Notes on The Intelligent Entrepreneur by Bill Murphy, Jr.

Transcription

1 NotesonTheIntelligentEntrepreneurbyBillMurphy,Jr. Chapter1: BillMurphyisajournalistandanentrepreneur,wrotethebookcasestudiesofthree entrepreneurs. (1) MarcCenedella Hemadegooddealsbydevelopinggoodrelationships. He dkepthiseyesopenandusedhisbrain. (2) MarlaMalcolm id= andhttp:// Shedevelopedareputationforbeingconfident,smart,andambitious.Oneofher firstteamleaderswasimpressedwithherwithherresilience(reboundsreadily, lively) (3) LieutenantChrisMichel u/andwww.military.com Chriswonthepeoplearoundhimoverwithhisdeterminationandcharm.His attitudeis Iamcommittedtodoeverythinginmypowertosucceed. 1

2 Chapter2:Entrepreneurshipcanbelearned ProfessorHowardStevenson,HBS Thereareskills,attitudes,andafundamentalbaseofknowledgethateducationand experiencecanprovide.youwon tturnmeintoaworld classathletebysendingmeoutto practicewithacoach,butiwillcertainlyplayabettergame.entrepreneurshipisnodifferent. (discuss) WhattheyteachinHarvardBusinessSchool?Thecorebeliefaboutentrepreneurship:itcan betaught,anditcanbelearned. HarvardBusinessSchool:Entrepreneurshipis thepursuitofopportunitywithoutregardto resourcescurrentlycontrolled. Itisnotsomuchasetofskillsasitisaprocess,abelief,and acommitment.itisamodeofthinkingandacting awayofobservingtheworld,offiguring outhowtochangeit(hopefullyforthebetter),and,perhapsmostimportant,ofbecoming thepersonwhoiscapableofimplementingthatchange.skillsareimportantbutskillsare commodities.besides,thenon MBAamonguscanhireMBAstoperformbusinessfunctions suchasfinance,marketing,andhumanresources. Becomingasuccessfulentrepreneurrequirescourage,characterandfaith. Entrepreneurs,theschoollearned,tendedtobehappier,healthier,andlesslikelytobe divorcedthantheirclassmateswhoworkedforlargefirms.forthemostpart,theyloved whattheydid.hbsprofessorhowardstevensonputsit, theyneverwanttoretire. Processofentrepreneurship: 1. Evaluatetheopportunity. 2. Assessrequiredresources. 3. Acquiretheresource. 4. Managetheventure. 5. Harvestthevalue. Needtoteachbythecasemethod,groundedingoodexamples,andforcestudentsinclassto interactthewaythattheywillintherealworld. Whydoessocietyneedentrepreneurs?Weneedthinkers,risktakers,creators,andbuilders. Weneedambitiouspeoplewhowillputthemselvesonthelinetobuildrealfirmsthatadd valueandcreatejobs.theysolvedifficultproblemsandinvententirelynewindustries. TheTENKEYRULES 1. Makethecommitment 2. Findaproblem,thensolveit. 3. Thinkbig,thinknew,thinkagain. 4. Youcan tdoitalone. 5. Youmustdoitalone. 6. Managerisk. 7. Learntolead. 8. Learntosell. 9. Persist,persevere,prevail. 10. Playthegameforlife. 2

3 Successfulentrepreneursmadeanunequivocal,pedal to the metalchoicetothrow everythingtheyhadintorealizingtheirdreamsofbuildingsuccessfulcompanies.firststep thatanyintelligententrepreneurmusttake:you vegottomakeacommitment.withaclear headandawholeheart,you vegottodecidethatyouabsolutely,positivelywillbecomea successfulentrepreneur. MAKETHECOMMITMENT Chapter3: Chancefavorsthepreparedmind. LouisPasteur Bygroup:sharepersonalitytest.Whatmakesanentrepreneur? Forteacher:HBStaughtitsstudentshowtoapproachandbreakdownproblems.Thecase studiesinvariablyincludedtoomuchinformation,andfewstudentsretrainedmuchofacase s detailsaftertheywerefinishedwithit.instead,studentsdevelopedtheabilitytoanalyze complexbusinessproblemsandjudgewhichinformationwasimportantandwhichwasnot. OptionistoteachthemMBAapproachtocasestudysuchas: o o o o o o StatementoftheProblem Objectives(SMART) AreasofConsideration AlternativeCoursesofAction AnalysisofAlternativeCoursesofAction(Financeissues,Whowillimplement,Pros andcons) Recommendation HBSprofessorsconsistentlytoldtheirstudentsthatcomingupwithgoodideaswasthe easiestpart.professorbillsahlmanwarnedthemthatstartingasuccessfulnewcompany wouldbeverydifficult.itwilltakealotofresearch,hesaid.you llhavetowantit.you ll havetofollowthrough,evenwhileyourfriendsandclassmatesareenjoyingthemselves. Ideasaredimeadozen, Sahlmansaid. Executioniswhatisimportant. EdZschau(professorinHBS): Ifyou replanningtobeanentrepreneur,youshouldbe planningtobeasalesman.you reconstantlyselling.you resellingyourselfwhenyour companydoesn tevenexistyet;you resellingtheconcepttopotentialemployees;you re sellingtocustomers.andyou retryingtoconvincesuppliersthatthisteenycompanyof yours,thatisn twellfinanced you resellingthemthebeliefthatyou regoingtosucceed. Chapter4:MaketheCommitment Youcan twaitforinspiration.youhavetogoafteritwithaclub. JackLondon Question:howbadlydoyouwantthis?What reallymotivatingyoutolaunchacompanycan makeallthedifferencedowntheroad. Beforetheydevelopedbusinessplans,recruitedteams,raisedmoney,learnedtodeal,and builttheirventures,marla,chrisandmarceachmadeaconsciousandverypersonal commitmenttobecomesuccessfulentrepreneurs. TheirsocialenvironmentsencouragedChrisandMarlatobelievethatbecomingan entrepreneurwasnotonlypossiblebutsomethingtheyferventlywantedtodo. 3

4 Surprisingfact:Manycompaniesarefoundedbypeoplewhonevertrulysetouttobecome entrepreneurs.instead,newventuresareoftenlaunchedbecausetheirfoundershavelost jobs theunemployedaretwiceaslikelytolaunchcompanies orbecausetheydon twant toworkforothers. Butstill,thedepthofyourcommitmentmattersgreatly.Makingaconsciouschoiceto becomearealentrepreneur ratherthansimplyfindingawaytomakealivingorstartinga business isessential. InHBS,theprofessorsseetheentiredisciplineofentrepreneurshipasnecessary,life fulfilling,andattimesalmostspiritual.they renotjustteachingbusinessstrategiesand processes;they reinspiringstudentstoembraceawayoflife. ProfessorJosephLassiter:Myhopeisthatwehelpourstudentsfindthecouragetoactually taketheleap.it sextremelyeasytofollowanestablished,well traveledpath,andtheirlives canmatterandtheycanfindfulfillmentandallofthoseotherthings.butsomepeoplewant totakeadifferentpath,andyettheyhesitatebecausethey refearfulaboutthe consequences becausetheycan texplainittotheirmomanddad,becauseit sriskierthan anotherpath,becauseit slonelierthananotherpath.butiwouldmuchratherthattheydie regrettingwhattheyhavedonethanwhattheyhavenotdone.(p.70) Importantquestionsforaspiringentrepreneurs: Whatotherobligationswillcompetefortimeandresources?Launchingabusinessentails risk.butifyouhavealotofobligations,itmaynotbewisetogiveupasteadypaycheckto startyourowncompany.askyourself:ifimakethecommitmenttobecomean entrepreneur,whoelsewillbecomingalongfortheride(family)?whowillitaffect?ifthe answerleadsyoutoconcludethattheriskistoobig,figureouthowtoreducethatrisk beforeproceeding. Whatkindofsupportsystemsdoyouhave?Whoarewillingtoprovideemotionalsupport, encouragement,andgoodadviceasyouembarkonyourentrepreneurialcareers?marla spentmanyhourstalkingwithestablishedentrepreneurswhorancompaniesthatledecky wantedtobuy.peopledon tfeelliketheycan tstartcompaniesbecausetheydon tknowor workwithotherpeoplewhohavestartedcompanies.entrepreneurshipcanbeahardand lonelylife.withoutthesupportandencouragementofothers,successwillbemoreelusive. Havingmentorsandrolemodelsmatters.So,who sreallygotyourback? Whatistheopportunitycost?Considertheopportunitycosts(i.e.salary,position)ofmaking acommitmenttobecomeahigh percentageentrepreneur.sometimes,namingyourfears canmakethemmuchlessscary. Whatisyourtoleranceforrisk?StigLeschly,HBSalumnus,whostartedacompanycalled exchange.comsoldittoamazonformanymillionsofdollarsandcamebacktohbstoteach: it(workingonexchange.com)wasnotrisky Ihateitwhenpeoplesayitwasrisky.Idon t thinkthat strue.ifyoufactorineveryaspectofadecision,wearealloptimizing uncertainty.forleschly,thebiggestriskwasthedangerofbecomingmediocre hewas morescaredofgoingbacktomckinsey,orskaddenarps,orp&g. (p.75)wherewillyoufindyourbestidea? Willitsurpriseyoutolearnthatmakingafirmcommitmenttoentrepreneurshipasyour firststepwillalmostcertainlyhelpyoucomeupwithyourbestideas? 4

5 Theysaythatcomediansliveinthesameworldastherestofus;theyjustseeeverything differently.it sthesamewithentrepreneurs.onceyou vetrulymadethatcommitment, you llbeamazedathowquicklyyoubegintoseetheworldinadifferentlight. Problemsgivewaytoopportunities. Why? becomes Whynot? It salwaysbeendonethisway turnsinto Whatifwetriedsomethingdifferent? Opportunityispersonal,notuniversal.Itgrowsoutofyourtalents,experiences,interests andtheproblemsthatyou reuniquelypositionedtoperceiveintheworld. ForMarla,ChrisandMarc:oncetheyhadmadethecommitmenttostarttheirown companies,theythoughtconstantlyhowtheworldaroundthemcouldbeimproved.they beganfocusingonaproblemtheywantedtosolve.andonlythendidtheystartlookingfor thesolution. FINDAPROBLEM,THENSOLVEIT. Chapter5: Everyproblemhasinittheseedsofitsownsolution.Ifyoudon thaveanyproblems,youdon t getanyseeds. NormanVincentPeale Marla:ifyoucouldjustgoonlineandpurchasethesebeautyproducts,wouldn titbeeasier? In1999,noonehadlaunchedaWebsitededicatedforthem. Theconceptofbluemercurywasnotsimplyacosmeticsite,butahigh end,luxury destinationforwomen. bluemercury isbuildinganew NiemanMarcusoftheInternet, shewroteinthebusinessplan theinternet sforemost,upscalespecialtyretailerfocused onbusy,professional,andaffluentwomen. MarlahadlistenedasLedeckyconcludedthatthemostinterestinge commerceproposals werethosethatproposedtobuildtheirbusinessesonlineandthenlinkupwithtraditional retailers.hercompanywasmuchbiggerthananideatosellcosmeticsovertheinternet. Sheemphasizedthat wearefocusedonademographics,notaproductcategory. Herrecentresearchhadrevealedthatthereweretwentyonemillionaffluentwomenin America, 65%ofwhomareintheworkforce,whocravetime,andwhoseneedsare underserved. Thiswasn tjustamakeupandcosmeticswebsiteshewaspitching;itwasa foundationforamultiplecategoryupscaleretailer. ForChris:theBigIdeahadbeenhidingrightinfrontofhimallthetime:theUnitedStates armedforces.hecouldbetheonetoconnectandempowerallthosewhoserved,andthe Internetofferedtheperfectwaytodoit.Addupeveryoneservinginthemilitary,thosewho hadserved,thosewhoaspiredtoserve,theirlovedones thetotalwasinthetensof millionsatleast,withtrillionsofdollarsinbuyingpower. WastherealreadyanInternetsitetargetingmilitarymembersandveterans? offer practicalinformation,avirtualplacetoreconnectwitholdshipmatesandarmybuddies, youngpeoplewhoarethinkingtojoincanbetargeted. IDEAScomefromdeterminingthatSEGMENTthatyouwanttoSERVE.It susuallywhoyou are.youservebestthesegmentthatislikeyou! 5

6 Chapter6:Findaproblem,thensolveit. StigLeschly,founderofexchange.comandformerlectureratHBS I llbetthemilitary.comguywasinthemilitary.i llbetthewomanwhostartedthemakeup companyreallylikeslipstick. Startwithaproblemyoureallywanttosolve.DoNOTstartwithasolutionandthengo lookingforaproblem.identifyproblemsyouknowsomethingabout.chooseproblemsthat youpersonallywanttosolve. Here saquestionyouwanttoaskyourself:whocares? It simportanttounderstandthateverygoodentrepreneurialopportunityispersonal,and thesetwoideassimplyweren ttherightopportunitiesforchrisandmarla,giventheir experience,strengths,andpersonalities. ItmakesperfectsensethatChriswouldincorporatehisloveforthearmedforcesinthe conceptofthiscompany.orthatmarlawouldbuildherventurearoundnotonlyher interestinbeautyproducts,butalsoherunderstandingofwhatanambitious,intelligent, professionalwomanwouldwantoutoflife. Theygottheirideas ideasthatworked becausetheybeganbyidentifyingproblemsand thenfocusedintenselyonproblemstheywerepersonallyeagertosolve. Marla:it seasierwhenyoureallycareaboutsolvingaproblem.it sdefinitelyeasiertostick withitifyoulikethebusiness. Focusingfirstonthesolutionratherthantheproblemthatneedstobesolvedcanbea recipeforfailure. ProfessorHowardStevensonsaysthat partofthereasonthatyouhavealotoffailuresin technologystart upsisthatthefoundersdon tknowthemarketplace.theymayknowthe technology,butoftenthereisnocompellingneedforthecustomertobuy. AtHBS,studentsareoftenadvisedtoworkintwoorthreedifferentfieldsaftergraduation. Thehopeisthataftersomeexperimentationthey llfindanindustrythatreallyinterests themandthengetajobthatallowsthemtolearnalotaboutit. Dataonentrepreneurshipshowsthattheoddsofbeingasuccessfulentrepreneurincrease whenonegraduatefromcollegethenworkforsomeoneelsefirst.learnasmuchasyoucan aboutanindustrythatinterestsyou.andifyou reseriousaboutstartingyourown company,you dbewisetolearntosupervise,manage,andleadonsomeoneelse sdime.in short,experiencematters. ProfessorBillSahlman Decidewhereyouwanttolive,pickanindustrywithgood prospectsandampleopportunity,findthebestjobyoucan,andthenlookforgoodmentors. Ifthingsgowell,youwillsoonhavefirsthandknowledgeoftheindustry andastimegoes onthere sagoodchanceyou llbeabletoidentifytheproblemsthatpeopletrulywant someonetosolve. NoamWasserman: makingsureyouaresolvingarealcustomerproblemissomethingthat differentiatesentrepreneurs. Therearedifferentkindsofproblems.Therealdividinglineis simple:doestheproblemyou veidentifiedrelatetothepromotionofpleasure,ortothe preventionorterminationofpain?andintensitymatters,too.you vegottodistinguish 6

7 betweenthe ideasthatonlyrisetothelevelof nicetohave, versusthingsthatpeople reallyneedorgreatlywant. Painbusinessesarethosethatsolveasignificantproblem,andpeoplewillrarelyhesitateto paymoneytosolvethatproblem(considermaslow shierarchyofneeds).pleasure businessessolvelessurgentproblems.theycansometimesbegreat,butthesuccessrateis muchlower. Entrepreneurialideas askyourself whatamiinterestedin?whatdoidowithmytime? Thenthinkabouttheproblemsyouencounterinyoureverydaylife.You remuchmore likelytofindaproblemyoucareabout andonethatotherpeoplewillcareaboutaswell ifyoufocusonsomethingthat spersonallyinteresting. Haveagenuinepassionforthatindustry. Thebottomlineis:WHOCARES?Considerthepeople,theopportunity,thecontext,andthe deal.willcustomerscare?willinvestorscare?willthemarketcare?isthereareadymarket fortheproductorthesolutiontotheproblemyou vechosen? THINKBIG,THINKNEW,THINKAGAIN Chapter7 Inevitably,launchingacompanymeantuncertainty,pressure,andwildswingsofemotion. AtHotJobs,thebusinesswasallaboutcollectingandtradinginformationratherthan physicalproducts. Marlahadtwoimmediatepriorities.First,theyhadtoreachouttothepremiumcosmetics companieswhoseproductsshehopedtosellonherwebsite.second,theyhadtohirea Weddevelopmentfirmtodesignandbuildthesitesinfrastructure.Oncetheyhada prototypeinplacetheycouldapproachahandfulofventurecapitalfirmsandquicklyraise thekindofmoneytheywouldneedtogrowverybigveryfast,beforeanyoneelsegotthe sameidea. BecausesheandBarryhadnevermadetheroundsofventurecapitalfirms,they dnever learnedaboutthemanyotherfirmsthatweresimultaneouslypitchingsimilarideas.she andbarry,asaresult,nowbelaunchingindirectcompetitionwithnearlyadozenwellfundedinternetbeautysites,noneofwhichshe devenheardofafewweeksbefore. Whensheoutlinedthecompetition,thepotentialinvestorsallsawthesamething: bluemercurywasdeadmeat. Marlarealizedthekeytoherideawasn tthewebsite itwasthecosmetics.marlarecast thecompanyasabricks and clicksenterprise shewouldopenretailstores,andtheweb sitewouldbeacompanionchannel.bluemercuryproposedtobuyefxoutright,aretail storeofcosmetics.herinvestorswerenotonboardwithherdecision. TofundthepurchaseagreementtobuyEFX,Marlahadtoremortgageherhomeandsigna personalguaranteetocoverallofthecompany soutstandingobligations.bythetimethe dealwasdone,marlaownedtworetailstoresandahalf finishedwebsite andshewas nowcarryinghalfamilliondollarsindebt.marlanowownsareal,livecompany. EFXbroughtwithitthepurchaserecordsofitstwentythousandcustomers.More important,thecompanyhadalonghistoryofdealingwiththemostprestigiousvendorsin 7

8 thecosmeticsindustry,theonesmarlaneededtoensurethatbluemercury boththeweb siteandthestores couldgrowtobecomeahigh enddestination. Hiringtherightpeoplematteredenormously.Thefirstquestionshewouldaskprospective employeeswasusually, Whatisyourfavoritebrandofbeautyproductandwhy? Any applicantwhocouldn tanswerthatquestionwithpassionandintelligencecertainlywasn t a beautyjunkie likemarla andsosheclearlywouldn tbewellsuitedtoworkfor bluemercury.marlahiredonlyfull timeworkersandpaidthemfull timesalarieswith benefitsratherthancommissions.equallyimportant,hercustomersshouldknowthatthe salespersondidn thaveafinancialincentivetosteerthemtowardaparticularlineofbeauty products. Chris:ThinkingBig Chris goalwastoorganizeeverybodyinthearmedforces. DemographicthatChriswastargetingwereasfollow: o o o Themilitarymarketislargeandattractive 30millioncurrent/formermilitarymembers Another40millionadultswithclosetiestothemilitary Toaskforfunding:Inthelate1990s,theconventionalwisdomwasthatanyentrepreneur pitchingtoaventurecapitalfirmneededtopresentacredibleplantoreach$50millionin revenuebythe5 th yearofoperations.thoughchrisachievedthis,noinvestorswere interesteduntilmikelevinthal. Forhispart,MikeLevinthalhadsatthroughmany,manypresentationsfromwould bedotcommillionaires,yetchris spassionmadetheideastandout.herewassomeonewho understoodthebusinessside,buthealsoseemedtounderstandthemilitarycommunity betterthananyoneelseinsiliconvalley.themarketmilitaryadvantagehadtargetedwas wideopen,andlevinthalbelievedthatitcoulddominateit.themayfieldpartnersinvested $5Minthebusiness. WiththeMayfieldinvestment,Chris sgrouplaunchedawebsitethatwasbeginningto attractasubstantialnumberofvisitors;thecompanyhadenoughcredibilitytoraisealot moremoney.withinmonths,chrishadraisedanother$20minventurecapital,butthe companyspentmoneyalmostasfastasitcamein(i.e.advertisementsandeventstobuild brand). Chapter8:THINKBIG,THINKNEW,THINKAGAIN It snotwhatyoulookatthatmatters,it swhatyousee. HenryDavidThoreau Arealopportunityconsistsofbothaproblemandaproposedsolution. Thinkingbigcanmeancomingupwithideasthathavescaleandscope,aswellasaimingfor hugefinancialreturns.attheveryleast,itmeanspursuingideaswithenoughpotentialto makethemworthyourtime nottomentionyourinvestors andcustomers time.venture capitalfirmsarerarelywillingtofundcompaniesthatdonotprojectrevenuesinthetensof millionsofdollars.butthinkingbigreferstomorethanjustmoney.successful 8

9 entrepreneursspendtheirlimitedtimebypursuingplansthatwouldmakeitpossiblefor themtohaveasmuchasimpactaspossible. Thinkingnew,fundamentally,meansbringingyouroutsider sperspectivetobearinan industrywherepeoplehavealwaysdonesomethingacertainway. Thinkingagainmeansrecognizingthatalmostnoonecomesupwithbothagreatproblem andtheperfectsolutionrightoutofthegate. THINKBIG Peoplearen talwaysnaturallyambitious.inchris scase,hebecamelegitimatelyambitious whenhemovedtowashington.everyday,heinteractedwithtopmilitaryandpolitical leaders peoplehe dseenonlyfromafarupuntilthen.gradually,hecametounderstand thattheywerehumanbeings,too.andiftheycouldclimbsohighuptheladder,why couldn the? IncaseofMarla,shelearnedtothinkbiggerandbiggerbecauseshesurroundedherselfwith peoplewhoaimedveryhigh.theypushedhertotakeongreaterchallenges,andtoenvision everbroaderdefinitionsofsuccess. Learningtothinkbigisaprocessthatneverstops.BarryBeck Don tgoaroundthere andlookforexperiences.experienceiswhatyougetwhenyoudon tachievewhatyou want.gooutthereanddowhatyouwanttodoandsucceedatit.andbecarefulwhich mountainyouclimb.godforbidthatyouclimbamountain,plantyourflagatthetop,and thenlookaroundandrealize WhatwasIthinking?Iclimbedthewrongmountain. THINKNEW Innovationusuallycomesfromeitherbringinganewtechnologytoanindustryorcoming upwithanewbusinessmodel.forinstance,marlaidentifiedalotofthingsshedisliked abouthowcosmeticsweresoldinamericabeforeshelaunchedhercompany.sheinsisted onhiringfull timesalespeople,employeeswhowantedwhatshewantedoutofherwork notjustanhourlyjob,butarealcareer.marladidn tidentifywithretailmanagersor cosmeticvendors,sheidentifiedwiththepeoplewhoshoppedinherstores.shebuiltthe bluemercury sbusinessmodelaroundprovidingthegreatestpossiblebenefittoher customers,whichwasbothasimpleandprofoundinnovation. THINKAGAIN Successfulentrepreneurslaunchedtheirbusinesseswithentirelythewrongidea and succeededlateronlybecausetheyrecognizedtheirmistake,slammedonthebrakes,and triedsomethingdifferent. Marlawasabletoraisecapitalforwhatshe sdoingnowonlybecausethecompanybeganas aninternetplay.butshehadtoquicklychangetheirstrategy.shehadabadfirstideabut thenfoundawaytotransformit. Thinkingbigdoesn tnecessarilymeanthinkingcomplicated. Someofthebestideasare simple, EdZschausays.Forinstance,Starbucks coffeebythecup! ProfessorNoamWasserman:Someofthebestentrepreneursenterintoabrand new industry,andtheyseeabetterwaytodothingsthanthepeoplewhoaresteepedwithinthat industry.asoutsiderswithdifferentexperiences,theyhavebroaderthinking,andthey 9

10 oftenseehowtoadaptamodelfromanotherindustrytothisnewindustrywherethings haven tchangedinawhile.theycanseeotherwaystodothingsbecausetheirperspective isn tbasedonthoseunstatedassumptionsabouthowthingshavetobedone. Intheend,you vegottofigureouthowtodeliverproductsandservicestocustomersata profit.whatoftenkeepsyougoing?it syourdream.sometimestorealizeyourdreamyou needtoseekthehelpofotherpeople.yousimplycan tdoitalone. YOUCAN TDOITALONE. Chapter9: It snotwhoyouknow.it swhoyougettoknow. ChrisMatthews Likemanyinvestors,CapitalInvestorsknownas thedinnerclub caredasmuchormore aboutthepeoplebehindaventureastheventureitself,andmarlapresentedacomplete package.shewastheright brainedidealistwhoknewwhatherclientelewantedbecause shewasherownidealcustomer.butshealsohadadriven,analyticalmind set.evenasshe andbarrywereaskingformoneytopentierfourthstore,theinvestorscouldseethatmarla hadacarefullyconsideredplantoopenthefifth,sixth,andseventhstores,allthewayupto adozenormore. Chapter10:Youcan tdoitalone Changecreatesunprecedentedopportunity.Buttotakefulladvantageofthoseopportunities, focusontheteam.teamswin. JohnDoerr TheKeytoFindingKeyPeople Highlysuccessfulentrepreneursleanheavilyon socialcapital tobuildtheirbusinesses. Firsttheydevelopednetworksthatwouldhelpthemtoidentifyandpursueopportunity. Second,theydidaremarkablygoodjobofrecognizingtheirownpersonalstrengthsand weaknesses,whichledthemtoputtogetherstartupteamsthatcomplementedtheirtalents andexperience. Marladoesn tcomeacrossasasuperficialorobviouslyambitiouspersonwhoisinterested inothersonlyforwhattheycandoforher.butstill,withforesightandconcertedeffort,she hadaknackforputtingherselfintherightplacesanddevelopingrelationshipswiththe peoplesefoundinteresting. Chrisgoesoutofhiswaytointroducehimselftounusuallyinterestingpeople. Highlysuccessfulentrepreneursneverhesitatedtointroducethemselvestopeoplewho mightproveusefulortoleveragewell developedcontactswhentheyhadaspecificendin mind. RecruitingtheRightTeam Successrequiresateam.Atthefoundingstage,itusuallyconsistsoftwoorthreepeople. BillSahlmaninaHarvardBusinessReviewauthorof HowtoWriteaGreatBusinessPlan minimizestheimportanceofbusinessplans;theireffectontheprospectsofanynew venture slikelihoodofsuccess,hewrote,ratedabouta2onascaleof1to10.instead,he recommendedfocusingonthe interdependentfactorscriticaltoeverynewventure.first amongthesefactors,hesaid,were themenandwomenstartingtheventure,aswellasthe 10

11 outsidepartiesprovidingkeyservicesorimportantresourcesforit,suchasitslawyers, accountants,andsuppliers. HBSalumniArthurRocksays, Iinvestinpeople,notideas.Goodpeople,ifthey rewrong abouttheproduct,they llmakeaswitch. Anotherventurecapitalistpartnersays, Whatmakesasuccessfulcompany?Thestrength ofthemanagementteam.it sveryimportant.weseekoutentrepreneurswhoareableto hireotheroutstandingpeople.welookforafounder/ceowhohasexceptionallyhigh intellectualhorsepower,whounderstandsthenatureofcompetitionandwhatwillbe requiredtowin forsomeonewhoisgoingtowin.welookatallingredients thesize,the businessmodel,thecompetition.but50to75percentisthecaliberofthepeople. MarcCenedella:Thenumberoneruleistobepassionateaboutsomething.Yourpassionis yourbestmeansofmeetingpeople.there ssolittleoitintheworld,andpeoplearedrawn totheexcitementofsomebodywhoisreallyalive,reallyonfireaboutsomething. Everythingelsefollows. Attheendoftheday,it llbeyournameonthedoor.they llbelookingtoyouforleadership direction,andinspiration.it syourcompany,andintheendyoubeartheultimate responsibilityfornotonlylaunchingit,butgrowingitintoathriving,successfulbusiness. It syourdream,sometimesthere ssimplynootherchoice.youmustdoitalone. YOUMUSTDOITALONE Chapter11: Tobeachampyouhavetobelieveinyourselfwhennobodyelsewill. SugarRayRobinson TobeontheInternetgame,oneneedstofigureouthowtoattractusersandmakemoney. ForMilitary.com,AnneDwaynesawanunderservedmarket:qualifiedleaddevelopmentfor theeducationindustry.imagine,shesaidtochris:you retheheadofadmissionsatacollege orvocationalschoolandyou retryingtofillyourclasses.whatifyoucouldfindasteady streamofstudentswhowerecapableofdoingthecoursework,whowouldaddvalueto yourstudentbody,andwhosetuitionwouldbepaidbythefederalgovernment?anne proposedthatmilitary.comoffereducationalinstitutionsasimpledeal.first,thecompany wouldaddacheckboxtoitsregistrationformanditscommunicationswithitsmembers, askingiftheywantedtohearfrom military friendlycolleges. Next,Military.comwouldsell thecontactinformationtheycollectedtocollegesandvocationalschools. ForAnne,thinkingnewisimportantbuttheyneededcustomerswhocouldthinknewas well.cutting edgecompaniesbecamethesuppliersandcustomersofothercutting edge companies. ForMarc,in2003,heembarkedhis27 th jobsearchandhadbeeninterviewedhundredsof times.hewouldspendanhourortwosearchingforjobsheknewhewouldneverapplyfor, inafieldhehadnointentionofentering.hestartedturningupamazingleads,positionsthat hiscousinsfoundveryintriguingandthattheyknewtheyneverwouldhavecomeacross otherwise.marc sproblem:hewouldhavetobeabletolistjobsthatpeoplecouldn tfind anywhereelse.butwithoutasolidcoreofjobseekers,howcouldhepersuadeemployersto postads? 11

12 Hisbusinessmodelwastochargejobseekersratherthanemployers.Heneedsan inexpensiveplantorecruitjobseekerswhowouldbewillingtopayfortheservice.hisplan istofocusonanarrowportionofthejobmarket. Ifwe reonlyacceptingthehighest paying salesjobs,peoplewillpayforthoseleads, hesays. Theresponsetohisbusinessmodelwasoverwhelminglynegative.Marcrealizedthat withoutrevenue,hecouldn tattractcapitalinvestment;withoutcapitalinvestment,he couldn tproducerevenue.marcrealizedthattheventurewouldhavetobeself funded. MarcranafewadsonCraigslist Lookingforhelpfinding$100,000 plusjobs?ifso,the adspromised,salesladderwouldsendalongafreenewsletter.marcalsolaunchedasimple viralmarketingcampaign,askingcousinsto allhercolleaguesinthesalesindustry andaskthemtotakealookatthewebsite.(targetistogetsubscribers). Chapter12:Youmustdoitalone TeddyRoosevelt: Itisnotthecriticwhocounts;notthemanwhopointsouthowthestrongmanstumbles,or wherethedoerofdeedscouldhavedonethembetter.thecreditbelongstothemanwhois actuallyinthearena,whosefaceismarredbydustandsweatandblood;whostrivesvaliantly; whoerrs,whocomesshortagainandagain,becausethereisnoeffortwithouterrorand shortcoming;butwhodoesactuallystrivetodothedeeds;whoknowsgreatenthusiasm,the greatdevotions;whospendshimselfinaworthycause;whoatbestknowsintheendthe triumphofhighachievement,andwhoattheworst,ifhefails,atleastfailswhiledaring greatly,sothathisplaceshallneverbewiththosecoldandtimidsoulswhoneitherknow victorynordefeat. Marc:Stubbornnessisthesecret.Haveastrongsenseofyourownopinion.Beingan entrepreneurisaboutsaying,iknowthisdoesn texist.thissegmentisn tbeingaddressed. ButIcangodoit.Isupposesomepeoplemightcallthatarrogance.Tome,it samatterof self assurance. Chris:Ichangetherulesofthegame.Ratherthancompetingwitheveryoneinthesquadron tobecomethenestguyintheairplane,ibuiltmyreputationcreatingthings.it sbecomea successstrategyforme:idon tplaybyotherpeople srules. Studyofentrepreneurialpsychology:theimportanceofconfidence,persistence,andthe abilitytogoitaloneareborneoutbytheacademicresearch. Oneofthetoughtensionsthat goodfoundersfaceishowtobesoloplayers, NoamWassermanagreed, butatthesame time,stillbeteamplayers. Confidencemaycomefrom:thestudents experienceofanalyzingabouttwohundredcase studiesandthusputtingthemselvesintheshoesofmanydifferentbusinessleaders;by interviewingfoundersofsuccessfulstartupsandwriteapaperthatdemonstrateswhat they velearnedtogivethemdirectexposuretoentrepreneurialmindsandhelpgivethem theconfidencethatmaybe,someday,theycouldstartacompanythemselves. MANAGERISK Chapter13 Trueentrepreneursworkextremelyhardtotakeaslittleriskaspossible. 12

13 Marc:usingeverypossiblelow costtactictobuildexcitement.tobuildhissubscribers,he wouldsendoutupdatesofsalesladder seachweekandtoanyoneheconsidereda potentialangelinvestor.hekepthismessagesshortandtothepointsothatpeoplewould actuallyreadthem.marc splanistotarget25,000subscribers,atwhichpointtheywould makeasubtleswitchandturntheweeklynewslettersintoasimpleadvertisingcircular. They dstilllistthejobs,butatsomepointtheywouldstartchargingthesubscriberswho wantedtoaccessthecontactinformationandgettheotherdetailsthey dneedinorderto apply.marcwouldpredicthowmanypeopleweregoingtosignupthatweek,orhowmany jobsthey dfind andalmostwithoutfailitwouldhappen. SalesLadder.comwaschangedtoTheLadders.TheLaddersranbanneradvertisementsonits competitors Website MonsterandCareerBuilderandcontinuallyupdateditsfreeadson Craigslistandothersuchsites.Thehardestpartofeveryone sjobwascompilingthe newsletterseachweek,whichtookanenormousamountofeveryone stimebecausemarc hadsetagoalofincludingatleastthreehundredlegitimate$100,000 a yearjobsineach issue. Theyadvertisedthattheywouldsoonstartofferingpremiumlevelofservice thenew President sclub thatwoulddeliverthemostvalue.peoplewereclearlyrespondingto theirjoblistings,andtheywereearningabitrevenuefromrunningpaidgoogleadsonthe site.recruitersandemployerswereevenstartingtosubmitjobsontheirown,without Marcortheothershavingtolookforthem. Marcrealizedtheyhaveenoughtractiontostartthepayproductwhenhiscousin s colleaguerecommendedtheladders servicetoherandwhenonemondaymorningthey got sat9amaskingwhathappenedtotheladderswhentheirnewsletterwasnotsent ontime(before9am). Toraisefunds,hepitchedhiscompanytoahandfulofventurecapitalfirms.In6months, Marcwasabletoraise$635,000torunalegitimate,growingcompany. ChrisMichelsoldMilitary.comafterworkingonitfor4andhalfyearstoMonster.com.The finalpurchasepricewas$39.5million,chriswalkedawaywithalittleover$5million.chris, AnneandtheremainderofMilitary.comteamwerenowemployeesandshareholdersof MonsterWorldwide.AndyMcKelvey,388 th richestpersonintheworldaccordingtoforbes magazinesays: Oncehe ddecidedtobuythecompany,hewasmostinterestedinthe peoplewhobuiltit,runit,andrescuedit.bigcompanieslikemonsterdidthisallthetime, buyingupsmallcompetitorsforafewmilliondollarsnotsomuchbecausetheywantedthe business,butbecausetheywantedthepeople. McKelvey hehadtakenatinyyellowpagesadvertisingfirmandoverfortyyearsbuiltit intothetoprecruitingserviceontheworldwideweb.whenhe dstartedout,thefieldof humanresourcesrecruitmenthadbarelybeenenvisioned nottomentiontheinternet. Besides, McKelveysaid, thinkabouthowmanydealsaredonethatleavethefounders feelingscrewed. Topreservetheteamthathadbuilttheventureintoacompanyhewanted toacquire,mckelveyfeltthat$5millionwasasmallpricetopay. Chapter14 ManageRisk Oneofthegreatmythsaboutentrepreneursisthattheyareriskseekers.Allsanepeoplewant toavoidrisk. ProfessorWilliamSahlman,HarvardBusinessSchool 13

14 Entrepreneurshipinvolvesrisk,butsodoeseveryotherchoiceyoumakeinlife.The decisiontolaunchacompanybuiltonasolidbusinessmodelmightactuallybelessrisky thanalotofothercoursesofaction.successfulentrepreneursconsistentlyaimtostrike advantageousdealsandassembleteamsofpeoplewhocontributeessentialassets. Marla:Hedgeyourfinancialriskmeansdon tspendmoneywhenyoudon tneedto.it meansraisemoneybeforeyouneedit,andfocusrelentlesslyongrowingyourrevenueand improvingyourbottomline. Chris:Hedoesn thaveahighertoleranceforriskthantheaverageperson. Thereisno special,overarchinglevelofrisktoleranceamongentrepreneurs,buttheydohavean inflatedsenseoftheirownabilities.theyabsolutelybelievethattheycangooutthereand launchasuccessfulcompany. Marc:Whenhestartedthecompany,hefundedithimself.Hewasalmostunbelievably cheap.helearnedtowritecodesothathecouldputuphisinitialwebsiteonhisown.he workedoutofhisapartment;hebroughtinpartnersandemployeesforequityratherthan pay;heandalexusedguerillamarketingtactictheycouldthinkoftoreduceexpenses. StigLeschly:Bycarefullymanagingrisk,youpreserveasmanyoptionsaspossible.The studentsbecomeverygoodatanalyzingalltheelementsofaventure,allthevariables,so thatiftheydodecidetoeverstartacompany,theirexposureisaslimitedasitcanbe. NoamWasserman:Entrepreneursmanageriskratherthantakerisk.Focusonthebottom line;raisemoney;befrugal.whatentrepreneursdoismanagetherisktheytake,inpartby allocatingtherisktootherplayerswhoarebetterabletomanageit. R&RisperhapsoneofthemostfamousentrepreneurialcasesatHBSwrittenbyHoward Stevenson.Thecaseprotagonist,BobReese,hadbeenintheboardgamebusinessforyears, andattheheightofthetrivialpursuitcrazeintheearly1980s,hecameupwiththeideaof designingasimilargamethatwouldfocusontvtrivia.inamatterofmonths,reese managedtogetawiderangeofstakeholderstocooperateandproducehisproduct, includingagamedesigner,tvguidemagazine,adepartmentstore,andothers. Stevensonoutlinedtheapproachedthisway. Weaskthequestion, Isthegamebusiness risky? Everybodysays, Yes. Andthenyouanalyzethecaseandyousay, Well,whodoes Reesehavetogettocooperate? Heonlyhasaboutthreemonthstolaunchthegame,and youask, Whatdoeshegive,andwhatdoesheneedtogetfromthem?Whotooktherisk? Thedesignerspenttwoweeksdesigningthegame,buthewaspaid$250,000,andsincehe normallymade$30,000,hesurewasn ttakinganyrisk.hedidn tevenhavetodesignthe gameuntilorderswereinplace.icangothrougheachofthese thedepartmentstore,for example,placedorders butreesearrangedfortvguidetogivethemfreeadvertisingthat exceededtheamountoftheirorder.soevenifthegamebombedandtheyneversolda singleunit,they dgetthesetwelvepagesintvguide,whichwasatthatpointinfrontof17 millionsubscribers.andsincethestoreswerenevergoingtoreorder,theyweren ttaking aninventoryrisk.bythetimewe vefinishedourstudyofthecase,ialwayssaytothe students, Well,wheredidtheriskgo?Ithoughtyoutoldmethiswasrisky! Thinkofwhatyouwillbringtotheventureandvalueyourassetsaccordingly.Yourideais worthsomething.yourtimeisworthsomething,too,soisyourpassion,yourexperience, andyourcontacts.opportunitiesvarydependingonwhoisconsideringit;similarly,therisk differsgreatlydependingonwhothinksabouttakingthoserisks.theintelligent entrepreneurworkshardtoensurethatthepeoplebearingeachriskaretheoneswho perceivethemasleastrisky. 14

15 SkillssetshouldbecomplementaryNOTsimilar. Toomuchcautionopensthedoortoadifferentsortofrisk:inaction. Nothingventured,nothinggained. Agoodwaytomanageriskisnottomanageitalone.Theassetsthateachmemberofour teambringstoyourventurewillhelpyoulimityourexposuretorisk;afterall,you ve broughtthemonboardbecauseyoubelievetheycanmakeasubstantialcontributionto yoursuccess. Whoeveryouare,whateveryourpersonality,yoursuccesswilllikelyturnonwhetheryou learntoleadpeopleeffectively. LEARNTOLEAD Chapter15 Marc:ThecofoundersofTheLaddersallunderstoodthattheyonlysurewaytoincrease boththeirsalariesandthevalueoftheirequitywastodoeverythingpossibletobuild TheLadders.Iftheylistedacertainnumberofjobsandspentacertainnumberofmarketing dollars,theycouldcountonsigningupafairlypredictablenumberoffreesubscribers.and foreachhundrednewsubscribers,theycouldmakeaprettyaccurateguessabouthow manywouldeventuallysignupforthepremiumservice. Fewmilliondollarsinvestedinthecompanywilldramaticallyrampuptheirmarketing, buildamorerobustwebsite,andcementtheirpositioninthisnewmarketbeforetheir competitorsknewwhathadhappened.weeklyrevenuenowisbetween$20,000to $25,000. NowinvestorswerecompetingforMarc sattention,nottheotherwayaround.meeting venturecapitalistswasalsoawayofgettingsomefreeadviseabouthisbusinessfromsome verysmartpeople.venturecapitalfirmfromboston:nickbeim,ofmatrixpartners he likedthelookofthebusinessmodel,buthewasevenmoreimpressedbythequalityofthe managementteammarchasassembled.thisteamhadbeenworkingintheindustryathigh levelsforseveralyearsbeforestaringtheladders.theybroughtobviouspassionand commitmenttotheirenterprise.theyhaddevelopedauniqueandcounterintuitive businessmodel thoughnoonehadevertriedtochargejobseekersforlistings,itwas clearlyworking. Andtherewastheideaitself.Theywereinthepainbusinessratherthanthepleasure business.asbeimknew,findingajobtriumphseverythingwhenyoudon thaveone.beim s firminvested$7.5million. Differencebetweenactivitiesandoutcomes Illustration:Supposeyoucouldgetalookattheofficialrecordsoftwonavyfighter squadrons.imaginethatthesehypotheticalunitsflewthesameairplanes,trainedinthe sameway,andundertookthesamemissions.further,imaginethatthesquadronswere madeupofpeoplewithvirtuallysimilarbackgrounds.giventheseequivalences,youmight thinkthatthetwosquadronswouldperformprettymuchonapar.butthedatashowed thatthiswasn tthecasetall.infact,navystudieshadrevealedthatstrongsquadrons outperformedweakeronesbyafactoroften. 15

16 Whatwasthedifference?Mostlikelyexplanationforthestrikingdifferenceinperformance wasleadership,culture,andarelentlessfocusondesiredoutcomes.equippingandtraining thesquadronswasimportant,butnotnearlyasimportantastheparamountgoal patrollinganddeterringduringpeacetime,fightingandwinningintimesofwar. Onlytwocharacteristicsreallymatteredwhenevaluatingteammembers competencyand fit.2x2matrix Greatfit. LowCompetency. Lousyfit. LowCompetency. Greatfit. HighCompetency. Lousyfit. HighCompetency. COMPETENCY Howdoyouhandlethehighlyproficientpersonwhowasneverthelessacomplainer whohurtotheremployees morale?ortheenthusiastic,nicepersonwhojustdidn thave theskillsorcompetenciestogetthejobdone?whenthingsweregoingwell,youcould coverupforpoisonousorincompetentpeoplebutwhentimesgetbad,theysimplyhaveto go. Marla:togrowbigger,theyraisedanotherroundoffunding.Marlastillinsistedonhiring onlyfull timeemployees,eventhoughsomeofherinvestorsencouragedhertoswitchto part timestaffsoshecouldsaveonfringebenefits.marlawasconvincedthatthelower levelofservicehercustomerswouldreceivewouldn tbeworthit.shestillusedastorebasedbonusstructure,sothatheremployeeswereencouragedtoworktogetherrather thancompetewithoneanother.andmarlastillpersonallyinterviewedeverynewemployee ineverystore.sheheldherselftoaveryhighstandardandthestoresreflectedherambition tobethebestofthebreed. Marc:company srevenuesweretobeused formarketingandgrowth, notforpaddingthe walletsofemployees.thoughtheladdershadneverpaidespeciallywell,ithadalways thrownfunpartiesandprovideditsstaffwithsomegreatperks.marcbelievesinmotivating peoplebypromisingtogivethemsomethingspecialittheyreallyperformed.marcinsisted oncelebratingthecompany swins. Chapter16LearntoLead Leadershipisgettingsomeonetodowhattheydon twanttodo,toachievewhattheywantto achieve. CoachTomLandry Toleadisabouthavingintegrity,clarity,andenthusiasm;aboutfindingtherightpeople; aboutgivingthemthepowertomakedecisionsevenwhileshepherdingthemtowarda 16

17 particulargoal.learningtoleadisaboutmakingpromisesandthendoingeverythingyou cantokeepthem. QUESTIONfordiscussion:Isagoodleaderagoodmanagerandviceversa?WHY? Chris:Leadershipisaboutsettingtheculture,performanceandhavingpassion.Ifpeople actuallybelievethatyouhavetheirbestinterestsinmind,youcanhavegreatconversations withthem,evenifthey resometimesprettytough.youcanhavearealimpact,notjuston theirworkbutontheirlives. Marc:abashisaboutmorethanhavingfun;they reagoodwaytoshowbothhispassionfor thecompanyandhisappreciationforthecontributionsofothers.youhavetohiremore talentedandcapablepeople,andyouhavetomanagethemusingdifferentskills. EdZschau:Mostentrepreneursareideapeople.Butwhenyoustartoutasanideaperson andthenovertimelearnhowtomanagethecompany,leadthecompany,andthenbringit toasuccessfuloutcome whenyou vedonethat,you vedevelopedsomeessentialskills thatmakeitpossibleforyoutobeacapableceo.thenyoucandecidewhetheryouwantto hireaceotorunyourcompanyday to day,orwhetherreallywanttobeboththeidea personandtheoperationsperson.sure,theidealisthatyoucandoboth,butthatisn tright foreverybody. NoamWasserman:Innovatorswhodon tknowhowtoleadpeopleoroperatebusinesses canflameoutveryfast.themostsuccessfulentrepreneurscanworkaloneandbeateam player;theycanmakeacriticalindividualcontributiontotheirventureandmakethat transitiontoleadingothers. Forinstance,itcanbeverytoughtomakethetransitionfrombeingasalesmantobeinga managerofsalesmen.insomeveryprominentcases,newventureshavepromotedtheir bestsalesmantomanagerandasaconsequencekilledtheircompany. Onelessonthat sespeciallydifficulttolearnisthatnogoodleaderwillbe UNIVERSALLYLIKED. Thekeytobecomingagoodleaderisnotabouthavinggreaterintellectualhorsepowerof betterskillsthanyouremployees.stigleschly:generalmanagementisalmostantiintellectual.true,somestrategyproblemsarehard,butmostaren timpossible.andin somedisciplines manufacturingscience,engineeringscience,andlifesciences,for instance specialistsarecriticaltothesuccessofacompany.butgeneralmanagersdon t needtohaveaspecializedskillset.whenitcomestoeffectiveleadership,whatreally mattersiswhattranspiresamonghumanbeings whetheryoucanhireandfire,whether youcanrunameetingwithtwoorsevenortwenty fivepeople,whetheryoucanrelateto people,motivatethem,connectwiththem. Wasserman sresearchdemonstratedthatwhensuccessfulcompaniesfinishtheirinitial productdevelopment,orwhenthey veraisedasignificantnewroundofoutside investment,it softentimeforthefoundingceotostepaside.inmanycases,heorshe simplydoesn thavethemanagementandleadershipabilityneededtorunalarger organization. Ifyoulaunchyourventuresuccessfully,theremaywellcomeadaywhenithasgrown beyondyourabilitytoleadit.astheceoofaneverexpandingenterprise,youhaveto worrynotonlyaboutyourproduct,butalsoaboutsuchthingsasbuildingasalesforce, distributingandsupportingyourproduct,managingfinances,andleadingbiggerandbigger 17

18 teams.maybeyoucandoallthosethingsandmore,butwhatifyoureachsuchapinnacleof successthatonedayyoutakealookatyourcompetitionandrealizethatyournew, innovative,game changingcompanyhasbecomethestatusquo? Whatmotivatespeopletolaunchcompaniesisoftenincompatiblewithwhatmotivates someonetoleadalargefirmoverthelongterm. Howdoyoulearntolead? 1) Howwelldoyoucommunicate?Areyouagoodlistener? 2) Howclearisyourvision?Ifyoucan tarticulateavisionforyourenterpriseorifyou doubtyourabilitytomakeandkeeppromisestoyourpeople,youarealmost certainlynotreadytomakeyourdreamofbecominganentrepreneurareality. 3) Canyouputegoaside?Areyouabigideaguyoragetstuffdoneguy?Areyou willingtostepasideanddelegatewhennecessary? 4) Whatdoyoutrulywanttodo? Leadershipisaboutorganizingpeopleandmotivatingthemtoworktogethertowarda commongoal.theflipsideofgoodleadershipistheabilitytosell.youmaythinkthat launchingacompanyisallaboutinnovation,buttherealtruthisthatit sequallyimportant tolearnhowtopersuadepeoplethatyourideaisasingeniousandinvaluableasyouthinkit is.yourventureisonlyasgoodasitsbestsalesperson. LEARNTOSELL Chapter17 Whendoesamarketerbecomeasalesperson?Whenheneedstomakeapayroll. Anne Dwayne Marc:Problem sincetheyhadsetthepriceforemployerstopostadsatzero,theyhad sentaclearmessagethattheirservicewasn tworthanything.forinstance,acorporate recruiterwhoworkedforafortune500firmhadbecomeabigboosterfortheladders. Wheneverajobwasopeninhercorporatedivision,shewouldsubmitittoTheLadders. She dhadgreatluckwiththeirserviceandtoldhercolleaguesthattheyshoulduseitas well.butalmostnootherrecruiterwithinthecompanyhadfollowedsuit.theyhavean evangelistinsidethecompany,andevenshecan tsellit! Freejustisn tworking. Freeisthewrongprice. ThesewereFortune500companiestheyweretargeting.Theyhadmoneytospendon recruiting. Marla:Bluemercurywasbecomingahotcommodityandinearly2006, PricewaterhouseCoopers(PwC)auditedthecompany sbooksfor2005andconfirmedthat ithadgenerated$17minrevenue nearlytwicewhatithaddonetheyearbefore.chris Spharhadseenretailfirmssellforsixtimesannualrevenuesorhigher. Goodmanagementbook:MadeinJapan,theautobiographyofAkioMorita,cofounderand CEOofSony.Culturethatputscustomerservicefirst;basedonabusinesssaying, Okyakusamawakami samadesu, whichmeant thecustomerisgod. Theattitudeiswhat simportant. Ledecky Darmantheoryofentrepreneurship:startandbuild,buttakeyourwin!Takesome moneyoffthetable. 18

19 BarryBeck:Don tfallinlovewithyourbusiness.barryturnedtohisfavoritemetaphor Icarus,thecharacterinGreekmythologywhoflewtooclosetothesun. Don tbeicarus,be Daedalus,whofliesalittlelowerandsurvives. Marla:Invuswouldinvestinthefirmatapre moneyvaluationof$62m.together,marla andbarryownedjustover70%ofbluemercury sstock;afterthedealthey dholdonto 24%,andsotheywouldbewalkingawaywithwellaboveBarry sgoalof$20mincash. Moreover,therewouldbe$10Mavailabletofundtheexpansionofmorestores,andMarla andbarrywouldstayinplaceastheceoandcooofthecompany. Sevenyears,onemonth,andfifteendaysfromthedayMarlastartedhercompany,shehad doneit.shehadstartedandbuiltbluemercuryandshehadtakenmoneyoffthetable. Chris:Ratherthankeeppushingaroundtheedges,tryingtosqueezeafewmorepointsand afewmoredollarsoutofthecompaniesthatwantedtoreachthemembershipof Military.comeachmonth,whynotreplicatethemodelandbuildcommunitiesfocusedon otheraffinitygroups?forexample,whynottaketheconceptbehindmilitary.comandstart anewwebsiteforlawenforcementofficerscalledsomethinglikepolice.com? Firefighters.com,Teachers.comandNurses.com Chapter18:LearntoSell Assoonasyoudecidetobecomeanentrepreneur,youbecomeasalesperson.You vegotto sellyourselfassomeonewhocaninnovate,leadandexecute.youwanttosellyourideaand yourventure.thatiswhatyouneedtolearnhowtosell. PASSION You realwaysbalancingyourpassionandyourcredibility. EdZschau:Themistakenimpressionaboutsalesisit sallaboutconvincingpeopletodo thingstheydon twanttodo.agoodsalespersonissomebodywhocanunderstandthe valuesandtheobjectivesofthecustomer,andthenmakeapropositionthatresonateswith thosevaluesandobjectives.he salsogottoconveyasenseofcredibilityandintegrity. Youhavetopersistentintheappropriateway,becauseyouwillofcoursegetturneddowna lot.butifyouknowhowtobringacustomerbacktothetableandsaysomethingthatreally makessense,you llgetbusiness. Chris:Oneofthemostimportantthingstounderstandaboutastartup,particularlyinthe earlystages,isthatyouhavetosellapromise.peoplewanttobelieve.theywanttobelieve inyou.theywanttobelieveinyourcompany.andyourobissimplytogivethemthe opportunitytobelieve.investorswanttofindthenextbigthing. CREDIBILITY Marc spassion:hemadetimeeachweekto updatesabouthisprogresstopeoplehe hopedmightsomedayinvestinhiscompany.hedidn tsendoutthoseupdatesbecausehe hadto;hesentthembecauseheenjoyedtellingpeopleabouthisefforts. Mosteffectiveentrepreneursarethosewithcredibility acombinationofintegrityand competence whichisjustasimportantashavingpassion.whenintegrityiscombinedwith competence,apersonearnsrealcredibility.billmurphyaskedhiswifewhysheliked Marla scompanysomuch.it sthesalespeople,sheansweredimmediately.theytookthe timetoworkwithherandevensteeredherawayfromanumberofmoreexpensive 19

20 productstheybelievedweren trightforher.theyseemedtohaveherbestinterestsat heart,andbecauseshetrustedthem,sheenjoyedbuyingwhattheyhadtosell.their passionwascontagiousandtheircredibilityclosedthedeal. Seekoutemployerswhoencouragecreativethinkingandrisktaking.You llbehappier workingforthissortofperson,andyou llalsodevelopthemind setandreflexesthatwill serveyouwhenyou refinallyreadytofoundyourowncompany. What sthemostimportantskillforanentrepreneurtohave?sales.noamwasserman vehementlypushedthestudentswhowantedtobeentrepreneurstogooutandcarryabag. Gooutandsellsomethingdoor to door,anddoitasearlyinyourcareeraspossible. Learningtosellisabigadvantageoverthepeoplewhohavereallyneversoldanything. Howtolearntosell?Thereisnosubstituteforexperience.It sachallenge. Onehastopersist,persevereandprevail. PERSIST,PERSEVERE,PREVAIL Chapter19 Nevergivein.Nevergivein.Never,never,never,never innothing,greatorsmall,largeor petty nevergivein,excepttoconvictionsofhonorandgoodsense. WinstonChurchill Chris:Withhistrackrecordandapromisingbusinessplanbuiltonhisprevioussuccess,he receivedanofferforcapitalafteronlyonepitch.severalventurecapitalistswerefighting overtheopportunitytoinvestinaffinitylabs.chrisreceived$6.5mventurecapitalistdeal withtrinityventuresandthemayfieldfund. Chris firstbigquestionwaswhichcareerfieldstotarget.theylookedforprofessionswith thelargestpopulations,highestincomes,biggestpercentageofinternetuser and perhapsmostimportant theintangiblenotionoftheiraffinityforoneanother.sucha policeofficers,nurses,teachers,firefighters,artists,governmentworkers,andpeople workingininformationtechnology. Byspringof2007,thefirstnewAffinityLabscommunityasreadytolaunch:PoliceLink.com. Bytheendof2007,AffinityLabshadgeneratedover$2MinrevenuefortheyearandChris projectedthattheywouldachievefourtimesthatamountin2008.they ddevelopedan excellentbusinessplan,hiredwell,andexecutedsmartly. Injust18months,Chrisstarted,built,andsoldhissecondsignificantcompanyfor$61Mto Monsterandabout40%ofthatamountwouldgotoChris. Chrisstilllivedinthesameone roomapartmentthathe dmovedintoalmost10yearsago. Hestilldidn townacarthoughhetraveled,tookpicturesandboughtnicersportsjackets andbluejeans. AffinityLabswouldneverhaveexistedifhehadn tfoundawaytomakemilitary.comwork. ItwashisexperiencewithMilitary.comthathadtrulymadehimanentrepreneur.Hehad setouttosolvequestionsthatbotheredhimpersonally:howdoesaformermemberofthe militarymakehisorherwayinciviliansociety?he dbuiltanumberoftoolsthathadhelped solvedthatproblemandanumberofothers,notjustformilitary.com smembers,butfor himselfaswell. InthewakeofAffinity ssale,chrisfinallyboughtacar(porsche);purchasedamuchbigger loftapartmentinsfandgavesomemoneytohisparents. 20

21 Marc:InJanuary2004,TheLaddershad flippedtheswitch andforthefirsttimebegun chargingjobseekers.theladdersfacedanotherproblem ithadalwaysmarketedits serviceas freeforemployers. Sinceallofitscompetitorsalreadychargedemployerstolist jobs,theladderswouldbegivinguponeofthecharacteristicsthathadsetitapartinthe recruitingfield. ThesolutionMarc steamcameupwithwastorollthingsoutgradually.theywentthrough alltherecordsoftherecruiterswhohadusedthesiteandassignedeachoneascorebased ontwelvecriteria howoftentheyposted,howoftentheyloggedinandsearchfor applicants,etc.basedonthesescores,theyofferedeachrecruiterbetweenoneandtwelve monthsoffreeservicebeforerequiringthattheybeginpayingtolistjobs.themoreactive anddesirableaclienthadbeen,thelongertheclientcouldlistitsjobsforfree. Theexistingbusinesscontinuedtomoveaheadaggressively,andthecompanyextendedits reachbylaunchingaeuropeanversionoftheladders. Marc:Heknewthatentrepreneursalmostnevergetthingsrightthefirsttimearound:you justhadtokeeppluggingaway,tryingfirstoneapproachtofindingasolutiontoyour problem,andthenanotherandanother,untilatlastyoufoundonethatworked. Thetransitiontopaidmodelwaspainful.Onlyabout14%oftheoriginalrecruiter users remained,butmarcwasconvincedthattheywerenotbookingadsfromthebetterclassof jobposterstheybadlyneeded.theystilllistedjustasmanyjobsforeachapplicant;the differencewasthatthepersonpostingthejobwasmoreoftendirectlyinvolvedinthehiring decision,ratherthanaheadhunterorothermiddleman. Chapter20:Persist,Persevere,Prevail Nothinginthisworldcantaketheplaceofpersistence.Talentwillnot;nothingismore commonthanunsuccessfulpeoplewithtalent.geniuswillnot;unrewardedgeniusisalmosta proverb.educationwillnot;theworldisfullofeducatedderelicts.persistenceand determinationaloneareomnipotent.theslogan presson hassolvedandalwayswillsolve theproblemsofthehumanrace. CalvinCoolidge Thekeyispersistinglongenoughtotakeadvantageofthegoodfortunethatdoescome yourway.showingupjustgetsyoustarted.thetrulycrucialingredientisthe determinationtopersist,persevereandprevail. Persistenceisanexcellenthedgeagainstrisk. Ifyougenuinelybelievethatyouwillpersevere ifyou veproventoyourselfoverandover thatyousimplywillnotquit thelikelihoodthatyou lleventuallyachieveyourgoalsis high. Ifpersistenceimprovesyouroddsofsurviving,italsoallowsyoutotakeadvantageof opportunitywhenitdoescomealong.sometimesanunexpectedeventcanaffectyou positively.academicsatbusinessschoolslikehbscallthisa shiftinthecontext. ProfessorBillSahlman:Caseofapackagingcompanythatwasdoingpoorlyintheearly 1980s.Oneofitsproductswasacheapmechanismformakingconsumergoodtamperresistant.Theownerswereonthevergeofsellingtheirstrugglingbusinesswhenatragic eventturnedtheirfortunesaroundcompletely.infall1982,sevenpeoplediedafter consumingtylenolcapsulesthathadbeenlacedwithpotassiumcyanide.salesoftylenol 21

22 plummeted,andthecompany smanufacturer,johnson&johnson aswellaseveryother manufacturerofconsumablegoodsintheunitedstates clamoredawaytopackagetheir productssotheywouldbetamper resistant.theailingpackagingcompanywassuddenly floodedwithordersandquicklybecameprofitableagain.persistencepaidahugedividend: thecompanyhadsurvivedlongenoughtotakeadvantageofacompletelyunforeseen changeinthebusinesslandscape. Chris:LouisPasteurquote Chancefavorsthepreparedmind. Workethicsmatters.Chris dideverythingtheycouldthinkoftoimprovetheirchancesofsucceeding,andtheynever stoppedlookingforopportunity. Marla:Theideajustgetsyoustarted.Onceyougetinthegame,you vegottoworkatituntil youfigureitout.andnomatterwhatwedo,nomatterhowmuchsuccesswehaveina givenyear,thegameisalwaysaboutsurvival.nothingstaysthesamefortenyears.we ve hadtochangeourstrategyyearafteryearafteryear.ifyoucansurvivethroughallthe toughtimes,you llbethatmuchstrongerwhenthegoodtimesfinallycome. StigLeschly:Theruleofpersistenceanditsassociationwithlearningissoimportant. Becauseone swisdomishard won:itcomesoutofone sownexperiencesasan entrepreneur,andastoryaboutaspectacularsuccessthatwasmadepossiblebyhisrefusal toacceptfailureasafinaloutcome. Akeytosuccess:willingnesstorevampafailedstrategyandpersistlongenoughorthe markettocatchup.leschly youwon tsucceedbecauseyouhaveagoodidea.you ll succeedbecauseyouworkyourassoff,becauseyounevergiveup,becauseyoureinvent yourselfconstantly.you vegottobeparanoidallthetime;you vegottoreadjustbasedon everylittlepieceofmeaningfuldata. Ifyouactwithintegrity,youhavenothingtolosehere.Ifyouburnthroughyourinvestment andthecompanyimplodes,butyoucomeoutofitwithyourreputationforintegrityintact, you restillgoingtogetyourcallsreturnedwhenthenextopportunitycomesalong. Cultivateyourabilitytopersistandpersevere,learnasmuchasyoucanfrombothsuccess andfailure,andprepareyourselfforthedaywhenopportunitiescomesyourwaysoyou cantakefulladvantageofit. Beastudentofbusiness.Readbooksaboutmanagement,leadershipandotherbusiness issues.readaboutbusinessandentrepreneurshipandsharewhatyou velearnedwithyour team. Gotothewell.Youwillfindwealthofvaluableinformationandadviceabout entrepreneurshipjustbybrowsingthewebsitesofschoolssuchashbs,stanford,etc.take fulladvantageofyourrelationshipswithyourmentors;reachouttootherentrepreneurs, developnewrelationships,andlearnasmuchasyoucanabouthowthey vehandledthe challengesthey vefaced. Whenyoucan tmoveforward,moveon.persistencedoesn tmeanyoushouldstaywithone ventureuntilthecaseisutterlylost.theresometimescomesapointwhenthesmartest thingyoucandoiswalkaway.butacommittedentrepreneurwillfindawaytogetbackin thegame. Entrepreneurshipischoosingawayoflifethatveryfewothershavethegutstopursue. Whenyouplaytheentrepreneurialgame,you replayingthegameforlife. 22

23 PLAYTHEGAMEFORLIFE Chapter21 Thereasonablemanadaptshimselftotheworld;theunreasonableanpersistsintryingto adapttheworldtohimself.thereforeallprogressdependsontheunreasonableman. George BernardShaw Marc:theoverseasexpansionhadcontinuedtogowell;TheLadders.co.uk IntheUS,the2008financialcrisiswastakingitstoll.Alargenumberofreliablecustomers oftheladderswouldsuddenlybeunabletopayfortheirservice.thisposesadirethreatto Marc scompany.theylivedoncashflow,andiftheamountofmoneycomingineveryweek diminishedsignificantly,heywouldhavetocutcostsimmediately.aswithmanycompanies, theirbiggestcostwaspayroll. Ifwe regoingtolayoffpeople, hetoldhimself, we lldoit once,andwe llcutdeepenoughtoensurethatwedon thavetodoitagain. Marla:Shedecidednottogoforwardwithbluemercury snationalexpansion.herinstincts hadbeenright:theeconomyhadindeedtakenadive.becauseshehadreducedcostsand takensuchaconservativeapproachtogrowth,thecompanyhadescapedmostofthepain sufferedbyitscompetitors. She dlongsincerealizedthatshewastrulyintheself esteembusiness,becauseher clientele shappinessdependedonlookinggoodandfeelinggoodaboutthemselves.evenin difficulteconomictimes,womenweregoingtobuybeautyproductslikemascara.andthey useduptheirsuppliesquickly;atubeofmascaramightlastthreemonths,andthenthey d havetobuyanother.whentimeswerehard,makeupcouldprovideakindofentertainment, awaytoputtroublesaside. SheandBarrydecidedtolaunchtheirownlineofcosmetics.Therewasagapinthe marketplace,marlaconcluded aplaceforhigh end,eco friendlyproducts. TopTENlessonsforHarvardMBAs: 1) Experimentwithyoursummerjob. 2) Getinthegame. 3) DROOM(Don trunoutofmoney JonLedecky,HBS 83) 4) Dosomethingyoulove. 5) Thefirstyearisthehardest. 6) AvoidtheGBF*mentality.(*GetBigFast) 7) Angelsareyourfriends. 8) Competitionmakesyoustronger. 9) Nothing sgoodforever. (DickDarman,HBS 67) 10) YouCANhaveitall. Chapter22:PlaytheGameforLife Weneed100,000peoplein100,000garagestrying100,000things inthehopethatfiveof thembreakthrough. TomFriedman Definesuccess:Wecanusequantitativemeasuresuchashowmuchmoneydotheymake? Butit snotalwaysonlyaboutmoney. Thefreedomandsecurityprovidedbyahighincomeorasignificantwindfallaremuch moreimportanttohighlysuccessfulentrepreneursthanthemoneyitself.atthedeepest 23

24 level,whatmattersmostisfindingatruemeasureoffulfillment onethatleaveyoufeeling thatyouhaveusedallyourtalentstoaccomplishsomethingworthwhile,makeadifference inpeople slives,andleavealegacyforthosewhofollow. Entrepreneurshipisn tjustaboutsolvingaproblem,buildingaventure,managingrisk,or makingmoney.it sabouthavingapositiveimpactontheworld,makingthemostofthegifts you vebeengiven,andrealizingyourfullpotentialasahumanbeing.anintelligent entrepreneur,inshort,playsthisgameforlife. Marc:In2010,theEuropeanversionofTheLadderscontinuedtothrive,withplansto expandintoevenmoreinternationalmarkets.marc sweeklye mailreachedmorethan 3.6Msubscribers,andhespentagooddealoftimegivingspeechesallovertheworldnow, too.heisalsopassionateaboutencouragingpeopletotakechargeoftheircareersandfind fulfillmentinlife,whereveritmightleadthem. Marla:Shewasproudtoreportthathervisionforhelpingheremployeesattaincareers,as opposedtosimplyjobs,wasworking,andthatmanyofhersalespeopleandmanagerswere nowcelebratingtheirtenthyearofworkingforbluemercury. Chris:Bothofthecompanieshestarted Military.comandAffinityLabs continuedto flourish.in2209,chrisvisitedtencountriesandtraveledtoalmosteverycontinent.one particularshot asensationalshotofakillerwhalejumpingoutofthewater symbolized muchofhislife.he dhadtospendyearsdevelopinghisskillwithacameraandthenhad traveledtoalaskatogetthephotograph,butthecrucialpointwasthatwhenhe dfound himselfinpreciselytherightplaceattherighttime,he dbeenfullyprepared Togetthat picture, hesaid, youneedtobeonthatboat.that sreallythestoryofmylife. Tobecomesuccessfulentrepreneur,you vegotomakeatotalcommitmenttothegoaland thenspendyearsworkingtowardthatmomentwhenitallcomestogether. ProfessorHowardStevensonandLauraNash sbookentitled JustEnough attemptsto showreadershowtojugglewhattheybelievearethefourkeyelementstosuccessinwork andlife:happiness,achievement,significanceandlegacy. It sturnsoutthatthere slittlecorrelationamongthefourelements,stevensonsaysinan interview.youcanachievegreatlywithoutbeinghappy.youcanprobablybesignificant withoutgreatachievement.youcanleavealegacywithoutachievingitinyourownlifetime (i.e.karlmarx)andyoucanbehappywithoutexperiencinganyoftheotherelements. Stevenson:Idon tliketothinkofitasstrikingabalance,becauseiprefertothinkofitas juggling. ProfessorJosephLassiter: Studentsusuallycomebacktoseeme.Mostofthemarehappy andcontent Theminoritywhoaren tsatisfied,inalmosteverycase,they reunhappy eitherbecausetheydon tfeelintenselyinvolvedwiththeirworkorbecausetheyhaven t falleninlove.moretothepoint,they reeitherworkinginaprofessionthatsomeoneelse thoughtwouldbeagoodfitbutisinfactofnoparticularinteresttothem,ortheyhaveno onetosharetheirlifewithandthey refundamentallylonely.theynever ever cometo meandsay,gee,i mnotmakingenoughmoney. Attheendoftheday,what simportantiswhatsegmentdoyouwanttoserve?whatproblemdoyou wanttosolve?toolsaretools,butwhat simportantisthewhatthatbringsaboutthepassioninyou. Frommypointofview,theseare2peoplewhochangedtheworld:HowardSchultzandSteveJobs. 24