All Marketers Are Liars
The Power of Telling Authentic Stories in a Low-Trust World
Seth Godin, Publisher: Portfolio Hardcover  ISBN: 1591841003 

Do $100 speaker cables sound better than $10 cables?

Is a Mercedes 15 times better than a Toyota to justify being 15 times the price?  Rationally - no. 

But - the sound the Mercedes door makes when it closes tells a story – a story that appeals to the world view of their target customers.  This story of quality and workmanship is something their target customers think is worth talking about and spreading to other people who share their world view.

People don’t buy the functional benefits – they buy the story that appeals to their emotions.

People buy SUV’s because of the story (the way it makes them feel) – not because it rationally makes sense.

People drive Toyota Prius – not because of the mileage, but because of the story Toyota has marketed to them, and the statement it makes about them as owners to others.

People don’t buy what they need (commodities) – they buy what they want (brands).

They buy bottled water with Fiji on the label because of the way it makes them feel (emotions).

Most companies still make the marketing mistake of promoting product / service superiority. 
It’s not the utility of the product / service (better / faster / cheaper / etc) that matters – it’s the story you tell – it’s how you make them feel.

The $80K Porsche Cayenne and the $36K VW Toureg are essentially the same vehicle. 

In blind taste tests – people prefer Pepsi.  But people drink the brand – not the contents – and Coke is still #1.

The exact same wine in 2 different bottles, one with a premium label and price tag – the other one with a budget label and price tag.  In blind taste tests when asked which one they prefer the taste of, people claim to enjoy the premium version more

In taste tests organic food does not taste any better in tests.  It does make organic consumers feel better about purchasing it however.  Wholefoods sells organic foods at inflated prices.  People don’t shop there for the food.  They shop there because of the way it makes them feel.

You can’t spend money and hope to change people’s minds with advertising or campaigning.

Facts are irrelevant.  What matters is what the customer believes

To succeed marketers must tell great stories.  A great story:

• Makes a promise
• Is trusted by those that share that world view
• Is not aimed at everyone
  

In marketing, you need to tell great stories that spread or you will become irrelevant.

Your story must appeal to the “world view” of the target customer (the beliefs / biases / lens / filters - through which they perceive things).  Don’t try to change peoples’ world views – you can’t – you need to find something they already agree with and market to that. You need to reinforce a bias they already have.

People tend to ignore (filter out) information that contradicts their worldview, and look for information that supports it.

Don’t market to the majority.  It’s at the edge where you will find customers whose worldviews are unfulfilled.  Find a neglected world view and frame your story to this group of customers - in a way you can reach them cost effectively.

Make your story “remarkable” = (able to be remarked about) = worth talking about by key influencers in this group (thought leaders / “sneezers”).  Keep your story simple and easy to spread.

The process:

• Target a group of customers who share the same world view
• Market your story to appeal solely to that world view
• Make it easy for the story to spread
• Everyone in your company and everything you do must completely embrace and “live” your story – so it will be believed
• The result = you create a new market which you “own” 

People only notice stories that are new and different.  In a world of information overload and infinite choices – consumers make snap judgments.  First impressions influence our decisions – you don’t get much time to tell a new story.

Once people have made a decision based on first impressions – they stick with it – regardless of new information that might prove them wrong (about people, products, companies).  People don’t want to be wrong, so they stick with their first impression.

Amazon.com has told a story and worked hard to build a great reputation for customer service.  They so exceeded expectations that their target customers started spreading this story about Amazon.   If they do mess up now, people tend to forget it as a random event, because it does not support their world view of what Amazon stands for.  As a result, it’s now easier, not harder for Amazon to maintain its great reputation.  People believe it because they want to believe it.

Be authentic.  If your marketing is cool, your location is cool, but your products and services aren’t – you won’t get talked about for long.  Everything counts!

If you want to grow, you must do something worth talking about = remarkable (= the purple cow concept)

Whilst your story may not be rationally “true” – you must NOT be fraudulent.  You must not harm anyone.  You must do the right thing by people.  “The cigarette preferred by doctors” (Phillip Morris) and encouraging mothers to use milk formula rather than breast feeding (Nestle) - is both inauthentic and fraudulent – and both companies were exposed as such.

You must be authentic and keep your promises.  Your marketing won’t work for long if it really is a lie.  Once fooled, a person will never repeat your story to someone else.

As per the book “Purple Cow” - you need to be remarkable.  That is you need to do something worth remarking about.  Remarkable products and services are worth talking about – not hype filled advertising.  You need to build your entire organization around providing the experience that supports your story.  You need to sell it to yourself first!

You cannot “out yell” someone who already owns a story.  A boring “me too” story is not worth a 2^nd look.

Once people have bought a story, persuading them to switch to an alternative is like telling them they were wrong – and people hate admitting they are wrong.  Don’t try to outdo a leader.  Find a different customer with a different world view.  Create your own category and story.

If you tell the right story you will automatically become a purple cow.  A purple cow is not about simply being different – its about being remarkable – able to be remarked about – to be doing something meaningfully different that is worth talking about

Crossing the chasm:  Go to the edges first.  Be extreme in your storytelling.  Win a loyal following.  Then gradually make it more palatable to more mainstream audiences who are persuaded to buy from you by your loyal customers through their own storytelling (not by your advertising).

 

Essential Business Strategies for Turning Ideas into Action

 
John Spence,
Publisher: Jossey-Bass
ISBN: 0470494514
 

This is a synopsis only.  RESULTS.com recommends you buy the original book.

The key to business success, based on the author’s work with thousands of organizations (including GE, Microsoft, IBM, and Abbot Labs), is tied to the disciplined application of the Six Principles of Business Success:

1. Vivid Vision
2. Best People
3. Robust Communication
4. Sense of Urgency
5. Disciplined Execution
6. Extreme Customer Focus

Application of these principles may be simple, but not easy.  It requires leaders with a passion about their business and its success, persistence, practice, and perspective to see patterns and trends that others do not.
 

Vivid Vision

Whether you lead two people or 2,000 it is critical that you have a clear, compelling and extremely well-communicated vision of where the organization is headed and what it stands for.  The mission (or purpose) is why the company exists, the values are the guidelines for behavior, and the vision (BHAG©) provides a vivid description of where the company will be in the future.

The key to Mission, Values and Vision (M/V/V) is not just creating them, but they need to be communicated and applied throughout the organization.

Ideas for bringing M/V/V alive in the organization include:

• Rewarding employees for demonstrating the values.
• Using M/V/V in the recruiting process by creating specific interview questions to identify alignment to them.Communicate repeatedly these elements in company newsletters, presentations, and signage.  Create fun posters, apparel and other items that reflect M/V/V.
• Audit how well the company is living its M/V/V through customer or employee surveys.

Best People

The success of your business is directly tied to the quality of the people you have on your team.  Many companies say, “Our people are our most important asset,” but very few have put in place a system to make talent management a key strategic advantage.  With the right people in the right culture, success and profitability will result.
Attracting talent is a strategic commitment that will take ongoing time and effort.  Leaders should maintain a roster of great people for every position, whether the position is currently vacant or not (talk to people now who may fill a position five years from now) and spend time identifying and keeping in touch with these individuals.

The best talent is attracted to a strong culture, and an organization with clear M/V/V.

Talented people demonstrate the 5 ‘C’s – Competence, Character, Collaboration, Communication and Commitment.

Hiring the best talent is not enough.  Once hired, people need to be highly engaged in the organization.  Engaged employees is the single greatest driver of customer satisfaction and loyalty, and overall company success.

Engaging employees requires a clear and compelling M/V/V, along with giving them an environment where they can progress and contribute, and establishing leadership that is authentic and approachable.
 

Robust Communications

Communication breaks down in many organizations at two levels, interpersonally and organizationally.

Strong interpersonal communication involves open dialog, building rapport, active listening, awareness of body language,  and a willingness to engage in constructive conflict.   Constructive conflict is difficult and requires courage and honesty.

Robust communcation at an organizational level builds from the interpersonal.  Leaders must model strong interpersonal communication skills, while being authentic and brutally honest in confronting reality and communicating the decisions and strategies moving forward.
 

Sense of Urgency

In business today, speed rules.  If you cannot move quickly the competition will - not to mention that customers hate waiting and are becoming more and more conditioned to instant response.

Speed requires making decisions, often in an environment of imperfect information.  To make good decisions …

• information must flow easily within the organization.  There can be no ‘hoarding’ of information, knowledge or learnings, and it must move without friction.
   
  AND
   
• intended results or outcomes must be clear.

With these components, all employees can make decisions about their priorities; deciding what to do and, more importantly, what NOT to do.

Bureaucracy can be the enemy – seek to eliminate hierarchy, bureaucracy, inefficiencies and any activities that do not add value, serve customers, or make employees more effective.
 

Disciplined Execution

Many companies have grand ambitions, but only about 10% of businesses can effectively execute on their strategic priorities in a disciplined and thorough manner.   Urgency and discipline can exist together and must be balanced.

Disciplined Execution requires:

• Systems and processes that align to strategic goals.
• Individual objectives that tie strongly to corporate objectives.
• Mechanisms for continuous improvement or innovation of processes.
• Give people the resources, tools and training to perform well in their roles.

Extreme Customer Focus

At the end of the day, the only critic whose opinion counts is the customer’s, and the company that owns the “voice of the customer,” owns the marketplace and will outpace the competition.

Know the ‘moments of truth’ for your customers – what are the key points where the market interfaces with your company?  Determine how to make each of these moments a highly satisfying interaction, and recognize that front-line employees are typically the most important element of these interactions.

Characteristics of great service include reliability, professionalism, empathy, responsiveness and ambience.

 

Blue Ocean Strategy - W Chan Kim, Renee Mauborgne

   

 

Competing for the Future  -  Gary Hamel, C K Prahalad

   

 

Competitive Strategy- Techniques for Analyzing Industries and Competitors  -  Michael E Porter

       

Confronting Reality- Doing What Matters to Get Things Right  -  Larry Bossidy, Ram Charan

     

 

Create Your Own Future - Brian Tracy

 

Execution - Larry Bossidy, Ram Charan, Ram Charan

What the world's greatest managers do differently

 
Marcus Buckingham and Curt Coffman
Publisher: New York : Simon & Schuster
ISBN: 0684852861

This is a synopsis only.  RESULTS.com recommends you buy the original book.

How do you measure and grow your human capital?

Financial statements do a poor job of measuring the true value of a company.  A great deal of your company value is tied up in your human capital – the hearts and minds of your people. 

The Gallup Q 12

Extensive research by Gallup has discovered 12 statements that are be the most powerful predictors of employee engagement.

The teams with highest engagement scores had:

• increased sales growth
• increased productivity
• increased customer satisfaction
• fewer accidents
• lower staff turnover
• less staff absenteeism

Each question is rated on a scale of 1 - 5

(1= strongly disagree, 2 = disagree, 3 = neutral / no opinion, 4 = agree, 5 = strongly agree)

1. I know what is expected of me at work.
2. I have the materials and equipment I need to do my work right.
3. At work, I have the opportunity to do what I do best every day.
4. In the last seven days, I have received recognition or praise for doing good work.
5. My supervisor, or someone at work, seems to care about me as a person.
6. There is someone at work who encourages my development.
7. At work, my opinions seem to count.
8. The mission/purpose of the company makes me feel my job is important.
9. My co-workers are committed to doing quality work.
10. I have a best friend at work.
11. In the last six months, someone at work has talked to me about my progress.
12. In the last year, I have had opportunities at work to learn and grow.

Research shows, it is the employee’s immediate manager who is the critical player in building an engaged, productive workplace – not pay, benefits, conditions, or even charismatic leadership

The best thing the business leader can do create a great company is to hold each line manager accountable for what their employees say to each of these 12 statements. 

 

The Difference between Leaders and Managers

The difference between managers and leaders is more profound than most people think

A leader is not a more advanced form of manager. Both roles are vitally important – they require 2 very different strengths. 

Great leaders look outward:

Key role = rally people to a better future

Great managers look inward:

Key role = find out what each individual’s strengths are and capitalise on them

CONVENTIONAL WISDOM	WHAT RESEARCH SHOWS
Management is not as important as leadership	Managers are the prime catalyst for superior employee performance
Management is a stepping stone to leadership	The core strengths of great leaders and great managers are very different
Hire staff based on experience, intelligence, and determination	Hire staff based on talents / strengths
Set expectations by defining the right steps	Set expectations by defining the right outcomes
Develop people through promotion – climbing the corporate ladder	Develop people by helping them find and specialise in roles that "fit" their core strengths
Provide more pay, perks and prestige the further one climbs the corporate ladder	Create heroes in every role. Provide more pay, perks and prestige for levels of achievement in each role
You can be anything you want if you work hard enough	You are naturally "wired" to be exceptional at certain things only. The key is to understand what your core strengths are
The key to success is to fix your weaknesses	The key to success is to play to your strengths
Treat people as you wish to be treated	Treat each person differently according to their needs
Spend time with struggling staff members	Invest most of your time with your most productive staff members
There is no "I" in team. Focus on team performance	Great teams are built around individual excellence and specialisation
Annual performance appraisal focused on "areas for improvement"	Performance appraisal every quarter focused on results and how best to leverage the employee’s strengths in the future
"Familiarity breeds contempt". Don’t get too close to your employees. Keep them at arms length	Managers must understand employees strengths, and be aware of the practicalities of their personal lives as they impact performance
Poor performance can be overcome with willpower and training	Tough love. Do not tolerate poor performance. Find them a role that matches their strengths or quickly terminate

 

The 4 Core Management Activities:

1. Select for Talent

Selecting for talent is the manager’s first and most important responsibility

Understand the 3 categories of talents / strengths:

1. Striving = the “why” of a person (what motivates them)
2. Thinking = the “how” of a person (how they make decisions)
3. Relating = the “who” of a person (how they relate to people)

• Study / interview your current top performers in each position - how they strive, think and relate
• For each role Identify at least 1 critical talent from each of the 3 talent categories
• Use this as the basis for recruiting and interviewing for each role
• Do not compromise on these talents – no matter how persuasive the candidate’s resume or personality  
• Talent trumps experience, intelligence & determination
• Ask questions that elicit past examples of specific behaviours
• Clues to talents / strengths = SIGN
  • S – Success – you are good at it
  • I – Instincts – you have the urge to do it
  • G – Growth – you love learning about it
  • N – Needs – it meets your needs - you feel a sense of fulfillment 
• Use profiling tools to provide objective measurement

2. Define the Right Outcomes

• Standardise the “ends” rather than the “means”
• Enforce only those steps that correlate with prescribed standards of performance
• The customer is the ultimate judge of what is a valuable outcome – ask them!
• Realise that employees will not do things exactly the way you would do them.
• Let employees leverage their own unique styles to meet measurable outcomes
• Select for talent / strengths in the 1st place and you will need fewer rules
• Create measures for all outcomes
• Hold people accountable for achieving measurable outcomes

 

3. Focus on Strengths

• Cultivate each individual’s strengths and manage around their weaknesses
• Manage around weaknesses by providing a support system, a complementary partnership, or change their role to match their strengths
• Don’t try to fix their weaknesses
• Everyone is different – and their strengths / talents are resistant to change
• Help them become more of who they already are
• Confront poor performance immediately
• Check - Is it a talent issue or a training issue?
• Check - Is the manager pushing the right buttons?
• Terminate the staff member early if you have made a hiring error

4. Find the Right Fit

• Help each person find roles that enable them to do more and more of what they are naturally wired to do
• Encourage world class performance in each role
• Promoting people can lead them to failure. Traditional career paths are traps
• Management / Leadership require specific core strengths
• Instead, create “heroes in every role” – i.e. alternative career paths
• Make every role, when performed excellently – a profession with associated prestige, pay and perks
• Create levels of achievement (ala lawyers – junior associate – associate – senior associate – junior partner – partner – senior partner)
• Broadband (overlapping) pay rates – i.e. senior salespeople earn more than junior sales managers
• Make specialization and excellence in a role more attractive in terms of pay, perks and prestige than seeking promotion 
• Celebrate individual successes

Customer Research – What customers really want:

The 4 Step Hierarchy to increase Customer Satisfaction

1. Accuracy 
   Did I get what I expected?
    
2. Availability
   Are you there when I need you?
    
3. Partnership
   Are you on my side?
    
4. Advice
   Can you help me to learn?

 

4 Keys for Effective Performance Appraisals

1. Simple 
    
2. Frequent
   • One on one manager meetings with direct reports
   • Minimum of 1 hour performance appraisal per employee per quarter 
   
    
3. Future focused
   • What “could be”, rather than focus on past mistakes 
    
    
4. Self Measurement  

• Staff track their own performance and learnings = self discovery
• Get them to prepare answers to the following questions prior to the meetingWhat results have you achieved? 
  • What have you learned?
  • What relationships have you built?
  • What do you think you are good at?  Why?
  • What parts of your current role do you enjoy?  Why?
  • What parts of your current role are you struggling with?  Why?
  • How can we manage around this?
  • What would be the perfect role for you?
  • What would you be doing?
  • Why would you like it so much?
  • What will be your main focus for the next 3 months?
  • What do you want to learn?
  • What relationships do you want to build? 
• During the appraisal, honestly tell them what you think about each of their answers to each question and add your comments to each of their answers.

Interviewing for Strengths:

• What made you want to apply for this role?
• What do you think you are good at?  Why?
• What parts of your current / previous role(s) do you enjoy?  Why?
• What parts of your current / previous role(s) do you struggle with?  Why?
• What would be the perfect role for you?
• What would you be doing?
• Why would you like it so much?
• How often do you like to meet with your manager to discuss progress?
• Do you tell people how you are feeling, or do they have to ask?
• What is the best praise you ever received?  What made it so good?
• Who was the best manager you’ve had & what made this relationship work well?
• Have you had any really productive work partnerships?
• What made these relationships work well for you?
• What are your future personal development goals?
• What skills would you like to learn
• What challenges would you like to experience?
• Is there anything else you want to talk about that might help us work well together?

 

First Break All The Rules - Marcus Buckingham and Curt Coffman (202 KB)

 

Focus - The Future of Your Company Depends on It - Al Ries

 

Jim Collins
Publisher: New York: HarperBusiness, 2001.
ISBN: 0066620996

This is a synopsis only.  RESULTS.com recommends you buy the original book.

Good is the Enemy of Great

The companies in the study had to satisfy the following criteria:

• 15-year cumulative stock returns at or below the general stock market

• Punctuated by a transition point

• Then cumulative returns at least 3 times the market over the next 15 years

• This weeded out the ‘one-hit-wonders’ and the average tenure of CEOs, removing the possibility that the company would crumble without the same leader.

• 6,000 articles, 2,000 pages of interview transcripts and about 10 people years of effort.

Research Findings:

• Majority of good-to-great company leaders came from the inside.

• They were not outsiders hired in to ‘save’ the company.

• Good to great companies focus on “what not to do” and what they should “stop doing”.

• Technology has nothing to do with the transformation from good to great. 

• Mergers and acquisitions do not cause a transformation from good to great.

• Good to great companies paid little attention to managing change or motivating people.

• Good to great transformations did not need any new name, tagline, or launch program.

• The leap was in the performance results, not a revolutionary process.

Three Stages of Breakthrough

1.    Disciplined People

• Level 5 Leadership

• First Who, Then What

2. Disciplined Thought

• Confront the Brutal Facts

• Hedgehog Concept

3. Disciplined Action

• Culture of Discipline

• Technology Accelerators

Level 5 Leadership

Level 1 Highly Capable Individual

• Makes productive contributions through talent, knowledge, skills, and good work habits

Level 2 Contributing Team Member

• Contribute individual capabilities to the group objective, works well in a group setting

Level 3 Competent Manager

• Organizes people and resources toward efficient and effective pursuit of objectives

Level 4 Effective Leader

• Catalyst, vigorous pursuit of vision, stimulates higher performance standards

Level 5 Executive

• Paradoxical blend of personal humility + professional will

• Humble, modest, self-effacing and understated

• Concern for the company’s success rather than one’s own personal fortune.

• Think in terms of “We” not “I”

• Do not want to be larger-than-life icons or heroes

• Ordinary people quietly working and producing extraordinary results

• Results-oriented. Do not tolerate mediocrity.

• Never allow nepotism or seniority.

• Will fire non-performing family members and friends.

• Are insiders. Worked many years inside the company or are from the family owners

• They are not saviors hired in from the outside.

• They are not show horses – rather they are plow horses

• Choose good successors because of their concern for the future of the company

• They want to see it endure for generations.

The Window and The Mirror

Level 5 Leaders:

• Give credit to outside factors when things go well, (looking out the window)

• Take full responsibility when things go poorly, (looking at the mirror).

Poor leaders of mediocre companies:

• Blame outside factors when things go poorly

• Take credit the company’s successes themselves

• Gargantuan personal egos that contributed to the demise or continued mediocrity of the company.

• Larger-than-life celebrity leaders who ride in from the outside are negatively correlated with going from good to great.

One of the most damaging trends in recent history is the tendency (especially of boards of directors) to select dazzling, celebrity leaders and to de-select potential Level 5 leaders.

 

First Who, Then What

Disciplined People:

First get the right people on the bus – and the wrong people off the bus

Then figure out what direction to drive the company

The right people will do the right things – regardless of the incentive system

• Good-to-great companies build deeply committed, strong management teams.

• Good-to-great management teams consist of people who debate vigorously in search of the best answers, yet who unify behind decisions, regardless of parochial interests.

• Mediocre companies = “genius with a thousand helpers” model - which fails when genius departs.

• No link between executive compensation – and the process of going from good to great.

• It is not how you compensate; it’s which executives you compensate in the first place.

• The right executives will do everything in their power to build a great company, not because of what they will get in terms of incentives and compensation, but because they simply cannot imagine settling for anything less. Their moral code is “Excellence for its own sake”.

• People aren’t your most important asset, the right people are.

• Place greater weight on character – rather than education, skills, or experience

• You can teach skills - but character, intelligence, work ethic, and dedication are ingrained

• People who did not fit the mold eventually quit or were told to find opportunities elsewhere.

Hiring Disciplines

• When in doubt, don’t hire. Keep looking.

• A company should limit its growth based on its ability to attract enough of the right people.

• When you know you need to make a people change, act.

• First, make sure you simply don’t have someone in the wrong seat.

• Move people to different seats to see where they might blossom

• Put your best people on your biggest opportunities, not your biggest problems.

• If you sell off your problems, don’t sell off your best people.

• Letting the wrong people hang around is unfair to all the right people

• Ask yourself, would you hire that person again?

• If they came to you saying she was leaving to pursue a new and exciting opportunity, would you be greatly disappointed or secretly relieved?

Confront the Brutal Facts (Yet Never Lose Faith)

Disciplined Thought

• Disciplined thought = confront the facts.

• When the effort to determine the facts is made, decisions become self-evident.

• People filter the brutal facts from a charismatic leader.

• They worry about how the leader will react rather than speaking up for the good of the company.

• Create a climate where the truth is heard

• Lead with questions, not answers. In order to gain an understanding of the facts,

• Use questions to gain information, not as a way to manipulate or put down others.

• Hold non-agenda forums or informal meetings to let current realities bubble to the surface.

• Engage in dialogue and debate, not coercion.

• Conduct autopsies, without blame.

• Build ‘red flag’ mechanisms = anything that will warn you before you lose your customers.

• The key lies not in better information, but in designing information that simply cannot be ignored

• Catalytic mechanisms (e.g. Granite Rock – “You pay us what you think the invoice is worth”).

The Stockdale Paradox

• Named after Admiral Jim Stockdale, the highest-ranking US officer to be taken prisoner in Vietnam

• Face the harshness of your current reality, but never lose faith you will prevail in the end.

• What separates great people or companies from the mediocre is not the absence of difficulties

• It is how they deal with the inevitable difficulties of life.

• If you have the right people, they will be self-motivated.

• The key is not to de-motivate them by ignoring the brutal facts of reality.

 

The Hedgehog Concept (Simplicity Within the Three Circles)

The 3 Circles

1. What can you be the best in the world at?

2. What drives your economic engine?

3. What are you deeply passionate about?

To achieve greatness, the three circles need to intersect (= BHAG)

• Focus on one simple, unifying concept, everything else is irrelevant.

• The fox, despite his cunning, fails to make prey out of the hedgehog.

• When the fox comes along, the hedgehog simply rolls up into a spiked ball.

• Foxes pursue many ends at the same time, and see the world in all its complexity

• Foxes are scattered - rather than focused on one simple organizing idea or principle.

• Hedgehogs simplify a complex world into a single basic organizing principle

• Everything else outside this basic concept is irrelevant and not worth wasting energy on.

• The key is to simplify - hedgehogs see what is essential, and ignore the rest.

• Good-to-great companies are hedgehogs - mediocre companies behave like foxes

• Stick with what you understand, and let your abilities, not ego determine what to attempt.

• Just because something is your core business doesn’t mean you can be the best in the world at it.

• If you cannot be the best in the world, then your core business cannot be your hedgehog.

Mediocre companies never asked the right questions

• Their strategies were based on bravado - not deep understanding.

• A hedgehog concept is a process, not an event.

• It took good-to great companies many years to clarify their hedgehog concepts.

Leadership Council: 

• Formed to gain understanding about important issues facing the organization.

• Each member has the ability to argue and debate in search of understanding

• Not from the egotistic need to win a point or protect a parochial interest.

• Each member retains respect for every other member without exception.

• 5- 12 people. Members come from a wide range of perspectives

• Not limited to members of the management team, nor is every executive automatically a member.

• The council is a standing body, not an ad hoc committee assembled for a specific project

• Does not seek consensus. Consensus decisions are often at odds with intelligent decisions.

• The responsibility for the final decision rests with the leading executive.

• Informal body - not listed on any formal organization chart or document.

A Culture of Discipline

Disciplined Action

• Requires people who adhere to a consistent system, yet the freedom to act within that framework

• Avoid bureaucracy and hierarchy.

• Create a culture of discipline with an ethic of entrepreneurship.

• Hire self-disciplined people willing to go to extreme lengths to fulfill their responsibilities.

• Create a “Stop Doing” list as well as a “To-do” list.

• Unplug any extraneous activities. Have clear constraints.

• Hire people who don’t need to be managed, so you manage the system, not the people.

• Disciplined People 􀃆 Disciplined Thought 􀃆 Disciplined Action

Technology Accelerators

• If you think technology alone holds the key to success, then think of the Vietnam war. The Americans lost to the Vietnamese despite superior technology.

• Good-to-great companies react to new technology with calm, quiet, and deliberate steps in the right direction, sticking closely to their hedgehog concepts.

• Mediocre companies react in a frantic, fearful, Chicken Little manner.

• Great companies respond to technology with creative thinking as to how to create greater results, mediocre companies react to technology with fear of being left behind.

• Great organizations avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies.

• Does the technology fit in with your Hedgehog concept? If yes, you need to pioneer in the application of that technology. If no, then you can ignore it entirely.

• Good-to-great companies use technology as an accelerator of momentum, not a creator of it.

• Use technology to accelerate momentum (of your hedgehog concept), not create momentum where there was none. Crawl – walk – run!

The Flywheel and the Doom Loop

The Flywheel:

• Like pushing a massive flywheel to acceleration is how good-to-great companies progress

• There was no defining action, innovation, launch event, clever tagline or miracle moment.

• The breakthrough came from an accumulation of consistent effort over time.

• An overnight success is usually the result of a decade of hard work

• People will naturally keep pushing the wheel in 1 direction when they see the tangible results

The Doom Loop:

• A new direction, new leader, new acquisition comes in

• Flywheel comes to a screeching, grinding halt.

• The company then changes direction, pushing it the other way.

• The results are disappointing, which leads to reaction without understanding what went wrong

• Then a new fad, leader or event appears to try save the company

• They push the wheel another way, and so forth.

• Mergers & Acquisitions – 2 mediocre companies joined together does not make 1 great company

• You cannot buy your way to greatness

From Good-to-Great to Built to Last

• Good-to-Great is not a sequel to Built to Last. It is actually a prequel.

• Discover your core values and purpose beyond just making money

• Combine this purpose with the dynamic of: preserving the core + stimulate progress,

• What is the difference between a good BHAG (big hairy audacious goal) and a bad BHAG?

• Great companies don’t exist merely to deliver returns to shareholders – they want to be GREAT!

• To aspire to greatness is to have the satisfaction that your time on earth was well spent

• If you have to ask “why should we make it great?” you are in the wrong line of work

• Clock building not time telling – great leaders build a company that can tick along without them, rather than being needed to tell the time.

 

John L. Nesheim
Publisher: Saratoga, CA: Electronic Trends Publications
ISBN: 0914405713

This is a synopsis only.  RESULTS.com recommends you buy the original book.

Business Plan:  

• Confidentiality of your Intellectual Property is a big concern

• Venture Capitalists won’t sign Non Disclosure Agreements yet they are a major source of leaks

• VC’s may be just interviewing you because they have invested in a competitor already

• Be careful of who you give business plan to and ask for its return (un-copied) 

Dealing with Venture Capitalists 

• Choose VC’s as carefully as you would top employees – you need to have complete faith in them

• Make sure they are experienced and focused in your area of business (not generalists) Check their references (vital) – talk to other startup CEO’s they have worked with to get a warts and all appraisal of their professionalism (don’t let yourself be fooled by their flattery or by the first one that shows you interest – reference check all firms you do business with – including investment bankers etc when preparing for IPO’s)

• Start looking for capital well before you need it!! (Don’t wait until you are under pressure to pay salaries)

• Get a personal introduction to VC’s if possible

• Visit them first – do not provide business plan until after 1^st meeting

• Query them for conflicts of interest – be suspicious

• Tell your story verbally only – you can control the information flow

• Keep handouts to a minimum

• Never leave any proprietary material

• Focus on the executive summary only

• Negotiate – don’t teach!  If they do not understand your concept straight away they will not fund it so don’t waste your time

• Treat every meeting as if it were a future negotiation for money and answer questions accordingly (ie if they get you to admit any weaknesses, they will use your admissions later as bargaining chips for a lower share price or greater ownership %)

• Make them think they are under pressure to act as you have hot interest from other VC’s (get as many as possible chasing you!)

• Never count the cash until you see it in your bank account – promises mean nothing!

• Expect a lot of “No’s” VC’s only fund 6/1000 plans they see

• 10% of startups that succeed make up for the 90% that fail in the VC’s portfolio. You are paying for their bad investments – hence why they are looking to highly dilute your ownership to maximise their gain

• They are looking for a Return On Investment of 20%+

• They get preferred shares (preferential tax treatment / first call on assets in bankruptcy) which are converted to common shares at IPO or sale of company

• If you suspect that they desperately need a winner (ie your company’s hot future prospects) then you have a better chance of retaining more of your company in the negotiations (thus reducing your cost of capital)

What Venture Capitalists are looking for: 

• A large, rapidly expanding market

• Competent management

• A revolutionary / unique idea or technology that can be commercialized

• Sustainable competitive advantage

• Reasonable purchase price per share
  

• They are looking for a complete, high calibre management team with proven track record or startup experience (they will do reference checks etc)

• They may aim to appoint their own CEO and want to get control of board of directors to manage their risk (You will need to fight for your own interests unless you agree it is in the company’s best interests. This can be difficult to let go of leadership when you are emotionally attached)

• The flip side is that they often have vast expertise and contacts to share that can make a positive difference, and can help you avoid mistakes – and they want the kudos of backing a winner

• When things are going great they are supportive and can expedite growth

• When times are tough they can be ruthless (“vulture” capitalists) and will do whatever it takes to protect their money (including replacing the founders)

• They will want to get you to IPO – or sell as fast as possible to get their money back (even though this may be a distraction, or not in its best interests of the business at that particular time)

• They will endeavour to exert control over the following:  salaries / employee share options / structures of deals with suppliers and customers / veto over & timing and pricing of additional capital rounds / choice of CEO & CFO / monthly cash burn rates / approval of budgets and operational plans

  
  

• Strategy – they will want to know:

  • Product Development

  • Positioning

  • Size of the market

  • Path to market

  • How you are going to get ahead

  • How you are going to stay ahead when large competitors enter the market

  • Product evolution / development pipeline 

  • 5 year financial projections

 

Presenting to Venture Capitalists  

• Be persistent – expect to have to call/email them 6 x before reply for appointment

• May have to present to 20 VC’s before you get real interest

• Don’t rely on one source – stimulate competition amongst several VC’s

• Brush up on your negotiation skills / get professional advisor to accompany you if necessary

• Do not present anything proprietary at the first meeting

• Present executive summary – 15-20 PowerPoint slides max

• Be able to discuss your presentation in detail and be able to back your financial projections

• Most sales estimates are overly optimistic and VC’s will grill you on these

• Most capital estimates and development times are grossly underestimated (VC’s will double your estimates in their valuation calculations)

• Expect them to ask a lot of negative sounding questions

• Be able to back your share price valuations but be willing to negotiate

• Rehearse and prepare your presentation and likely question responses prior to the real thing (don’t wing it – they are seeing great presentations every day)

• Ask for double the funding you want or think you are going to get

• Even if you get a refusal, ask for their feedback on how the business plan can be improved

• Get your business plan back!

The Core Team:  

• Pick the most outstanding talent that you can afford in sync with your company culture

• Talent attracts talent

• Try to get a “name” CEO

• Try to get “name” investors

• Team is usually built in the following order; Technical experts, CEO, Marketing, Sales (business development) , Operations, Finance

• Outsource key roles / contractors if necessary – consider using share options to keep costs down

 

Ownership / Dilution / Negotiation / Valuation: 

• Make sure your lawyer is very experienced in venture capital and can structure a deal today that will take into account likely scenarios tomorrow

  • What % of the company the founders will own at IPO time

  • What each share will be worth at IPO time

  • How many shares will be available to the public at IPO

  • (Ownership%) x (total # of shares outstanding) x ($/share) = $wealth

• Create classes / layers of jobs to determine share options allocations for new hires

• Founders on average own only 4% of their companies by the time they get to IPO (can be higher in companies with low capital requirements)

• Get agreement from founders how much they are willing to dilute their ownership prior to starting any funding negotiations

• Founders get greater % of ownership than those joining later (regardless of how much more experienced or capable the new hires may be), to compensate for the founders’ risk (personal funds invested / leaving employment before money is raised / creating business plan / convincing others to invest in or join their quest / staking their reputations on the business outcome)

• Ensure enough shares are set aside to attract talented employees later and tie them in to the success of the company with share options

• Get agreement on how much ownership you are willing to give up to VC’s in return for what level of investment

• The greater amount of capital to be raised = the lower the % of ownership retained by the founders

• VC’s typically own 60-70% of a company by IPO time (but negotiate your own terms)

• The quicker you can get to IPO, typically the less ownership is given away

• Each round of funding typically adds another VC investor to the board

• Be wary of any veto rights VC’s may insist on as they can be restrictive later on

• The founder/CEO should be responsible for securing (additional) funding. Do not count on lead VC’s to do it on your behalf, they have other interests

• Be honest - keep VC’s informed of slippage in terms of development times & budgets and payroll requirements to maintain your credibility with them

• It is dangerous (and bad form) to raise money prior to releasing hidden bad news – you expose yourself to legal action and investor resentment all round

• Aim to exist on low salaries until the company becomes profitable (keep lean and mean)