Where do good business ideas come from?

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I’m doing a piece of research with U of T that looks at where good business ideas come from and it’s making me look back at some of the very bad business ideas I’ve had over many years. It seems that age doesn’t prevent me from having bad ideas.

Several years ago I decided to try to solve the problem of strategy execution that bedevils many companies. This was a problem that I had had when I was CEO of Synamics. We could come up with strategies (whether they were good or not is another matter) but I felt we fell short in their execution. At the time I wished I had software to help keep track of whether my strategy was being executed effectively or not but I never got around to creating it.

Fast forward a few years and I kept seeing articles, many of them in the Harvard Business Review that reported that strategy execution is the biggest problem in business today. Even polls of CEOs will confirm that strategy execution is their biggest problem. So I figured, this is a problem that I had as a CEO and HBR says that this is the biggest problem in business today, so maybe this is a good idea for a business.

‘They’ say that when you’re starting a business you should look for a problem to solve, not create a product that goes in search of a market. So here I was, trying to solve a well documented problem. But was it successful? No, not even close. I teamed up with Mike Tobias at Mercanix to launch software and services to address problems in strategy execution and we bombed.

And when I say bombed, I mean that we couldn’t even find anyone to talk to. We went out to the market aggressively but met blank stares. I’ve spent some time analyzing what we did wrong and in the process I’ve learned a lot about launching new products. What I discovered when I did the analysis was that there really isn’t a market for what we created. But wait a second, this is documented as the biggest problem in business today but there is no market for a solution?

Well as it turns out, most companies haven’t assigned the generic function of strategy execution to anyone. (If you want to check this out, take a look at how many of your LinkedIn contacts mention strategy execution in their bios. According to my stats there are 100 people doing strategic planning for every one that is doing any strategy execution.) Most companies don’t have any one individual responsible for strategy execution as a job function. Instead they say that everyone is responsible.

So when no one person is responsible for something there is no one looking to buy software and services, even if the problem is the biggest one the company is experiencing. And with no one responsible for buying solutions, there is no one to talk to when you call up a company. So there is no market and you’ve come up with a bad idea.

It’s obviously not enough then, to base a company around a personal need or even around published problems. And if these aren’t enough of a source for an idea, then I’m trying to find out exactly where good ideas come from. The research I’m doing is telling me a lot but I thought I would ask the question in case any of you can add to the conversation. If you have any feedback, let me know. Where have your good business ideas come from?


Extreme Value

Extreme ValueI was thinking the other day about extreme value as a result of reading a blog about which retailers will survive when the middle class is eliminated. You can picture them. They are the Saks, Nordstrom,  Tory Burch, Tiffany’s, Versace and John Varvatos of the world.

While luxury retailing continues to grow , mid-priced retailers are struggling. Abercrombie & Fitch, Aeropostale, American Eagle, Ann Taylor, J. Crew and the Gap as examples of brands which are struggling to differentiate and prosper.

I don’t think that this is particularly due to the loss of a middle class though but of a polarization in business strategy. Product developers and retailers have found that the most money is to be made delivering extreme value. As we get more sophisticated, the tendency is for us as consumers to search out products and services that add value to an extreme degree on one dimension of the quality, cost, speed triangle.

Consumers are tending now to look for extremes in value, sometimes in quality and other times in cost and it really doesn’t matter which socioeconomic group one is in. The best business strategies are exploiting those extremes.

The same thing is occurring in politics. As you look at the US primaries, several candidates on both sides, Trump and Carson for the Republicans and Sanders for the Democrats are exploiting the voter search for extreme value.

Extreme value hiring is also in full force with companies outsourcing to get the lowest cost on one end of the continuum and paying exorbitant salaries for talent on the other end.

This is happening because we have moved from mass marketing to highly differentiated, highly segmented markets. You can differentiate on both ends of the extreme value curve but not in the middle.

So how does this apply to work? Well if you want to be successful, you had better be defining yourself on the talent end of the extreme value curve. If you don’t then you’ll eventually be outsourced as employers will look for extreme value on the cost dimension when faced with an average bunch of prospects.

Startup Failure – We Need a New Word

startup failureI came to the realization the other day that we need a new term for startup failure. For some reason, articles such as this one, seem to link childhood failure in school and on the sports field with startup failure. But the linkage is just not there.

Let’s look at how we use the term failure.

If you take a course in school and do not pass, this is called a failure. And this is one place where the term is properly used. You have failed to pass.

Now in school again, if you lose a game of baseball, some people call this a failure but it is actually only losing a game. You haven’t failed when you lose a game because you can’t win every game the way you.

And look at the field of scientific research. I have a friend who is researching malaria. He has been at this for over 30 years. Is he a failure because he hasn’t cured malaria yet?

When you look at startups, we use the term startup failure to describe all sorts of different situations. If you look at the stats, something like 75% of startups fail, quite like batter stats in baseball.

But these aren’t really failures, they are startup attempts that are just like times at bat or scientific experiments. The problem with the term startup failure is that is lends such a negative connotation and a sense of shame to the entrepreneur.

When someone tries a new business venture they start out with a thesis or proposition that they need to test in the market. They try a bunch of tests until they get it right.

Some entrepreneurs get it right faster than others and they succeed. Others might be trying something more difficult and it may take longer but if they run out of money, they stop trying.

This unfortunately is called a startup failure when it really isn’t a failure. Much like a scientific experiment it is the act of stopping trying.

The Germans solve the problem by having so many different words that their meanings are nuanced and have much less chance of connecting with an negative emotional response. In German, academic failure is Schulversagen and liver failure is Leberversagen.

Startup failure in German is covered by the phrase Startfehler which effectively means Startup Error and this is closer to the mark but not there yet.

Since I have such a huge following in the blogosphere (not) I’m going to invent a new word which will immediately catch on. Going from the German for Stop Trying – “Stoppen zu versuchen”, I’m going to propose we use the term Versuchen for failure.

Thus a failed startup is now a versuchen startup. You can use the term in ways such as “I really versuched that startup” or “he’s a serial versucher.”

I feel better already.

Necessity is the Mother of Invention

Necessity is the mother of inventionI was preparing a talk for Techno at the Impact Centre recently recently on evaluating new innovations and I ran into this old proverb again: Necessity is the mother of invention.

I thought about it for a while and realized that the expression is very apt but that there is a corollary to it and that is that “Innovation depends upon Necessity.”

My thesis, which I presented in not quite so elegant terms to the Techno participants is that innovation only happens when people are forced to innovate. I’m not talking about the people who come up with innovative products or services but about necessity being a precondition to users actually adopting an innovation.

And why is this? It’s because for the most part, there are all sorts of natural barriers to innovation. You can probably summarize these natural barriers in a few buckets:

  • Costs of implementing the new innovation.
  • Risks of failure
  • Changes required to behaviour
  • Psychological barriers to change

And the biggest one of all I think is that people are generally lazy. They can expend no extra effort to do what they have always done but to innovate, they need to expend energy, time, and money.

I’ve seen lots and developed a few products and services that go absolutely nowhere in the market despite being real improvements over what is out there. When I look back at all of them I can find one of the barriers listed above standing in the way.

When all is said and done, there must be some powerful force to counteract the barriers to innovation. Unfortunately, having a better product just isn’t enough.

There must be some other force, whether it is regulatory, competitive, technological or economic that makes someone need to innovate. So I think the corollary works: Innovation depends on necessity.

Why Startups Succeed

There is a great TED Talk you should watch that went live yesterday. In the talk Bill Gross who is the founder of IdeaLab and has founded a lot of startups talks about some research he has done about why startups succeed and others fail.

“He has gathered data from hundreds of companies, his own and other people’s, and ranked each company on five key factors. He found one factor that stands out from the others — and surprised even him.”

And that factor is timing. It is his proposition that the one thing that contributed most to a business’s success was timing. The startups that came out at the right time succeeded and the ones that were early or late didn’t do as well.

Two other factors that he felt contributed to why startups succeed were the characteristics of the founding team and the degree of differentiation of the idea.

Unfortunately, as a recipe for success, that leaves a little bit lacking. You really should ask the question, then: “How do I get my timing right and how do I know this is a good time for my business?”

I think I have an answer for the question of timing. While I haven’t done the quality of the research that Bill has, I’ve been doing similar research for 15 years, trying to figure out why startups succeed. But more on that tomorrow.

Watch the talk, it’s only about six minutes long, and return tomorrow for my take on how you can get your timing right.

The life of the Peasant Farmer

peasant farmerA blog about feudalism recently showed that the system worked for the peasant farmer much better than it does for us now.

“In a recent chat at the highly literary Hay Festival in Wales, Andrew Simms and David Boyle, authors of The New Economics: A Bigger Picture and both directors of the New Economics Foundation think-tank, argued that for a small farmer in the 12th century to make a sufficient amount to live on for a year, he would be able to (and did) take 170 days holiday almost half a year When you dig up 12th-century skeletons you find they are taller than or as tall as skeletons at any other part of history other than our own. That suggests they were getting economics right.”

How is it that we have gone from working a half year only to working full days as well as nights, weekends, and holidays?

We must be getting something wrong that the peasant farmer got right. What I suspect is that in feudal times, people worked until the job was done. Nowadays, due to the industrial revolution and the factory method of production we work a standard number of hours instead of until the work is done.

But we moved out of the factory into the information age. Why is it we are still working factory hours when we could chose to work until the job gets done instead of until the time is done.