Entrepreneurship and Digital Marketing discussions

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Join me every Friday and Wednesday at 12 noon ET on Twitter as we discuss entrepreneurship topics at #startupchats and also every alternate Wednesdays at 11am ET #GuruChats as we discuss digital marketing issues.

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Leadership in 3 ideas

leadership-slider1What is leadership? We talk about it, take courses on it, in my opinion it can be mostly expressed with 3 overall concepts.

1.      Understanding other people. This concept encompasses concepts such emotional intelligence, path goal theories, situational theories, Herzberg’s motivational theory and Maslow’s motivational theory.

2.      Create an environment such that other people can be successful. This encompasses organizational culture, compensation, recruitment, leadership styles, team formation concepts, organizational tools, information availability, values, vision, missions, goals, and metrics.

3.      Do it all with Integrity. Without integrity, trust that the leader has the best interests of everyone in mind could be absence and thus people might be more hesitant, more protective of their position, less communicative, less creative, and more risk adverse. People need to know that the leader can be trusted.

Check out our ethics simulation for universities, colleges and organizational training.

Technology Start-ups lead by non Techies – Entrepreneurship Notes

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I have been approached many times by would-be entrepreneurs that want to start a company which has technology as its core intellectual property, usually software as service. In some cases, the would-be entrepreneurs have no capability in technology and figure they will outsource the technology’s development and maintenance, manage everything and get investors to pay for it.

What’s wrong with this?

1)     The core intellectual property and knowledge of the technology will reside outside the company. Admittedly this could be dealt with through legal agreements but the risk remains of intellectual property theft.

2)     A primary issue is the risk that the delivered technology will be problematic this can occur for the following reasons:

a.      Technology developers might not understand what exactly is needed and thus deliver what is asked for but not what is needed, for example, a web site is asked for, the software developer doesn’t question whether a cell phone app would be better, so a website is delivered and without security protections because that wasn’t asked for. Yes, I have seen this happen. In other words, they delivered what you asked for but not what is needed or optimal given the long and short term vision and goals.

b.     The nature of the vision and understanding of the market tends to evolve, an in-house team tends to be more attuned to the evolving nature of what is needed.

c.      I have seen business plans in which the entrepreneur figures their role is just to manage. Just being the ideas person or the management person doesn’t always work in startup.

While outsourcing or delegating can work, there are three main take-aways:

1)     Never delegate understanding, the entrepreneur team needs to understand the nuances i.e. implications and implementation issues around their core IP this usually occurs for those that can do technology.

2)     Entrepreneurs need to be able to do, not just imagine and inspire.

3)     Investors tend not to like funding all the development costs while the founding team just “manages”.

Check out our entrepreneurship simulation

Hey Entrepreneur, does your Risk Ripple?

What do we mean by risks in a startup and do they ripple?

Over the years I have seen many business plans and in the startup world we often speak of calculated risks (see my entrepreneurship simulation).

Risk is divided into impact and likelihood of the occurrence of an event. Essentially every assumption in the business plan is a risk, the management team, the price charged to the customer, etc. Creating a risk score of business plan has some value, but more so is understanding where the risk of the business plan is and working to reduce it, for example, we know that the management team is a risk area of concern, a high quality management team tends to have an overall impact of reducing risk.

A calculated risk means we have minimized impact and likelihood of each risk. Part of this process is to reduce the number of assumptions by validating them, ie, will customers pay money for this product? We can reduce risk associated with the assumption about customers by finding someone(s) willing to commit to purchasing the product prior to its completion i.e. advance sales.

A startup is set of risks of different impact and likelihood and thus different significance. I have seen investors who will not invest in any company where the management team is unproven which suggests that the team is one of the highest impact risks.

We could develop a 2 dimensional impact v.s. likelihood chart and assign values to each resulting area on the chart to derive an overall risk score. While the term impact could be interpreted broadly, its typically interpreted to mean an immediate impact such as an angel investor doesn’t invest or a particular partner doesn’t align with the company.

This narrow interpretation fails to capture a more strategic impact such as the integrated nature and the system wide impact of some risk items.

If the team is of poor quality then the ripple effects can be broad and deep, if a particular customer doesn’t buy then the impact might be short lived.

Generally, the advice around startups is to reduce risk as much as possible and then proceed with launch. But this advice is too coarse.

The advice should be tailored to say something more, along the lines of reducing the risk items that have the largest ripple effect across other risk items. In other words, cause and effect linking of risk items i.e. one risk item could increase the likelihood or impact on another risk item(s). Items that ripple include the management team, barriers against competition and shortage of financing.

So when devising a risk plan:

–         understand that assumptions are risks

–         that some risks have a ripple effect due to their systematic and integrated nature

–         investors tend to dislike ripple risks

–         understand ripple risks by considering their impact on other risk items

–         reduce ripple risks impact by figuring out a way to decouple them from other risks, for example, adviser teams for a weak management team.

KPIs and Metrics – they aren’t reality

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Key Performance Indicators (KPI), metrics, balanced scorecard and other measurement based approaches to management have a common set of objectives: to give management visibility into what is happening in the organization.

Perhaps you have noticed that in some organizations the metric values look good but deep within the organization, it’s actually poorer than perceived quality and manipulated results. I have seen organizations so obsessed with metrics and documentation that a cadre of bureaucratic minds tends to raise to the top and believe that metrics are reality, as long as the documentation and metrics look good, they say its all good.

I recently spoke at a university that is heavy on documentation and metrics, before walking into the classroom, I was told by one of the bureaucrats to say something to the  students that they would need for the exam but wasn’t available elsewhere because students weren’t attending class, essentially what was this bureaucratic saying?:

1)     The students saw no value in attending class,

2)     The university was aware of that, and,

3)     Rather than improve quality by changing something, the solution was to punish the students.

A recent investigative review of hotel and restaurant cleanliness by a customer oriented TV show, found shocking problems with a lack of cleanliness, essentially employees using unsanitary approaches to keeping facilities clean and food free from contamination. When confronted, hotel and restaurant leaders babbled the usual corporate speak but appeared to have no idea what was actually happening at the operational level.

We have also seen banks caught cheating customers in a push to drive profit metrics higher, some of the leaders of the organization appeared surprised that their excessive focus on revenue metrics resulted in unethical behaviour.

At United Airlines did a focus on profit, adherence to rules and schedule metrics result in a man being dragged down an aisle?

Metrics aren’t reality.

There are a few reasons for this difference between metrics and reality:

1)     Some metrics are subjective and are tabulated using subjective weights, we have subjective weights, descriptions, ratings and thus subjective results used as objective results.

2)     Metrics can suffer from validity and reliability problems i.e. are we measuring what we think we are measuring.

3)     Organizations can use metrics to reduce operational skill level requirements and thus dumb down jobs.

4)     At the operational level, excessive focus on metrics can be de-motivating and result in employees putting what over how and losing sight of why.

5)     Leaders use metrics as a primary form of understanding and reduce the person to person communication or learn-by-getting-involved approach.

When we represent a complex multidimensional space with simple two dimensional metrics we have lost information, for example, converting a 256 colour picture into a gray scale image means we have lost information.

Metrics are summary of reality and potentially a lower dimensionality summary of reality.

If you in a leadership position, you need to do every job within your realm, if you don’t have the required skill then act as an apprentice or job shadow. An additional approach is to interact with your organization as a supplier, partner or customer and see what your organization looks like from the outside. Experience what is actually involved with a job. Don’t accept the summary or the metric as a true understanding of the job. You need to understand the nuances, the implementation, the implications of each job and decision.

Don’t be fooled into thinking metrics are reality.

Integrity – can we teach/train it?

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Integrity is regarded by many people as honesty and truthfulness, its values include empathy and respect.

At the organizational and higher educational levels, we want to see individuals consistently acting ethical regardless of the situation, regardless of whether anyone will know.

Can we teach integrity by telling employees or students what is right and wrong?

Or should we have them experience it prior to an ethical dilemma event?

There is tremendous value gained from sharing a learning experience, when we see what others will do, it helps shape or validate our mindset. We wouldn’t play a team sport without team practice and ethical education/training is similar. Teams that rehearse a particular play implement it better during the game.

For example, in the recent United Airlines situation, why did the passengers, flight attendants and the airport security agents not stop the situation? It was probably a new situation for all involved and in a group environment people tend to act according to a herd instinct. Before acting they wonder what everyone else is going to do. If we give a revolution no one wants to be the first out on the street, most people will only consider joining a revolution once it is already started.

What if the herd instinct was to act rather than wait to see what others are going to do? What if through practice or rehearsal people knew what others are going to do and therefore acted without waiting?

I suggest that is where ethics organizational training and education needs to go. Less abstract discussion or videos on telling employees or students what is the right thing to do, more focus on developing a group understanding of how the group and individual will act in any particular ethical dilemma situation. Developing a cultural norm of what to do in a new situation will provide the basis for resistance to unethical decisions and actions.

For corporate training or students in a university/college setting, we tend to rely on videos, and ethics documents, what if we did frequent ethical role-plays in a group setting of actual ethical dilemmas, and employees/students enacted what should be done?

Ethics training/education as a team practice.

We need to instill a group consensus of what to do for types of situations prior to their occurrence, otherwise there is likelihood that during an unethical situation, some people will sit and watch rather than do the right thing.

There are tools to help (see simulations). The first step is to recognize that the herd tends to act when the thought of what to do has been shared/rehearsed as a group prior to the event.