industry, geographic location, size in revenues) and will usually acquire a 60-80 percent ownership percentage, sometimes higher, in the business.
One of the major criteria of Equity Funds and PIGs is that there must be a strong management team in place in the business as they are typically not interested in running the day-to-day operations of the business, but only in providing strategic direction at the board level. There should also be a certain degree of synergy with their existing portfolio of businesses such as same or related industry, market served, technology used.
If there are family members who are capable of, and interested in managing the business, this is an excellent way to meet the personal and business objectives of the owner-founder by allowing him to receive a significant payment while management and the remaining percentage of ownership in the business can be transferred to the next generation.
5. Selling to the public: Initial Public Offering
Although there are some very large family businesses as mentioned in Part One of this article, the typical family owned business is generally too small to seriously consider an IPO as an exit strategy alternative. We will not discuss the IPO in detail other than to mention it is a time consuming and expensive process.
6. Transfer ownership to other family members-the succession plan
Succession planning is essential to ensure the future continuity of management of the business, particularly if there are other family members interested in, and capable of managing the business.
The quotation at the beginning of this article illustrates the importance succession planning has on the future of the business The average life expectancy of the family business is 25 years.
Succession planning when there is single heir, son or daughter, is the least complicated model, if he or she desires to enter the business, and has the ability to eventually run the business. The models get more complicated when there are multiple heirs, older vs. younger children, sons vs. daughters, inactive family members, the spouse of the dead owner-founder, a second spouse, a son-in-law, and unrelated (non-family member) successors.
In the case where there are multiple heirs, succession planning should involve two entities in the planning process: a family council and an outside advisor. The role of the family council is to first define the responsibilities and qualifications required for the successor in terms of knowledge, skills and experience. Some suggest the following criteria be considered when identifying potential successors:
3-5 years employment in a job or jobs that have depended on competence, skill, and sustained performance, rather than on family-based relationships. Many also suggest that this experience should have been gained outside of the family business.
Experience in directing the activities of others.
Recognition for proven competence on the job.
Evidence and ability to manage relationships, both with peers and with supervisors.
Evidence of the ability and willingness to take initiative on the job.
Evidence of having been a valued employee with legitimate contributions to make.
The next step for the family council is to then identify possible successors, either family members or non-family professional managers, but not to make the selection themselves.
This should be left, as Drucker suggests, to an outside, non-family advisor who can provide an objective perspective and eliminate the chance of potential conflict among the family members. As part of the selection process, it is also important to make it clear to everyone involved that they are not required to join the family business.
With respect to the spouse eventually becoming a successor if the owner-founder passes away, this depends on how much involvement she or he had in the business prior to the death. If there is another business partner, or business partners, they may not want the spouse involved in the business.
This potential problem can be resolved with a buy-sell agreement established between the partners at the time of the formation of the business outlining how a partner s share in the business can be purchased in the future.
Once the successor has been identified, it is important to have a developmental plan for the individual to gain the necessary knowledge and experience to take over the management of the business. The extent of the developmental plan will obviously vary depending on the age and experience of the potential successor.
The son or daughter entering the business after working elsewhere in their first job will require considerable more development as compared to a non-family professional manager who is already performing in a key management position as suggested by Drucker in our first article.
Summary
The first article outlined Druckers Rules for managing and growing the family business and this part with how to ensure continuity through succession planning.
Various exit strategies available to the owner-founder when there are no apparent family members interested in eventually managing the business were briefly discussed.
We conclude with Drucker s two key points relative to succession planning and exit strategies don t leave this important task until the last minute, and use objective, non-family advisors to assist in the selection process. Finally, no attempt was made to compare how the concepts presented in these articles relate or do not relate to Chinese family businesses. Although we feel many of these concepts would relate, history, tradition, and culture would most likely and unfortunately, cause these concepts to fall on deaf ears.
Via: btmbeijing.com
the four kinds of FREE
A few weeks ago, I posted a diagram grouping free business models into three categories: cross-subsidies (eg, razor-and-blades), three-party markets (ads) and "freemium" (what economists call "versioning"; in this case most people get the free version). But as I was writing through that chapter, I realized that wasn't quite right.
The problem is that they're all cross-subsidies in one way or another:
I've also modified the first to describe it as a direct cross-subsidy, which is to say that's typically you subsidizing yourself. The others are all other people subsidizing you, or you subsidizing other people. Finally, for economic purists out there, note that what I'm calling three-party markets (FREE 2) is what economists call "two-sided markets".
The problem is that they're all cross-subsidies in one way or another:
- Paid products subsidizing free products: This is a staple of business, from the popcorn that subsidizes the loss-making movie to the expensive wine subsidizing the cheap meal in a restaurant. Free just takes that further
- Paying later subsidizing free now: The free cellphone with a two-year subscription contract is a classic example of the subsidy over time. It’s just shifting phone service from a point-of-sale revenue stream to an ongoing annuity. In this case, your future self is subsidizing your present self, with the hope that you won’t think about what you’ll be paying each year for the phone service but are instead dazzled by the free phone you get today.
- Paying people subsidizing free people: From the men who pay to get into nightclubs where the women get in free, to “kids get in free”, to progressive taxation where the wealthy pay more so the less wealthy pay less (and sometimes nothing), the notion that segmenting a market into groups by their willingness to pay is a conventional part of pricing theory. Free takes that to the extreme, extending to a class of consumers who will get the product of service for free. The hope is that the free consumers will attract or bring with them paying consumers (the aforementioned women or kids) or that some fraction of the free consumers will convert to paying consumers. When you walk through the amazing interiors of Las Vegas attractions, you get the view for free on the hope that some people will stop and gamble or shop.
I've also modified the first to describe it as a direct cross-subsidy, which is to say that's typically you subsidizing yourself. The others are all other people subsidizing you, or you subsidizing other people. Finally, for economic purists out there, note that what I'm calling three-party markets (FREE 2) is what economists call "two-sided markets".
Via: Longtail.com
Thursday, 23 July 2009
Mission and Vision statement (with examples)
Some examples of Mission and Vision:
Nike: To experience the emotion of competition, winning and crushing competitors.
Wal-Mart: To give ordinary folk the chance to buy the same things as rich people.
Disney: We create happiness by providing the finest in entertainment for people of all ages, everywhere.
Google: To organize the world's information and make it universally accessible and useful
Yahoo: Our mission is to be the most essential global Internet service for consumers and businesses
Amazon: To build a place where people can come to find and discover anything they might want to buy online
Dell: To be the most successful computer company in the world at delivering the best
customer experience in markets we serve.
Hewlett-Packard: To make technical contributions for the advancement and welfare of humanity.
Ford Motor: To become the world's leading consumer company for automotive products and services.
Ebay: to provide a global trading platform where practically anyone can trade practically anything.
Facebook: Facebook gives people the power to share and make the world more open and connected
Ibm: we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics
Microsoft: we work to help people and businesses throughout the world realize their full potential
Sony: To experience the joy of advancing and applying technology for the benefit of the public.
Apple: To produce high-quality, low cost, easy to use products that incorporate high technology for the individual. We are proving that high technology does not have to be intimidating for noncomputer experts.
Generalmotor: to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment.
Toyota: To sustain profitable growth by providing the best customer experience and dealer support
Mcdonald's: McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile.
Burger King: We will prepare and sell quick service food to fulfill our guest's needs more accurately, quickly, courteously, and in a cleaner environment than our competitors. We will conduct all our business affairs ethically, and with the best employees in the mid-south. We will continue to grow profitably and responsibly, and provide career advancement opportunities for every willing member of our organization.
CocaCola:Everything we do is inspired by our enduring mission:
To Refresh the World... in body, mind, and spirit.
To Inspire Moments of Optimism... through our brands and our actions.
To Create Value and Make a Difference... everywhere we engage.
Pepsi: We have absolute clarity about what we do ‘WE SELL HIGH QUALITY FOOD AND BEVERAGE PRODUCTS.’ Our success will ensure: customers will build their business, employees build their futures, and shareholders build their wealth.
Ford Motor: To become the world's leading consumer company for automotive products and services.
Ebay: to provide a global trading platform where practically anyone can trade practically anything.
Facebook: Facebook gives people the power to share and make the world more open and connected
Ibm: we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics
Microsoft: we work to help people and businesses throughout the world realize their full potential
Sony: To experience the joy of advancing and applying technology for the benefit of the public.
Apple: To produce high-quality, low cost, easy to use products that incorporate high technology for the individual. We are proving that high technology does not have to be intimidating for noncomputer experts.
Generalmotor: to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment.
Toyota: To sustain profitable growth by providing the best customer experience and dealer support
Mcdonald's: McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile.
Burger King: We will prepare and sell quick service food to fulfill our guest's needs more accurately, quickly, courteously, and in a cleaner environment than our competitors. We will conduct all our business affairs ethically, and with the best employees in the mid-south. We will continue to grow profitably and responsibly, and provide career advancement opportunities for every willing member of our organization.
CocaCola:Everything we do is inspired by our enduring mission:
To Refresh the World... in body, mind, and spirit.
To Inspire Moments of Optimism... through our brands and our actions.
To Create Value and Make a Difference... everywhere we engage.
Pepsi: We have absolute clarity about what we do ‘WE SELL HIGH QUALITY FOOD AND BEVERAGE PRODUCTS.’ Our success will ensure: customers will build their business, employees build their futures, and shareholders build their wealth.
3M: To solve unsolved problems innovatively.
Fannie Mae: To strengthen the social fabric by continually democratizing home ownership.
Mary Kay Cosmetics: To give unlimited opportunity to women.
Merck: To preserve and improve human life.
for more missions, visit: Man on a Mission or this one
Fannie Mae: To strengthen the social fabric by continually democratizing home ownership.
Mary Kay Cosmetics: To give unlimited opportunity to women.
Merck: To preserve and improve human life.
for more missions, visit: Man on a Mission or this one
Tuesday, 23 June 2009
Free - The future of disruptive price
Slide
Chris Anderson speech on Free
View more OpenOffice presentations from zlite.
Via: the LongTail - wired
Tuesday, 31 March 2009
10 Things to Do Immediately After a Networking Event
The true color of networking is often revealed after the event itself. The emails that get traded, the connections we make, and the relationships that continue to grow. Here are 10 things to do immediately after attending a networking function (conferences, seminars, business clubs).
1) Send email. Don’t wait for the next day or the next week. Chances are you won’t get around to it-and even if you do-they may not recall. Send an email to everyone you took a card from. Even if you don’t see an immediate connection, just say thanks.
2) Connect on Facebook. My favorite strategy. I look the people up on Facebook using their business cards and add them to my network. Now, I know their birthdays, their occupation, and their day to day status (literally!). Best Rolodex in the world.
3) Put one thing into action. Too many people walk away from networking events feeling good, but doing nothing. Take one decisive action from what you learned.
4) Introduce two people to each other. One of my colleagues, Jim Penny, is a master at this. He finds one person at each event and introduces them to someone else he thinks they should know. Now, where those two people take the relationship is up to them, but he is always remembered as the guy who made the introduction!
5) Contact one PRP (Potential Referral Partner). One of the best ways to grow a business is through collaboration with others. Joint ventures can be amazingly powerful. Whenever I network, I try to seek out one referral partner. This can be someone that I can send business to or someone whose clients we can help. The best PRPs are those who can figure out a win-win situation. Example: A web designer sends a printer work, while a printer recommends the designer to their clients.
6) If you took pictures, put them up on Facebook. Tag them whenever possible. Pictures are best posted when the memory of the event is still fresh. If you follow #2, then you can also tag people you have added as friends. Pictures are a great way to attract people to your profile as well.
7) Blog or write about your experience. Whenever I come back from events, my mind is spinning with new ideas. If I don’t get them down, they are lost. Bullet point ideas or write them across your white board. Just get them down!
8) Make sure your website is working well. If you met a lot of people, the chances are that they will check out your website. Make sure that it is up to date and a good representation of who you are.
9) Thank the host - if applicable. This especially applies to local events which are put together by one individual. A quick note thanking them will go a long way.
10) Check networking supplies. Yes, check your stock of cool business cards, pens, and stickers after your event - and before the next one. I can’t tell you how many times I have had to order cards overnite before I learned this lesson. Check your stock after each event, and you will thank yourself later!
1) Send email. Don’t wait for the next day or the next week. Chances are you won’t get around to it-and even if you do-they may not recall. Send an email to everyone you took a card from. Even if you don’t see an immediate connection, just say thanks.
2) Connect on Facebook. My favorite strategy. I look the people up on Facebook using their business cards and add them to my network. Now, I know their birthdays, their occupation, and their day to day status (literally!). Best Rolodex in the world.
3) Put one thing into action. Too many people walk away from networking events feeling good, but doing nothing. Take one decisive action from what you learned.
4) Introduce two people to each other. One of my colleagues, Jim Penny, is a master at this. He finds one person at each event and introduces them to someone else he thinks they should know. Now, where those two people take the relationship is up to them, but he is always remembered as the guy who made the introduction!
5) Contact one PRP (Potential Referral Partner). One of the best ways to grow a business is through collaboration with others. Joint ventures can be amazingly powerful. Whenever I network, I try to seek out one referral partner. This can be someone that I can send business to or someone whose clients we can help. The best PRPs are those who can figure out a win-win situation. Example: A web designer sends a printer work, while a printer recommends the designer to their clients.
6) If you took pictures, put them up on Facebook. Tag them whenever possible. Pictures are best posted when the memory of the event is still fresh. If you follow #2, then you can also tag people you have added as friends. Pictures are a great way to attract people to your profile as well.
7) Blog or write about your experience. Whenever I come back from events, my mind is spinning with new ideas. If I don’t get them down, they are lost. Bullet point ideas or write them across your white board. Just get them down!
8) Make sure your website is working well. If you met a lot of people, the chances are that they will check out your website. Make sure that it is up to date and a good representation of who you are.
9) Thank the host - if applicable. This especially applies to local events which are put together by one individual. A quick note thanking them will go a long way.
10) Check networking supplies. Yes, check your stock of cool business cards, pens, and stickers after your event - and before the next one. I can’t tell you how many times I have had to order cards overnite before I learned this lesson. Check your stock after each event, and you will thank yourself later!
Via: clicktoclient.com
Sunday, 8 February 2009
Everything I Know About Business I Learned From Poker
EVALUATING MARKET OPPORTUNITIES
MARKETING AND BRANDING
FINANCIALS
STRATEGY
CONTINUAL LEARNING
CULTURE
- Table selection is the most important decision you can make.
- It's okay to switch tables if you discover it's too hard to win at your table.
- If there are too many competitors (some irrational or inexperienced), even if you're the best it's a lot harder to win.
MARKETING AND BRANDING
- Act weak when strong, act strong when weak. Know when to bluff.
- Your "brand" is important.
- Help shape the stories that people are telling about you.
FINANCIALS
- Always be prepared for the worst possible scenario.
- The guy who wins the most hands is not the guy who makes the most money in the long run.
- The guy who never loses a hand is not the guy who makes the most money in the long run.
- Go for positive expected value, not what's least risky.
- Make sure your bankroll is large enough for the game you're playing and the risks you're taking.
- Play only with what you can afford to lose.
- Remember it's a long term game. You will win or lose individual sessions, but it's what happens in the long term that matters.
STRATEGY
- Don't play games that you don't understand, even if you see lots of other people making money from them.
- Figure out the game when the stakes aren't high.
- Don't cheat. Cheaters never win in the long run.
- Stick to your principles.
- You need to adjust your style of play throughout the night as the dynamics of the game change. Be flexible.
- Be patient and think long term.
- The players with the most stamina and focus usually win.
- Differentiate yourself. Do the opposite of what the rest of the table is doing.
- Hope is not a good plan.
- Don't let yourself go "on tilt". It's much more cost effective to take a break, walk around, or leave the game for the night.
CONTINUAL LEARNING
- Educate yourself. Read books and learn from others who have done it before.
- Learn by doing. Theory is nice, but nothing replaces actual experience.
- Learn by surrounding yourself with talented players.
- Just because you win a hand doesn't mean you're good and you don't have more learning to do. You might have just gotten lucky.
- Don't be afraid to ask for advice.
CULTURE
- You've gotta love the game. To become really good, you need to live it and sleep it.
- Don't be cocky. Don't be flashy. There's always someone better than you.
- Be nice and make friends. It's a small community.
- Share what you've learned with others.
- Look for opportunities beyond just the game you sat down to play. You never know who you're going to meet, including new friends for life or new business contacts.
- Have fun. The game is a lot more enjoyable when you're trying to do more than just make money.
Via: zoppas blog
How Twitter Can Make You A Better (and Happier) Person
I was in Washington, DC last week and spent several days participating in inauguration-related events with various people including Evan Williams, the CEO of Twitter. So I thought this would be an opportune time to write about a topic that I've been thinking a lot about over the past few months: how Twitter has contributed to my own personal growth and made me a better person, and how you can take the same principles and apply them to yourself if you'd like.
I've talked a lot in the past about how we've used Twitter at Zappos for building more personal connections with both our employees and our customers. In fact, we recently debuted on FORTUNE MAGAZINE's annual "100 BEST COMPANIES TO WORK FOR" list, and they began and ended the article talking about our use of Twitter to build more personal connections with people. That in itself is its own reward that has both personal and business benefits, but for this blog post, I wanted to share my stories and thoughts on how Twitter has helped me grow personally.
For me, it comes down to these 4 things:
The great thing about all 4 of these things is that not only have they helped me grow as a person, but they've also led to me being generally happier in life. And the benefits aren't just personal -- they also spill over into what we want the Zappos brand and business to be about: Zappos is about delivering happiness, whether for customers (through customer service) or for employees (through company culture). It's been interesting thinking about how all of my personal learnings about happiness can be applied to delivering happiness in the business world as well.
#1 - TRANSPARENCY & VALUES
#2 - REFRAMING REALITY
That's not to say that I don't get into situations that I'm not initially happy about. But now anytime something that used to get me upset or frustrated happens, I try to find the humor in the situation and think about how the situation can be reframed. I've found that almost every "bad" situation is actually an opportunity that can be entertaining to my followers on Twitter, which also forces myself to see things in a different light.
For example, last year I was staying at a hotel in Mexico and somehow managed to lock myself out on the balcony of my hotel room. I was stuck there for 45 minutes before I was finally rescued. This would haven normally been a very frustrating experience, but because I had my cell phone with me, I was able to tweet about it and it actually ended up being a very enjoyable 45 minutes as I tweeted about the progress of my situation and read all of my followers' responses to it:
Went 2 my room after my speech, came out 2 balcony. Balcony door somehow locked behind me so now I am trapped outside. @ zappos_fred 2 rescue [http://twitter.com/zappos/status/812279213]
Hotel front desk is telling @zappos_fred it's not possible for me to be locked out on balcony. I assure you it is, I am not pretending. [http://twitter.com/zappos/status/812287969]
Hotel security finally believed @zappos_fred, rescued me after 45 mins. Asked 4 ID so I could come in from balcony. No ID = stay on balcony [http://twitter.com/zappos/status/812292469]
in fact, I now almost looked forward to situations that would normally be frustrating, because I've learned that almost any situation can be reframed to be funny as a tweet, which then makes the situation in real life funny as well. For example:
Airport bathroom: guy tries washing hands - auto faucet motion sensor broken. He tries voice recognition instead by yelling "Wash!" at sink [http://twitter.com/zappos/statuses/806944443]
If it weren't for Twitter, I would have instead probably been a bit annoyed waiting in line behind this man who was unfamiliar with motion-activated sink faucets. But instead, Twitter forced me to search for and find the humor in the situation by taking a step back and realizing that it actually was a pretty funny situation.
#3 - HELPING OTHERS
One of the great things about Twitter is the instant feedback loop. Within 5 minutes of sending out a tweet, you can find out whether people enjoyed or appreciated your tweet. When I first started using Twitter, I used to just tweet about what I was doing. Most of my tweets were very "me-focused", because the guideline Twitter gives is to answer the question "What are you doing right now?"
Every once in awhile I might share an inspirational quote or funny story or link to an interesting article. What I found was that those types of tweets also garnered the most responses. So today, with most of my tweets I try to do at least one of the following:
#4 - GRATITUDE
In my research into the science of happiness, many studies have shown that gratitude activities (such as keeping a gratitude journal) helps people increase their overall happiness level in life. There are many ways to be thankful, and many things to be thankful for, but one technique is to make a more conscious effort to notice and appreciate the little things in life.
For me, because I try to tweet every day, I've found that I'm always looking for opportunities to have something to tweet about. So I end up noticing and appreciating things that I would normally not even give a second thought to. Here are examples of some tweets I've sent about things I've noticed that I would have normally ignored or forgotten about:
http://twitpic.com/rcli - Guy in New York with a cat on his head. Apparently this is normal. [http://twitter.com/zappos/status/1046534414]
http://twitpic.com/13fn1 - It's so cold that the NY street food vendors' tomatoes & lettuce are frozen [http://twitter.com/zappos/status/1124243255]
At Vegas airport. While in bathroom, I had an AMAZING revelation: Toilet seat covers are shaped exactly the same as life vests! [http://twitter.com/zappos/status/1109483429]
Enjoying just hanging out at home for my birthday. Looking at the full moon which is closest to earth today, happens once every 15 years. [http://twitter.com/zappos/status/1054918866]
So now, anytime I notice something that would normally be inconsequential, the very act of tweeting forces me to spend some time appreciating what would have otherwise been ignored or forgotten. And because of that, I've learned that every day, there are many, many opportunities to notice and appreciate the little things in life.
So for all of the reasons I've outlined above -- Transparency & Values, Reframing Reality, Helping Others, and Gratitude -- I'd like to say thank you to Twitter for helping me grow as a person.
SOME QUESTIONS FOR YOU
Some questions for you to consider thinking about: What are your personal values? What do you want your personal brand and values to be? How can you use Twitter as a tool to help you grow as a person and be happier? If you've ever vented on Twitter, do you think you would be happier if you thought of Twitter as a tool for you to reframe your perspective? I'd love to hear people's thoughts and comments below!
I've talked a lot in the past about how we've used Twitter at Zappos for building more personal connections with both our employees and our customers. In fact, we recently debuted on FORTUNE MAGAZINE's annual "100 BEST COMPANIES TO WORK FOR" list, and they began and ended the article talking about our use of Twitter to build more personal connections with people. That in itself is its own reward that has both personal and business benefits, but for this blog post, I wanted to share my stories and thoughts on how Twitter has helped me grow personally.
For me, it comes down to these 4 things:
- Transparency & Values: Twitter constantly reminds me of who I want to be, and what I want Zappos to stand for
- Reframing Reality: Twitter encourages me to search for ways to view reality in a funnier and/or more positive way
- Helping Others: Twitter makes me think about how to make a positive impact on other people's lives
- Gratitude: Twitter helps me notice and appreciate the little things in life
The great thing about all 4 of these things is that not only have they helped me grow as a person, but they've also led to me being generally happier in life. And the benefits aren't just personal -- they also spill over into what we want the Zappos brand and business to be about: Zappos is about delivering happiness, whether for customers (through customer service) or for employees (through company culture). It's been interesting thinking about how all of my personal learnings about happiness can be applied to delivering happiness in the business world as well.
#1 - TRANSPARENCY & VALUES
What would you do differently if you were always on camera? I'm not talking about being on a reality TV show, but what if there were a permanent public record of everything you do or say from now on that anyone in the world could view at anytime? How would you act differently in certain situations? Would you be friendlier to people? Would you be less negative and less judgmental?
If you were always on camera, then everything you did would go towards shaping your personal brand, whether positive or negative. What are your personal values, and what values do you aspire to?
At Zappos, we have 10 core values that act as a formalized definition of our company culture. Our core values weren't formed by a few people from senior management that sat around in a room at a company offsite. Instead, we invited every employee at Zappos to participate in the process, and here's the final list we collectively came up with:
1) Deliver WOW Through Service
2) Embrace and Drive Change
3) Create Fun and A Little Weirdness
4) Be Adventurous, Creative, and Open-Minded
5) Pursue Growth and Learning
6) Build Open and Honest Relationships With Communication
7) Build a Positive Team and Family Spirit
8) Do More With Less
9) Be Passionate and Determined
10) Be Humble
The cool thing about the Zappos core values is that I've used them as my own personal values as well. So it makes tweeting really easy for me... Whether I tweet about something personal or something related to Zappos, if I'm living my life through these 10 core values, it all goes towards building the Zappos brand while shaping me personally as well.
A lot of marketers are initially mystified by how Twitter, in which you're limited to 140 characters or less per tweet, can actually help a company build a brand when you're so restricted in the length of your tweet. Here's the analogy I like to use:
Think of each tweet as a dot on a piece of paper. Any single tweet, just like any single dot, by itself can be insignificant and meaningless. But, if over time, you end up with a lot of tweets, it's like having a lot of dots drawn on a piece of paper. Eventually there are enough dots for your followers to connect them together. And if you connect the dots, in the aggregate it paints a picture of you and/or your company, and it's that total picture that is your brand.
I have to admit, like probably most other people, when I first joined Twitter I felt a bit uncomfortable publicly announcing what I was doing and what I was thinking. But because radical transparence was part of the culture of tweeting, I decided to give it a try and be as transparent as possible, both for myself personally and for Zappos. It was also consistent with Zappos Core Value #6: "Build Open and Honest Relationships With Communication".
What I found was that people really appreciated the openness and honesty, and that led people to feel more of a personal connection with Zappos and me compared to other corporations and business people that were on Twitter.
By embracing transparency and tweeting regularly, Twitter became my equivalent of being always on camera. Because I knew that I was going to be tweeting regularly about whatever I was doing or thinking, I was more conscious of and made more of an effort to live up to our 10 core values.
A lot of people use Twitter to complain or vent, but I generally try to avoid doing so because it's not in line with our core values. What I've noticed is that it's also caused me to complain a lot less in real life, and because of that, I've found that my own personal happiness level has gone up.
#2 - REFRAMING REALITY
That's not to say that I don't get into situations that I'm not initially happy about. But now anytime something that used to get me upset or frustrated happens, I try to find the humor in the situation and think about how the situation can be reframed. I've found that almost every "bad" situation is actually an opportunity that can be entertaining to my followers on Twitter, which also forces myself to see things in a different light.
For example, last year I was staying at a hotel in Mexico and somehow managed to lock myself out on the balcony of my hotel room. I was stuck there for 45 minutes before I was finally rescued. This would haven normally been a very frustrating experience, but because I had my cell phone with me, I was able to tweet about it and it actually ended up being a very enjoyable 45 minutes as I tweeted about the progress of my situation and read all of my followers' responses to it:
Went 2 my room after my speech, came out 2 balcony. Balcony door somehow locked behind me so now I am trapped outside. @ zappos_fred 2 rescue [http://twitter.com/zappos/status/812279213]
Hotel front desk is telling @zappos_fred it's not possible for me to be locked out on balcony. I assure you it is, I am not pretending. [http://twitter.com/zappos/status/812287969]
Hotel security finally believed @zappos_fred, rescued me after 45 mins. Asked 4 ID so I could come in from balcony. No ID = stay on balcony [http://twitter.com/zappos/status/812292469]
in fact, I now almost looked forward to situations that would normally be frustrating, because I've learned that almost any situation can be reframed to be funny as a tweet, which then makes the situation in real life funny as well. For example:
Airport bathroom: guy tries washing hands - auto faucet motion sensor broken. He tries voice recognition instead by yelling "Wash!" at sink [http://twitter.com/zappos/statuses/806944443]
If it weren't for Twitter, I would have instead probably been a bit annoyed waiting in line behind this man who was unfamiliar with motion-activated sink faucets. But instead, Twitter forced me to search for and find the humor in the situation by taking a step back and realizing that it actually was a pretty funny situation.
#3 - HELPING OTHERS
One of the great things about Twitter is the instant feedback loop. Within 5 minutes of sending out a tweet, you can find out whether people enjoyed or appreciated your tweet. When I first started using Twitter, I used to just tweet about what I was doing. Most of my tweets were very "me-focused", because the guideline Twitter gives is to answer the question "What are you doing right now?"
Every once in awhile I might share an inspirational quote or funny story or link to an interesting article. What I found was that those types of tweets also garnered the most responses. So today, with most of my tweets I try to do at least one of the following:
- Cause my followers to smile with something funny
- Inspire my followers (for example, with an inspirational quote)
- Enrich my followers' perspectives (such as with a link to an interesting article)
In other words, I've become a lot less "me-focused" and instead do a lot more thinking and asking myself, "What can I tweet about that would brighten the day for my followers or enrich their lives somehow?"
And by regularly putting myself into the mindset of asking what I can do for others, it inevitably ends up spilling over to my regular life outside of Twitter. And somewhat ironically, becoming less "me-focused" has actually increased my overall level of happiness for myself personally.
#4 - GRATITUDE
In my research into the science of happiness, many studies have shown that gratitude activities (such as keeping a gratitude journal) helps people increase their overall happiness level in life. There are many ways to be thankful, and many things to be thankful for, but one technique is to make a more conscious effort to notice and appreciate the little things in life.
For me, because I try to tweet every day, I've found that I'm always looking for opportunities to have something to tweet about. So I end up noticing and appreciating things that I would normally not even give a second thought to. Here are examples of some tweets I've sent about things I've noticed that I would have normally ignored or forgotten about:
http://twitpic.com/rcli - Guy in New York with a cat on his head. Apparently this is normal. [http://twitter.com/zappos/status/1046534414]
http://twitpic.com/13fn1 - It's so cold that the NY street food vendors' tomatoes & lettuce are frozen [http://twitter.com/zappos/status/1124243255]
At Vegas airport. While in bathroom, I had an AMAZING revelation: Toilet seat covers are shaped exactly the same as life vests! [http://twitter.com/zappos/status/1109483429]
Enjoying just hanging out at home for my birthday. Looking at the full moon which is closest to earth today, happens once every 15 years. [http://twitter.com/zappos/status/1054918866]
So now, anytime I notice something that would normally be inconsequential, the very act of tweeting forces me to spend some time appreciating what would have otherwise been ignored or forgotten. And because of that, I've learned that every day, there are many, many opportunities to notice and appreciate the little things in life.
So for all of the reasons I've outlined above -- Transparency & Values, Reframing Reality, Helping Others, and Gratitude -- I'd like to say thank you to Twitter for helping me grow as a person.
Tony Hsieh - CEO, Zappos.com
SOME QUESTIONS FOR YOU
Some questions for you to consider thinking about: What are your personal values? What do you want your personal brand and values to be? How can you use Twitter as a tool to help you grow as a person and be happier? If you've ever vented on Twitter, do you think you would be happier if you thought of Twitter as a tool for you to reframe your perspective? I'd love to hear people's thoughts and comments below!
