Archive for February, 2013

Mastering the Favor Economy

Posted: February 24, 2013 by Bob Gilbreath in Ecosystem, People, Startup

BobGilbreathWhen people step away from a career to start a new venture, perhaps the biggest shock is learning how hard it is to get things done. You no longer have the power to compel others to join your meeting, buy your products or answer your emails. Humbled and alone, you soon understand that relying on the kindness of others is the only way to survive. Veteran entrepreneurs understand one must tap into a complex social system of trading favors.

Trading favors is one of the most important survival strategies in human history. Favors were a form of currency long before the first coin was ever minted. If your ancestor was lucky on a hunt for meat, he shared with his fellow tribesmen, knowing they would remember his gift when they were lucky next time. Some scientists believe our brains grew larger in order to  to keep track of frequent, complex trading exchanges among people.

Even while they are inventing the most breakthrough technologies, entrepreneurs must go back to these social rules to give their companies a shot at a future. Other people hold the key to information or access that could mean life or death for a new venture. With little money in the bank and the clock ticking mercilessly, the favor of an introduction to a potential investor, customer, advisor or new hire can mean everything.

Unfortunately no one teaches these soft skills in business school, and few people openly talk about their strategies for getting the returned phone call or opened door. I have learned a few lessons along nearly a decade of small business trials and tribulations, and I offer these Five Rules for the Favor Economy:

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At the Center: Creating Value for Customers

Posted: February 17, 2013 by Chuck Matthews in Leadership, Marketing, Planning, Startup

Dr. Charles Matthews bio“Just because you are struggling does not mean you are failing. Every great success requires some kind of struggle to get there.”
– Anonymous

In our hurry-up distracted world, there is a strong temptation to fall victim to the false promise of immediacy and success in all things we do. Instant communication, instant feedback, 24/7 connectivity, faster planes, trains and automobiles, and more. Even in entrepreneurship, the latest buzz phrase is “fast to fail.” It is an interesting concept that is often misunderstood to mean giving up, when in fact, it has more to do with how to go about achieving our goal of success.

In my last column, I introduced three deceptively simple yet powerful strategic planning questions to guide our entrepreneurial journey: where have you been, where are you now, where do you want to go. Addressing these three items allows us to address the more challenging question of how you plan to achieve your goals. While it often looks easy in retrospect, it is rarely easy prospectively and while we are actively engaged in the process. To do this, let’s examine four core areas – focus, environment, the entrepreneur, and the process – today and over the next several columns. But first, let’s take a look at the role and importance of establishing a compelling value proposition.

Value proposition: Keep in mind that the entire entrepreneurship process model is underscored by what must be a rock solid foundation: the creation of value for the customer. This value proposition must be sufficiently compelling to induce a value exchange between your good and/or service and the customer’s need, want, desire, pain, problem, etc. Most entrepreneurs who solve problems, no matter what the size, tend to create a solid value proposition.

Focus: It is difficult yet critical not to be distracted along the way. So the first step and core area is focus, focus, focus. Even a casual perusal of successful new ventures reveals a clear and persistent focus on three core elements: the product and/or service offered; the customer; and the competition. One of my all-time favorite examples of a new venture startup that lived, breathed, and executed this focus principle is the Boston Beer Co. In 1990, about seven years into his venture, I was very fortunate to have James Koch, founder and CEO of the Boston Beer Co. and a native Cincinnatian, give a guest lecture on strategy and entrepreneurship to one of my classes.

When Koch first conceived his new venture idea in 1983, entering the brewing industry was not very attractive. In fact, breweries were closing, growth was stagnant, and there was excess brewing capacity. Initial thoughts of building a brewery were quickly abandoned, as potential investors were naturally reluctant to participate. Given this relative lack of overall industry attractiveness, what did Mr. Koch know that would set him apart? The short answer: product, customer, and competitors.

Product: Samuel Adams lager would become the cornerstone of what would eventually become an entire product line of beer that would be targeted to just 2 percent of the beer-drinking market. Pursuing a focus differentiation strategy demanded that the product attributes not only meet but exceed the customer’s expectations. Since the premium product attributes (especially taste) were paramount, considerable time was spent perfecting the heart and soul of the company – the product.

Customer: The customer segment was small, but of sufficient size, quality and durability to support a new entrant. By conceding 98 percent of the brew-drinking market to the dominant domestic breweries, Boston Beer was able to successfully focus on the 2 percent of beer drinkers that sought a premium or super-premium product – an emerging segment addressed at that time only by the imported or specialty beer producers.

Competitors: In the early years, he correctly assessed that the major domestic players would be unable and/or unwilling to initially respond to a new entrant in the premium beer segment. They were committed to the larger non-premium segment and had conceded the premium/ specialty segment to the imported beers. While he knew the imported beer makers would respond, focusing on product attributes the customer sought, he would gain valuable time and space on his eventual emerging competitors.

Through the early 1990s, micro and craft brewing were still highly fragmented, giving Boston Beer first-mover advantage.

Of course, by the late 2000s the business landscape had changed dramatically. Given the context of continual change, in our next column we will explore three critical aspects of the changing environment. Till next time, all the best for continued entrepreneurial success!

Charles H. Matthews, Ph.D., is professor and executive director of the Center for Entrepreneurship Education & Research, Carl H. Lindner College of Business, University of Cincinnati.

E-Capital Our Greatest Need

Posted: February 10, 2013 by Jim Kahmann in Ecosystem, People, Startup

jim kahmann wp My boss just returned from a trip to Palo Alto, California ostensibly to raise capital, but also to make connections with new networks. He felt energized by his meetings, new connections and old friends from Apple. The most obvious source of this energy emanated from the hundreds and thousands of courageous, nothing-to-lose, and arguably masochistic entrepreneurs. Palo Alto and similar startup Meccas have a seemingly limitless supply of human entrepreneur-capital.

E-capital is clearly our region’s greatest need. We must all work to energize and expand the community of courageous, masochistic entrepreneurs. Startup “energizers” like the Brandery, UpTech, CincyTech, and now Cintrifuse pump jet fuel into startups. Our next challenge is spreading word outside the area, and bringing talent – specifically, human e-capital – back to the region.

Attracting more Venture for America fellows to our startup companies is a great start. This May, Venture for America launches its second class – 100 fresh undergrads from top universities. After joining VFA’s first class, I moved to Cincinnati to join a web-based logistics startup called OneMorePallet. Six more VFA graduates also joined the startup world here. We represent Columbia, Georgetown, Cornell, Duke, The University of Maryland, and Wesleyan.

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rod robinson“Everyone has talent.  What is rare is the courage to follow the talent to the dark places where it leads.”  — Erica Jong

I have often reflected upon Erica Jong’s words during my entrepreneurial journey over the last 7 years.  Through all the highs and lows (note:  the highs are really high and the lows are really low!) —  I have attributed my staying power and ability to overcome adversity to none other than my passion, patience, and perseverance.

I’m a firm believer that everyone arrives on this earth for a reason.  Each person possesses special gifts and talents to contribute to society.  Our biggest challenge determining our gifts.  Some find it early; others find it difficult to discover.  It took 35 years to figure out my gifts and how to harness them to make a difference for others.  What better way to go through life than waking up every morning to do what you absolutely love, while simultaneously making life easier for others?

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