Predictions and Postulations

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By Tom Fedro

Have you ever watched a television show or a movie from your youth and just sat astounded at the way everything in the show doesn’t mesh with today’s world?  I’m not just talking about the emotional or political aspects of it.  Sure, when Ricky Ricardo gives Lucy a spanking, our eyes get wide and we shake our head about how different our world is now; but I mean the way technology has become such an integrated part of our life that things just seem off when it’s not part of the equation.  There’s something about watching a police officer put a quarter in a pay phone or a detective open up a phone book that seems strange.  I catch myself wondering why Starsky doesn’t just call Hutch on his cell phone!

Nobody in the 1980s could have predicted the way things have progressed.  Sure, Alvin Toffler was pretty close when he wrote The Third Wave and announced the end of the industrial age and the beginning of the information age, but even Toffler’s genius didn’t anticipate the completely wired-in (or wireless for that matter) access to…well, to just about everything.  In fact, while the beginnings of the information age focused on technology—Can we do it?—the new focus is on service based delivery of functionality and information.  Content is king in ways never imagined before, and this means that opportunities have really shifted from pretty buttons to secure methods of storing, transferring, and accessing data.

With every major company trying to get in on the Cloud in one way or another, predictions explode from tech pundits like one of Lucy’s cooking experiments gone wrong.  How many of these predictions will go the way of the flying car or the teleportation device?  There’s no way to tell, really, because so much of what we get in the world of technology is driven by market forces that are fickle.  One thing I believe is certain, though, is that we have to interpret technology based on trends we anticipate for the future.  Twenty-five years ago, we couldn’t have anticipated (absent sheer genius) the social media explosion, the complete mobile revolution, or the trend toward instant access, but the one thing that we could have and should have anticipated is the reliance on data and its complete takeover of our daily lives.

Someday, our kids will watch television shows and movies from our time and wonder why the hero doesn’t hop in his flying car or simply order up a logical answer to the dilemma or something else that seems impossible now.  Who knows what technology will be standard in thirty years.  I’m willing to bet, though, that at its core it will deal with information and access to it.

 

Successful Exits

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By Tom Fedro

Most of us have the dream, right?  We imagine taking our company public or selling it for a dramatic windfall.  A great many of us saw at the height of the Internet boom when a successful exit didn’t necessarily require anything resembling fundamental business health.  We watched companies that were giants merging with companies less than a decade old.  We watched kids become millionaires with stock options and public offerings.  In many ways fundamental business planning gave way to product development intended not for profit but for eventual sale to someone else.

There are still some examples of this kind of attitude, but the opportunities to sell non-monetized companies have faded significantly.  The days of impossible valuations are numbered if not already gone.  Take Bebo for example.  It sold for $850 million to AOL and almost immediately tanked.  AOL’s CFO lost his job and when the founders bought it back for 1/85th of its sales price, the fiasco finally ended.  This isn’t to say AOL was cheated or that the founders of Bebo didn’t deserve an exit.  However, it was AOL’s desperate attempt to remain relevant in the world of social media that led to overpayment and then a complete loss of more than three-quarters of a billion dollars’ worth of shareholder value.

If you’re looking at this and seeing an $850 million exit strategy, you’re looking wrong.  For all intents and purposes, the purchase of Bebo signaled the end of insane valuations. The key to business is and always has been valuations, and the slap in the face to each of AOL’s shareholders illustrated that far more effectively than anything I could ever write.  My advice?  It’s absolutely appropriate to build a company with the intent to sell, but  you have to be in for the long haul with genuine value creation and profitability over time because you never know if or when that buyer will actually show up with the big check.

Into the Heart of the Jungle

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By Tom Fedro

Jim Stengel is an author, business guru, and experienced global marketing executive.  His branding expertise surpasses most, and I’ve enjoyed wisdom I’ve garnered from his writing, especially his new book.  He focuses on consumer branding more than business to business, which is no surprise given he was the global marketing officer for Proctor and Gamble, a company legendary for its ability to brand consumer products.  He came to mind a few days ago as I caught up on my various feeds and found him quoted in a post about great marketing quotes.  Here’s his quote:

If you want to understand how a lion hunts don’t go to the zoo. Go to the jungle.

It was a bit strange to see that quote right in the middle of a list of quotes that spoke of customer awareness, product development, advertising, and response ratios.  Each of the others was a somewhat pompous truism (and let’s face it,  a lot of the “experts” can make even the most basic marketing statement in a completely pompous way—myself included.)  I suppose that’s why it stuck with me, and I found myself realizing it had a lot of value in the world of B2B technology.
One of the problems with those of us in the tech sector—especially in tech startups—is that we tend to market our product as though our customers were caged.  In a zoo, the lion gets what’s thrown through the bars of its cage.  It’s docile.  It’s reactive and not proactive.  In short, it’s just waiting for the zookeeper to direct its behavior.  How often do we market to our customers with the same perspective?  We parcel our data and try to control the sale as though our targets lived in a cage and had no ability to see beyond the exhibit.
That’s not today’s customer for us.  Today’s executive isn’t locked in a cage.  We’re not zookeeper’s handing out controlled portions of information with which to make a buying decision. On the contrary, today’s executive is constantly on the hunt.  Access to information is almost completely without barrier today and it doesn’t come from zookeepers in call centers.  Our customers aren’t caged and we can’t control the sale.  So what do we do?  There’s a simple answer, though it’s by no means easy.  We start exploring the jungle.

Passion Is Overrated

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By Tom Fedro

What?  Can I really write this post?  I’m all about business and startups and suggest that the driving force of a multitude of entrepreneurs isn’t as important as every other blog on this subject suggests?  What of all the stories?  What of all the movies?  What about all the inspirational books and the men and women just about to give up but hanging on because they accessed deep within themselves that last vestige of hope and passion that kept them motivated against all odds.

It makes for good storytelling, but I have to tell you that I’ve been in more than one startup.  I’ve advised in more than one startup, and I’ve seen countless pitches from founders.  I’ve spent my career focusing on startups.  I’ve yet to find a single founder of a startup who wasn’t consumed by passion.  Why in the world would anyone put in the kind of effort and sacrifice necessary to start a new venture if there wasn’t passion?  Everyone has it.  Everyone in this arena, anyway.

The bottom line is this.  According to studies (and there seem to be a million of them) the failure rate for startups is staggering.  Low estimates put it at about eighty percent, some suggest the rate is ninety-two percent.  That means your brilliant new business has about an eight percent chance of success, no matter how passionate you are.  In fact, there’s a good chance your passion, if not reined in, will be your undoing.

The Genome Project’s study of 3200 startups concluded that the number one reason for failure is self-destruction, primarily through premature scaling.  In other words, passion makes us grow too quickly and get ahead of ourselves.  Things get crazy and our dreams become nightmares.  Our incredible idea is so incredible that we implement it faster than it can actually succeed, and the net result is failure.

I’m not suggesting passion isn’t important.  I’m just trying to tell you that everyone attempting to start a business probably already has it.  Don’t work on motivating yourself in this area.  Don’t focus on the passion, focus on the business.  Make good, fundamental business decisions.  Those are the decisions that may seem dispassionate or even appear to show a lack of confidence in the idea about which you’re so passionate.  Don’t worry about that.  You worry about whether or not you’ll be one the eight percent that make it.