Small Business News
The Tesla CEO on electric car design.
The audacious entrepreneur describes how he set out to influence the future in a positive way.
In a video interview with VC Steve Jurvetson, Elon Musk says he outlined these business opportunities while standing in the shower.
The anchor was fed up to here with her employer. That's a feeling familiar to many entrepreneurs.
Liz Wahl, an American anchor for the Kremlin-funded news outlet Russia Today, is the toast of social media this week after leaving her position live on the air. Wahl said she could no longer justify working for a propoganda outfit during the crisis in the Ukraine.
"I'm proud to be an American and believe in disseminating the truth," Wahl said, "and that is why, after this newscast, I'm resigning."
While they might not have reasons so geopolitical, the idea of quitting a day job is hardly foreign to entrepreneurs. I reached out to members of the Young Entreprenuer Council and Entrepreneurs' Organization for the stories of their "I quit" moments before they took to running their businesses full-time. The following are their lightly-edited responses. The breakups range from angry to amicable to laugh-out-loud funny.Craig Fluty, Pinnacle Recruiting and Staffing
Prior to starting my first staffing firm, I was working for one of the nation’s giants. I got together with one of the other guys in my office and we decided to start our own firm. We talked two of our other friends into joining us, set up an LLC, and we were off.
However, I didn’t quit then. I stayed on with the company while we got the other business going. After a few months we built up enough contracts to move into our first office space, but I still didn’t quit. I managed to pull off the double dip because the nature of my position had me out in the field meeting with clients all day. So I could still hit my numbers at my first company and work with my partners to grow our new company.
One afternoon while I was sitting in my new office with my new partners reviewing a contract we were about to close, there was a knock at the office door. And then in walks one of the other reps from my other company, along with our area director, doing a cold call on our new business.
There I sat caught redhanded and we all just kind of stared at each other trying to figure out what was going on. If I was smooth I would have said that I there doing a cold call when I ran into our old colleague and had stayed to talk. Unfortunately, I was not that smooth. All I could think to do was blurt out, "Ummm hi...I quit!"Ralph Dise, Dise & Company
I started up a new division for my employer. They were paying me on a heavily commissions-based comp plan. Once the business got up and running and I was making significant commissions, they changed my comp to a base plus a bonus that I was to share with three other people who had never sold a thing in their lives.
I was heartbroken. Before joining them, I’d worked for a similar company on straight commission for two years, so I felt that I’d sacrificed a lot to get to where I was at their firm. My wife encouraged me and threatened me to start my own business--or else. Our family calls that the "ultimate ultimatum."Gerard Murphy, Mosaic Storage Systems
The last time I quit my job was after launching my company. I had been running my startup for a couple months while being fully employed. The balancing act was getting harder to keep up. My company was growing and needed my attention, and it was affecting my day job. I was torn. I was honestly scared to make the leap to run my business full-time but didn't like the idea of being distracted at work. So I walked into the CEO's office and told him.
I thought there was a 50/50 chance that he would politely walk me to the exit and mail me my personal items. But luckily, after he got over the initial shock, he said that I should work part-time for him for as long as I could. He wanted me around and the part-time salary would certainly ease the transition to running my own startup.
Turns out my boss's old boss did the same for him when he started his company. It certainly helped that I broke the news to him personally as opposed to him hearing it from someone else. Also, our companies were not competitive. He still checks in on me and I count him as one of my mentors.
How did you leave your last job before launching your company? Tell us in the comments.
Most startups, even those helmed by experienced founders, mistakenly seek funding based on their concepts alone.
The winner gets a cash prize, exposure, and connections to capital sources. I recently spoke to Tina Weber, who runs the contest. I asked: What are the most common mistakes you see every year that undermine entrants--and, likewise, what are the positive traits winners typically share?
Her answer shocked me, given that the entrants typically have business school training or previous startup experience. Most entrants make the mistake of trying to compete based on the strength of their concepts alone. The wiser path--what winners always do--is demonstrate customer demand for the concept.How to Demonstrate Customer Demand
All of which creates a markedly important question: If you're a pre-launch startup, what steps can you take to show that your concept has viable customers? Here are two tips from Weber:
1. Before you build your prototype, build a landing page. A landing page could be as simple as a one-page web site with a "buy" button. This basic online form will allow you to quantify prospective customer interest (based on how many people push the "buy" button). You'll also be able to collect contact information from those prospects, surveying them on not only what they're willing to pay for but also what they're willing to pay. That feedback can help you build your first prototype.
You might be thinking that all of the above is obvious. Who wouldn't try to gauge customer interest, prior to building a prototype? But Weber says that the build-it-first-ask-questions-later approach happens far more often than not.
Of course, building a so-called "minimal viable prototype" or MVP is a key stage in lean startup methodology. In their haste to reach it, many entrepreneurs neglect the crucial step preceding it: Specifying the customer problem that needs to be solved. Which is to say, figuring out precisely what customers will pay for.
Weber told me about one experienced entrepreneur who'd run an online brokerage company for 10 years. "He wanted to build something else, and he said, 'I need $300,000 for the MVP,'" she recalls. He was asking for this sum of money before he performed any customer research. To Weber's mind, it was as if he was building the company before he'd even tried to gauge customer interest. That's a mistake.
Moreover, it's possible to learn from potential customers, even if you don't want to spend money building a landing page. Weber worked with one group of founders who went to colleges and stood in front of dorm rooms, interviewing a few hundred students, and persuading them to sign up to receive an email. It was old-school market research, in other words. But it was something tangible.
2. Respond to what you learn from customers. Think of this as the process of finding your niche. And embrace the notion that your initial niche will be smaller than your product's eventual niche.
For example, the winner of last year's contest, Avalanche Energy, developed a new way to collect solar energy that doesn't involve photovoltaic sells. Their device is the size of a satellite dish. Their potential niche--anyone who pays an energy bill--was massive.
Their breakthrough, after performing their customer research, was to fine-tune their offering. They recongized that the specific, most immediate problem they could solve for customers was saving them money on their home hot water heating bills. So they positioned their product as an easy-to-install roof-based device that works with existing hot water tanks.
They did this, even though their product has the potential--with an upgrade--to go one step further and generate electricity, using a slim micro-turbine. The reason? They'd discovered it was much easier to get homeowners to push "buy" on a simpler, more affordable initial investment. "They spoke to customers before going to their MVP," notes Weber.
Another way to look at this, she points out, is that patenting a product can cost upwards of $10,000, considering all of the consultations and billable hours it involves. Before spending on a patent to protect an MVP, wouldn't it be wiser to validate that MVP with potential customers? Or to have customers who've testified that they'd happily pay for such a product, once it becomes available?
The bottom line is, you can't develop your idea in a vacuum, tempting though it can be. "A lot of entrepreneurs are protective of their ideas in the beginning, and they don't want to show it to the world unless it's perfect," says Weber.
"But you really need to break it down--and shop it around--in a way that gives you proof."
Here are three tips from companies that saw their campaigns off to a runaway start.
Ideally, you want contributions to your first crowdfunding campaign to take off like a snowball falling downhill. What's not so obvious is just how crucial the first few hours, even minutes, of the campaign are to getting that momentum going.
Scanadu, which developed a mobile health device to measure vital signs, reached its total funding goal of $100,000 within an hour of opening its campaign last year. By the time the team showed up for work at 9 am that day, they had doubled their objective. At the end of the 30 days that the campaign ran, the company raised a total of $1.6 million -- a record on the crowdfunding site Indiegogo.
"We often encourage campaign owners to raise about a third of their campaign goal in the first 24/48 hours after going live," Breanna DiGiammarino, cause director at Indiegogo, said. She spoke this week before an audience of about 100 at a local HealthTech women Meetup in San Francisco.
While Scanadu clearly had no issues meeting and then exceeding the recommendation, you're certainly in good company if you find this idea daunting.
The good news is, you're not expected to just hit "start" and automatically acquire thousands of campaign supporters. There are a variety of tactics you can use to ensure that you're off and running upon launch. Scanadu Cofounder Sam De Brouwer and other campaign organizers were on hand to share their tips at the meetup. Here's what they suggested:
1. Roundup local supporters and show them a good time. Striving to hit that one-third mark early, concierge medicine startup PlushCare threw a party the night its campaign launched.
"We had booze and food and there were people there that just started contributing -- friends, family. I think that night we hit 15 percent of our goal," PlushCare Cofounder Ryan McQuaid said.
"If people showed up the next day there was no money raised, we probably wouldn't have gotten much," McQuaid added. PlushCare's campaign, still going on now, has about $3,000 of its $25,000 goal left to raise.
2. Design perk offerings with early adopters in mind. Scanadu had the benefit of being a one and a half year old company when it launched its campaign last May. De Brouwer already knew her potential customers and what they were most likely to get excited about. She designed her perk offerings, or rewards for those who contribute a certain amount of money, with that in mind, she said.
For example, the earliest fans of the company were on Scanadu's mailing list. De Brouwer emailed them about three minutes before the campaign went live, and they received the chance claim a Scanadu Scout device for an early bird rate of $149. Within an hour the special had sold out.
Next, De Brouwer designed a package for the quantified self community. "Those are data freaks, they want to try everything," she said. As part of the perk system, she promised quantified selfers that they'd get access to new Scanadu additional features before anyone else. This perk, too, sold out.
3. Acknowledge that you're asking for help. It's not lost on De Brouwer that the well-planned perk system isn't really what generated the support from Scanadu's fans. Crowdfunding allows customers to show a company just how much they want them to succeed. And with those contributions, funders did Scanadu a huge favor to say the least.
"Never be afraid to ask for help," De Brouwer said, recalling some good advice she'd once gotten. "Because if your project, if your company is worth the help you, will get that help," she said.
Take a little time out of your lunch break to do this activity and you can improve your mental function all afternoon, according to a new study.
Just this week on the Buffer blog, Belle Beth Cooper offered a list of ways to put your lunch break to better use backed by science. She offered productivity-boosting suggestions such as snacking on super foods like avocados and blueberries (and dark chocolate… yum!), napping and stepping out into nature to reset.
But maybe she missed one quick and effective way to make your lunch break work harder for you -- take a quick timeout for yoga.
The idea of engaging in a 20-minute yoga session doesn’t come from Eastern gurus or health nuts, but from a recent study out of the University of Illinois at Urbana-Champaign, and the idea isn’t aimed at staying slim, flexible or more grounded, but instead at boosting brain function afterwards.Better Than Going for a Jog
The researchers recruited 30 volunteers for a head-to-head test comparing a quick yoga session with an equal period of moderate aerobic exercise, another frequently recommended brain booster and one also listed by Cooper. Half of the study participants engaged in one kind of activity, half in the other. When the two groups were tested for mental function afterwards, the yogis fared better.
"It appears that following yoga practice, the participants were better able to focus their mental resources, process information quickly, more accurately and also learn, hold and update pieces of information more effectively than after performing an aerobic exercise bout," lead author Neha Gothe said, according to PsyBlog.
The scientists are still unsure why yoga outperforms standard aerobic exercise, but speculate that the breathing exercises that are part of a yoga practice or the meditative nature of a session might be the key. "Meditation and breathing exercises are known to reduce anxiety and stress, which in turn can improve scores on some cognitive tests," Gothe noted.
Perhaps these effects are the reason a parade of business luminaries from Salesforce’s Mark Benioff to author Keith Ferrazzi are avowed meditators. Studies also indicate that meditation can help entrepreneurs beat biases and make sounder financial decision. Perhaps you could start accessing those benefits with just a 20-minute yoga session during your lunch break today.
The SnapRays Guidelight has taken Kickstarter by storm, drawing $12,000 in only two hours. Here's a page from their playbook.
Few things sound less exciting than watching a video about a night light. But after viewing the clip for the SnapRays Guidelight, which drew $101,000 within the first 29 hours of its Kickstarter campaign, you'll be convinced of its life-changing powers.
The campaign launched Tuesday, drawing $12,000 within its first two hours. But unlike most startups hungry for funding, Snap Power took four months to plot its crowdfunding page.
"We felt if people watched [the video] and understood the product, they would want it," Sean Watkins, a co-founder of Snap Power, the night light maker, and former car insurance salesman, tells Inc. "But we knew it could be tough to make a night light cool and not boring."
Naturally, Watkins credits his success with his stellar product. Designed to resemble and replace traditional electrical outlets, he claims it's energy efficient, safe around kids, and will turn on automatically in the dark. But the real selling point is his video, which shows the Guidelight lighting up when a woman returns home late, tucks in her daughter, or enters a dark bathroom.Secret Ingredients
The original video "just showed applications, like a mom tucking in her daughter," says Watkins. But that wasn't enough to get the point across. "We decided to say, 'Let's get all the night lights and review them, look over the competition. Then we said, 'Let's show why ours is better, why we think it's better, and convey that to the customer.'"
The Snap Power team--that is, Watkins, lawyer Cam Robinson, and inventor Jeremy Smith--also researched other successful Kickstarter campaigns before crafting theirs. "Our goal with the page was to explain to people what the features and benefits of the product were, and to do it in as visual a way as possible," Watkins says.
After filming the video, the trio tapped Robinson's 15-year-old son, Kayden, to extract stills and use them to illustrate every facet of the product, from features to installation to applications. "None of us know what we're doing on the Web, but he's the smartest," says Watkins of his young IT guy. "A lot of the edits on the video, he did."
The FAQs on the page were derived from actual questions asked while presenting the product to prospective investors and partners. "One of the big ones was, 'Does it stay on?'" recalls Watkins. "We went through the questions and decided that we heard the most should be [included in the campaign]."Marketing Magic
Plenty of thought was given to marketing as well. "We knew the first 48 hours is really, really important. So we sat down and created a timeline from Hour 1 to Hour 48 and said what has to happen, what has to go out, and how it's going to be shared on Facebook and Twitter," Watkins says. "We had a game plan when we launched: share on Facebook, tweet, email the press, and make phone calls."
The founders, who've bootstrapped the company for the past two years in Provo, Utah, also listed every blog and media outlet they hoped to appear in (Inc. was among them).
Though he describes the pledge levels as a "shot in the dark," Watkins also did his homework before settling on any. "Our product is very similar to hardwired guide lights," he says, "so we looked at the price of those and thought they ran anywhere between $12 and $50."
But since the Guidelight resembles a plug-in night light, they also examined those prices, which can cost anywhere between $1.50 and $12. "We tried to say, 'We're a much better option, but we want to be affordable and get our product to everybody."
With the campaign in first position on Kickstarter's "Popular" page--out of 134,679 campaigns--it seems they're off to a great start.
After years of remaining anonymous, the inventor of the cryptocurrency was discovered living in a humble Los Angeles County home--hidden in plain sight.
UPDATE, March 7, 12:28 p.m.: In an exclusive interview with the Associated Press, Dorian Prentice Satoshi Nakamoto denied Newsweek's claim that he is the inventor of Bitcoin or that he has any involvement with the digital currency. AP reports that throughout the interview he referred to Bitcoin as "bitcom" and thought it was a company.
Nakamoto told the AP that a key quote attributed to him in the Newsweek story--that he was "no longer involved" with Bitcoin--was misinterpreted. "I'm saying I'm no longer in engineering. That's it," he explained. Newsweek's Leah McGrath Goodman, who broke the original story, told the AP she stands behind her report.
The mysterious man behind Bitcoin is a 64-year-old Japanese-American who lives in Temple City, California, according to Newsweek. He is a model train enthusiast and has done classified engineering work for the U.S. military.
The man's name is Satoshi Nakamoto, the same as the name on the white paper that introduced Bitcoin, which had been widely thought to be a pseudonym for a person or a group of people. During a two-month investigation, Newsweek's Leah McGrath Goodman found that the creator was able to avoid being identified in part because he changed his name decades ago to "Dorian Prentice Satoshi Nakamoto." He now goes by "Dorian S. Nakamoto."
Nakamoto changed his name after graduating from California State Polytechnic University. He worked in a series of engineering positions on both coasts, including doing military projects and a stint for the Federal Aviation Administration in New Jersey after the September 11 terrorist attacks. Following that, he never got another stable job, leaving him free, Goodman suggests, to start working on the digital currency.
Although some Bitcoin enthusiasts, especially on Reddit, are upset that someone would unmask the person who gave them "the gift" of Bitcoin--it is the apparent end of a mystery that lasted for years. Below, read three facts about the elusive Nakamoto.1. He won't admit it.
Goodman reports that when she finally found Nakamoto's home in Southrn California's San Bernardino foothills, he called the police on her. After two officers came, Nakamoto came outside. He didn't give her much information, but did obliquely refer to a former connection with Bitcoin. "I am no longer involved in that and I cannot discuss it," he told Goodman. "It's been turned over to other people. They are in charge of it now. I no longer have any connection."
His two brothers, Tokuo and Arthur Nakamoto, say their brother will probably never admit whether or not he is the creator of Bitcoin. "Dorian can just be paranoid. I cannot get through to him. I don't think he will answer any of these questions to his family truthfully," Tokuo tells Newsweek. "He is very meticulous in what he does, [and] he is very afraid to take himself out into the media."2. He doesn't trust the government.
The chief scientist behind Bitcoin, Gavin Andresen, says he never met Nakamoto or even spoke with him on the phone. Still, he feels like he understood Nakamoto's motivations: "I got the impression that Satoshi was really doing it for political reasons," Andresen tells Newsweek. "He doesn't like the system we have today and wanted a different one that would be more equal. He did not like the notion of banks and bankers getting wealthy just because they hold the keys."
Nakamoto's daughter, Ilene Mitchell, 26, tells Newsweek that her father doesn't trust the government. "He is very wary of government interference in general," she says. "When I was little, there was a game we used to play. He would say, 'Pretend the government agencies are coming after you.' And I would hide in the closet."3. His love of model trains influenced Bitcoin's creation.
Nakamoto has been collecting and building model steam trains since he was a teenager--he started after he and his mother immigrated to California from Beppu, Japan, where, according to Newsweek, he was "brought up poor in the Buddhist tradition by his mother." His second wife, Grace Mitchell, says that he buys most of his trains over the Internet from England. Goodman writes that Mitchell feels Nakamoto's initial interest in building a digital currency was borne from his "frustration with bank fees and high exchange rates when he was sending international wires to England to buy model trains."
But other factors may have influenced him to build Bitcoin as well. After being laid off twice in the 1990s, Nakamoto fell behind on mortgage payments and taxes, which resulted in his family's home being foreclosed. His daughter Ilene says that may have given rise to his suspicious attitude towards the government and banks. Today, Nakamoto reportedly is holding on to an estimated $400 million worth of Bitcoin.
With Square and others getting into the business of merchant cash advances, the industry's rates--often in the triple-digits--could tumble.
Square's not offering plain vanilla small business loans. With Square Capital, the San Francisco-based company is offering a more controversial product, called a merchant cash advance. In a merchant cash advance, the financier buys a portion of your future revenues--but at a discount. Technically, it's not a loan, and you're paying fees as opposed to interest. A Square spokesperson declined to comment on the specifics of the program.
Merchant cash advances have been around for a while, but they got a lot more attention after the financial crisis, when more companies started offering them. With banks reluctant to loan to small companies, merchant cash advances--along with other tools such as invoice financing and factoring--became one of the few ways small companies could get working capital.
Interest rates for merchant cash advances can be astronomical, sometimes reaching triple digits. The financing is somewhat risky, the time period of the cash advances tends to be very short, and the transactions aren't governed by usury laws.
Square's offering highlights just how tricky it is to evaluate merchant cash advances. Say you need $7,300. In an example cited by The Information, Square would require you to pay back the $7,300 plus a $1,022 fee. Yes, that $1,022 works out to 14 percent. But it's not a 14 percent annual rate, because there appears to be no fixed time period in which the loan needs to be repaid. Instead, in the example, every time you receive a credit card payment from a customer, Square will take 10 percent of it. If it takes you a year to pay back Square, then yes, you've paid a 14 percent annual interest rate.
Alternativley, say that right after you get the cash advance, your business takes off. Square is still taking 10 percent of each transaction, but now you manage to pay the loan off in only two months. That sounds great, right? But because you paid the whole thing in two months, your equivalent annual percentage rate is now more than 84 percent. That sounds horrible.Defending the markup
At OnDeck Capital, another company that offers short-term cash to business owners, CEO Noah Breslow says that annual percentage rates average 56 percent. He says that business owners don't look at interest rates--they care about the bite each payment takes out of their cash flow. Plus, the amount his company charges is part of what allows it to make small loans in the first place.
OnDeck has built technology that helps it make loan decisions in just a few hours. Amounts under $35,000 can be approved in just a few minutes. That's something business owners care about, says Breslow, and it costs money to develop and implement those tools. Breslow says that as loan volume grows, rates will naturally come down.
Marco Lucioni, CEO of California microlender Opportunity Fund, agrees that rates are headed down. But he says it has nothing to do with loan volume. Instead, he says, it's about competition between lenders, which is increasing rapidly. Opportunity Fund has built an online lending engine too, but it doesn't make on-the-spot lending decisions. It takes about a week to get a loan (in the case of Opportunity Fund, the transaction is technically a loan), and Lucioni wants one of his lending officers to visit each business. As a nonprofit, Opportunity Fund built its technology with grant money, not venture capital. It's not under pressure to bring home tenfold returns.
Opportunity Fund is charging between 15 and 20 percent for loans through its platform. Compared to its competitors, that's low. Lucioni doesn't think he'll be that much of an outlier forever. Eventually, as the industry matures and it becomes easier for businesses to comparison shop for short-term money, he says rates will come down.
"Between 25 percent and 35 percent, including fees, is where it eventually comes in," Lucioni says. "That's doable in any state in the country. Those are rates any regulator will be able to stomach. It will take a while to get there." He declines to comment on what the range might be for a fair price on such a loan at this time. Cleverly, that's a debate Square is managing to stay out of, too--at least for now.
Turning around any company, especially one as big as Yahoo, takes time.
A recently-hired executive might be frustrated if their initial changes aren't felt right away. Over in Silicon Valley, one high-profile company might serve as a useful case study in showing that turnarounds don't happen overnight.
Earlier this week, Yahoo CFO Ken Goldman spoke at an investor conference in San Francisco and told the audience that the company is in much better shape from a cultural and talent management perspective than it has been in some time.
"(CEO Marissa Mayer) deserves the credit relative to changing the attitude and morale and the desire, if you will, to…attract new folks as well as to retain folks we have,” Goldman said, according to Quartz. "So I think--I’m very confident. If you talk to anybody at Yahoo today you would find them, whether they’ve been here for a year or five years, they’re very, very pleased with what they see in working at Yahoo. I’m absolutely, very confident in that relative to attrition and our ability to hire all points to that."Sorting Things Out
Goldman is biased by his position at Yahoo, of course, and his words invite even more skepticism when considering that he was speaking to an audience of investors. But let's give him the benefit of the doubt and say things are cheery at Yahoo these days.
If so, it's fitting to hear about it just over a year after Mayer's most attention-grabbing move as CEO: the day she called all employees back to the office. The business world was set alight and asunder with debate and dissent over the decision to remove telecommuting from Yahoo's employee offerings.
The policy was regarded by many as regressive and anti-parent, and by others as ignorant of the company's core issues. On the other side, people felt Yahoo had little to lose and cited company data showing telecommuting employees hadn't signed in to the company's servers in months.
Even in contempt, though, most observers agreed that the decision was a big splashy move for Mayer, who had at the time been at Yahoo's helm for just over half a year. And quick action from new leaders, previous research has shown, is key to that leader's success.
Over the course of 2013, Mayer would lead a massive acquisition spree, highlighted by its big spend for the popular blogging service Tumblr. While Tumblr remains a standalone product, most of Mayer's nearly 40 acquisitions have served to bring talented engineers on-board--an asset that has been sorely lacking from Yahoo as it went from tech industry leader to cautionary tale.How Long Do You Get?
Now, about 20 months into Mayer's tenure, she's seeing results. If Goldman is to be believed, talent is coming into Yahoo, and more importantly it's happy and it's sticking around. If so, it's happening right on schedule.
In today's age, turnaround execs usually get about eight quarters to make their mark (a pretty drastic shift from the 16 quarters leaders were afforded in the pre-Internet era). Mayer's wrapping up her seventh (with a late start on her first, given her mid-July start date in 2012), and she clearly identified Yahoo's people issues as the one to tackle first. If she's largely erradicated them as the company turns its eyes to product and technical issues, then that's a major turnaround accomplishment.
An improved Yahoo culture might have little do with the work from home policy, or even with the acquisitions. That Yahoo still pays pretty well, and that employees seeing a better return on their stock options due to Yahoo's improved market performance, probably doesn't hurt the mood over there. No doubt, employees still much prefer the option to telecommute.
But nearly at the seven-quarter pole, Mayer appears to have solved a major problem. That only means so much if bottom line success doesn't follow. Still, the Yahoo of today is decidedly more marked by Mayer's actions, and so far those actions appear to have had a positive effect. If nothing else, that serves as a reminder that turnarounds take time--and leaders deserve that time to try and make them happen.
Unlike with startups, larger companies' emphasis on execution often stifles innovation.
In the last few years we've recognized that a startup is not a smaller version of a large company. We're now learning that companies are not larger versions of startups.
There's been lots written about how companies need to be more innovative, but very little on what stops them from doing so. Companies looking to be innovative face a conundrum: Every policy and procedure that makes them efficient execution machines stifles innovation.
This first post will describe some of the structural problems companies have; follow-on posts will offer some solutions.
Facing continuous disruption from globalization, China, the Internet, the diminished power of brands, and the changing workforce, existing enterprises are establishing corporate innovation groups. These groups are adapting or adopting the practices of startups and accelerators--disruption and innovation rather than direct competition, customer development versus more product features, agility and speed versus lowest cost.
But paradoxically, in spite of their seemingly endless resources, innovation inside of an existing company is much harder than inside a startup. For most companies it feels like innovation can only happen by exception and heroic efforts, not by design. The question is: Why?The Enterprise: Business Model Execution
We know that a startup is a temporary organization designed to search for a repeatable and scalable business model. The corollary for an enterprise is:
A company is a permanent organization designed to execute a repeatable and scalable business model.
Once you understand that existing companies are designed to execute, then you can see why they have a hard time with continuous and disruptive innovation.
Every large company, whether it can articulate it or not, is executing a proven business model. A business model guides an organization to create and deliver products/services and make money from them. It describes the product/service, who is it for, what channel sells/delivers it, how demand is created, how does the company make money, and so on.
Somewhere in the dim past of the company, it too was a startup searching for a business model. But now, as the business model is repeatable and scalable, most employees take the business model as a given, and instead focus on the execution of the model--what is it they are supposed to do every day when they come to work. They measure their success on metrics that reflect success in execution, and they reward execution.
It's worth looking at the tools companies have to support successful execution and explain why these same execution policies and processes have become impediments and are antithetical to continuous innovation.20th century Management Tools for Execution
In the 20th century, business schools and consulting firms developed an amazing management stack to assist companies to execute. These tools brought clarity to corporate strategy and product line extension strategies, and made product management a repeatable process.
The Boston Consulting Group 2 x 2 growth-share matrix
For example, the Boston Consulting Group 2 x 2 growth-share matrix was an easy-to-understand strategy tool--a market selection matrix for companies looking for growth opportunities.
Strategy Maps are a visualization tool to translate strategy into specific actions and objectives, and to measure the progress of how the strategy gets implemented.
Product management tools like Stage-Gate® emerged to systematically manage Waterfall product development. The product management process assumes that product/market fit is known, and the products can get spec’d and then implemented in a linear fashion.
Strategy becomes visible in a company when you draw the structure to execute the strategy. The most visible symbol of execution is the organization chart. It represents where employees fit in an execution hierarchy; showing command and control hierarchies--who's responsible, what they are responsible for, who they manage below them, and who they report to above them.
All these tools (strategy, product management, and organizational structures) have an underlying assumption. That is, that the business model--which features customers want, who the customer is, what channel sells/delivers the product or service, how demand is created, how the company makes money, etc.--is known, and that all the company needed is a systematic process for execution.Driven by Key Performance Indicators (KPI’s) and Processes
Once the business model is known, the company organizes around that goal. It measures efforts to reach the goal, and seeks the most efficient ways to do so. This systematic process of execution needs to be repeatable and scalable throughout a large organization by employees with a range of skills and competencies. Staff functions in finance, human resources, legal departments, and business units developed Key Performance Indicators, processes, procedures, and goals to measure, control and execute.
Paradoxically, these very KPIs and processes, which make companies efficient, are the root cause of corporations' inability to be agile, responsive innovators.
This is a big idea.
Finance: The goals for public companies are driven primarily by financial Key Performance Indicators (KPI's). They include: return on net assets (RONA), return on capital deployed, internal rate of return (IRR), net/gross margins, earnings per share, marginal cost/revenue, debt/equity, EBIDA, price earning ratio, operating income, net revenue per employee, working capital, debt to equity ratio, acid test, accounts receivable/payable turnover, asset utilization, loan loss reserves, minimum acceptable rate of return, etc.
(A consequence of using corporate finance metrics like RONA and IRR is that it's a lot easier to get these numbers to look great by 1) outsourcing everything, 2) getting assets off the balance sheet, and 3) only investing in things that pay off fast. These metrics stack the deck against a company that wants to invest in long-term innovation.)
These financial performance indicators then drive the operating functions (sales, manufacturing, etc.) or business units that have their own execution KPI's (market share, quote to close ratio, sales per rep, customer acquisition/activation costs, average selling price, committed monthly recurring revenue, customer lifetime value, churn/retention, sales per square foot, inventory turns, etc.)
HR Process: Historically, human resources was responsible for recruiting, retaining, and removing employees to execute known business functions with known job specs. One of the least obvious but most important HR Process issues--and ultimately the most contentious--in corporate innovation is the difference in incentives. The incentive system for a company focused on execution is driven by the goal of meeting and exceeding "the (quarterly/yearly) plan." Sales teams are commission-based; executive compensation is based on EPS, revenue, and margin; business units on revenue and margin contribution, etc.
What Does this Mean?
Every time another execution process is added, corporate innovation dies a little more. Innovation is chaotic, messy and uncertain. It needs radically different tools for measurement and control. It needs the tools and processes pioneered in Lean Startups.
While companies intellectually understand innovation, they don't really know how to build innovation into their culture, or how to measure its progress.
What to Do?
It may be that the current attempts to build corporate innovation are starting at the wrong end of the problem. While it's fashionable to build corporate incubators, there's little evidence that they deliver more than "innovation theater." Because internal culture applies execution measures/performance indicators to the output of these incubators and allocates resources to them the same way as to executing parts of company.
Corporations that want to build continuous innovation realize that innovation happens not by exception but as integral to all parts of the corporation. To do so they will realize that a company needs innovation KPIs, policies, processes and incentives. (Our Investment Readiness Level is just one of those metrics.) These enable innovation to occur as an integral and parallel process to execution. By design, not by exception.
We'll have more to say about this in future posts.
- Innovation inside of an existing company is much harder than a startup
- KPIs and processes are the root cause of corporations' inability to be agile and responsive innovators
- Every time another execution process is added, corporate innovation dies a little more
- Intellectually companies understand innovation, but they don't have the tools to put it into practice
- Companies need different policies, procedures, and incentives designed for innovation
- Currently the data we use for execution models the past
- Innovation metrics need to be predictive for the future
- These tools and practices are coming…
It's that time of year again when the Oracle of Omaha writes to his shareholders. As always, there's much wisdom in those pages.
Critics gotta criticize, and when you're as successful in your undertakings as Warren Buffett, they're going to look for anything they can find. This year, having combed through Buffett's annual letter to his Berkshire Hathaway shareholders, Fortune noted that S&P 500 returns beat Buffett's over the last five years--but not the past six.
Who gives a flying frijole? Buffett has proven himself one of the greatest investors of all time and someone who understands business like few people can. He gets the basics, the flourishes, and the twists. On an off year in 2013, Berkshire Hathaway pulled in 23 percent growth in pretax profits. It's even more remarkable because Buffett typically holds companies for extended periods of time and is the head of a conglomerate, which, given the history of disasters that have often plagued such entities, makes it additionally impressive.
So, forget about reading the Berkshire Hathaway results for gotchas. Let's take a look at some sound business advice that comes from watching what someone does, not just listening to what he says.1. Know your company's intrinsic value.
People focus far too often on the external measures of a company's value. They look at stock price or the valuation derived from looking at the prices venture capitalists pay for a given percentage of a company. Forget all that, because those are ephemeral measures. Here's how Buffett thinks of it:
Intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life.
The calculation can be complicated and can change with interest rates or cash-flow projections. But Buffett's definition offers reasonable guidance. Calculating the intrinsic value is an excellent exercise. When you have a sense of the company's real worth, you have a context in which to consider investments, deals, and strategic decisions. Just be careful of the inherent danger of believing your own hype: Look at all the tech companies that twist accounting metrics into pretzels to pretend that they're profitable when they aren't.2. Build business templates.
Ask most businesspeople about templates and they'll mention word-processing documents and spreadsheets. Buffett talks about a partnership template. He has built a new methodical approach to large acquisitions. The specific details are immaterial for an entrepreneur, who isn't buying a company like NV Energy or a big chunk of H.J. Heinz. What is important is the idea of developing repeatable processes. Major deals are always unique, and then they all have common characteristics. Know how to achieve what you need, and you have far more energy available to consider the quirks.3. Know the difference between types of growth.
Many companies are anxious to grow at a breakneck pace. Even large companies will buy other large companies for their revenue. But in a way that's just trading one block of money for another. It can be a wash. Buffett says he doesn't want Berkshire Hathaway to simply grow, but to grow per-share results. Even though your business is probably private, that's a good way to think about it. Are you just bulking up, or are you becoming proportionately more successful?4. Invest in management.
An important reason for Buffett's success is that Berkshire Hathaway only invests in companies if they have strong management. Otherwise, you only subsidize a badly working business. Get the best management you can in your company from people who really know how to run marketing, sales, supply chain, customer service, manufacturing, finance, and any other silos. While providing strategy, let the people who know how to do the work actually do it. Buffett admits that two people working for him handle $7 billion portfolios with returns far outperforming his. Better to have them work for you than compete with you.5. Use your money effectively.
Buffett wrote about the money that Berkshire Hathaway doesn't own but that it can use to its benefit. The idea of float is well known in certain types of businesses, particularly low-margin ones like groceries and distributors. There's the difference between when you get paid and when you pay. Some grocery chains make a significant percentage of their profit on the float made available by being a cash business that has terms from its vendors. Effective use of money can also mean passing on your bonuses or compensation and using the cash to strengthen the weaker parts of your operation. Invest in people and capital smartly. As Buffett wrote, "it's better to have a partial interest in the Hope diamond than to own all of a rhinestone."
That's five points in barely the first three pages of his letter. You can learn a lot from reading a little of the practices and thought processes of successful people.
A new report highlights the best and worst cities to begin a startup in.
If you're searching for the cheapest place to plant your startup, think beyond America's coastlines. In a ranking of the estimated costs of starting up in 11 booming cities, the three least expensive locations were outside of the U.S.
Berlin is the lowest-cost city to startup in, followed by Singapore and Beijing, according to a report from The Information. On the opposite end of that list was San Francisco, being the most expensive, followed by slightly less expensive startup cities Palo Alto, California and Washington, D.C.
The Information used salary data from jobs site Glassdoor to estimate about how much money it would take to hire a basic startup team of two software engineers and a designer in each city. It also considered average commercial real estate prices.
Of course, there are tradeoffs involved with setting up shop in any city. Bay Area-based startups, for example, generally enjoy greater access to venture capital than companies in other parts of the country.Cheapest Places to Startup
It might surprise you to learn that the average annual salary for a software engineer in Berlin is just $61,934. That results in a low startup cost estimate of just $212,645. The Information arrived at its numbers by totaling the average annual salaries for two software engineers, a designer and the cost of an annual lease on a 1,000 square-foot office. In Singapore that adds up to $232,900, while in Beijing it's $258,004.Most Expensive Startup Cities
By comparison, the cost of establishing your startup in the nation's capital -- $318,000 -- is third only to costs in Palo Alto and San Francisco. In those locations you will have to pay about $379,121 and $388,513 respectively. Though real estate is much cheaper in Palo Alto than in San Francisco, engineers working in the Valley expect to make about $12,600 more per year than their counterparts in the city.And, Somewhere in the Middle
Of course the list didn't forget New York City. It came in just below Washington, D.C. in terms of expensiveness. London, Seattle, Los Angeles and Chicago also all fell somewhere in between the extremities.
Business ethicist James O'Toole recently made the case for caring more about your employees' off-the-job behavior.
Is a company responsible for the off-hours behavior of its employees?
This is the question that James O'Toole, a senior fellow in business ethics at Santa Clara University, posed in an editorial that appeared on strategy+business this week. His thought-provoking post comes at time when many long-time San Francisco residents are clashing with a new breed of affluent, high-skilled tech workers who have moved in next door. While hot-button issues like affordable housing and luxury commuter buses should be of concern to Big Tech, O'Toole says so should their employees' overall behavior towards locals.
And this isn't just San Francisco's problem, he argues. What happens out West eventually travels to other parts of the country.
He believes that businesses do in fact need think about their roll in shaping employees' off-the-job behavior. "Admittedly, this is a grey area with little precedent," he wrote. I touched base with O'Toole to delve further into his thoughts. Below is an edited version of our conversation.
Is the tech industry as a whole starting to develop a bit of a black eye because of what's going on in San Francisco?
At a time when people are losing their jobs, or their incomes are stagnant, there are certain problems that arise when you see other people around you doing very, very well. And that's all part of a much bigger picture of what's happening in this country in terms of polarization, so I don't think there's any one factor here.
But social scientists will tell you that complex social problems never have a single cause. I think that there is a technological, a social, an economic and a psychological aspect to the way people are now rethinking the impacts of the tech world.
You suggested that in addition to on-the-job ethics and character training sessions, tech companies might want to have similar sessions that address off-the-job behavior. Can you talk about how these might play out?
I pointed out that it's a tricky area because you have to protect the rights and the privacy of your employees.
But I do think that in the case here in Northern California, there is a growing consensus among local leaders, political leaders people like our former mayor, Willie Brown, who is saying to the tech industry: You're going to have to address your image here. It's really going to hurt you if you don't start paying attention to these questions.
I think that it would be useful for a lot of these big companies to have some kinds of sessions where they would at least talk to their employees about the impression that they are making on the local community.
Maybe having some community leaders come into some of these companies and talk about those problems. Start a dialog in which companies and the locals can try to find some solutions to these problems before they get any bigger than they are.
What would be the best-case scenario that comes from a sincere effort to address the issue?
Usually what happens in California happens elsewhere -- very soon if not a couple of years later. If they can address those social economic issues, it's going to lead to a much healthier society and one in which the climate for business is going to be better in the long-term.
What seems like idle chitchat can elevate your productivity--and your career.
We all talk all day long. I know I do.
What if said I could teach you to turn all that chatter into a productivity tool? Would you try it?
The trick is to think of your office conversations not as idle filler you use to pass the time between meetings, but as tactics to advance your goals. Conversation is a nice social experience - but what I’m talking about is Conversation Leadership - taking all that talking and making it productive for you and for your company.
And the big news is, anyone can do it and profit from it, from CEO to summer intern.
Here’s how to use conversation to drive business success:1. Converse - Even if You Think You Can’t
Far too many people talk themselves out of this profitable tactic before they’ve even tried it. Oh, I’m not a good conversationalist. I’m shy. I’m an introvert. I’m too busy. These are all excuses, and they keep you away from what could be a potentially powerful boost to your career. I used to consider myself shy. I got over that by getting a job as a bartender. Conversation was a job requirement. So if you think you’re not a natural conversationalist and that’s what keeping you quiet, put yourself in a position where talking to people will be expected. A bar is not your only option. Look for situations that will help you flex those conversation muscles.2. Converse Across Hierarchies
Stop talking to your co-workers. At least stop talking to them exclusively. It’s great to talk to your colleagues and peers, but to attain Conversation Leadership status, you need to converse up and down the food chain. Talk to the lowly newcomer. Talk to senior managers. Remember that conversations can be in person, via email, or office-approved social media. You don’t need to buttonhole the boss in the hallway if that seems awkward, but you could send an email after a company speech with your thoughts. I hear from 1-800-Flowers.com employees all the time. I often use these emails as a start to a conversation between us. Virtual tools make an excellent Conversation Leadership platform.3. Converse for Intimacy, not for Efficiency
Converse like you mean it. If you’re in a hurry, you’ll be hard pressed to engage in Conversation Leadership. Speedy delivery is great for giving orders, delivering information, even quick check-ins. But Conversation Leadership is a way to really connect with people - hear what they are saying and think about it. Answer thoughtfully and be prepared to hear even more. This is something we don’t often do in our work interactions. We’re in such a hurry to give orders, to pitch our ideas, to move the ball forward that we are not really trying to create a moment of connection and understanding. Those who realize when it’s time to slow down and talk in a more intimate and unhurried way are engaged in Conversation Leadership. Those who say, “Just talk to me while I’m walking, checking my iPhone and thinking about my next meeting” are missing the point.
Conversation Leadership - try it. It’s a productivity tool that works.
A recent survey offers food for thought for the next time you're filling a job: a surprising number of people are woefully ignorant of common technology terms.
Technology is the basis of a huge part of the economy, intrinsic to running a modern business, mandatory to communicate with the rest of the world, and necessary to performing a job. Ever wonder how much your job applicants really understand about technology?
Better brace yourself, because the answer is depressing. Coupons website Vouchercloud surveyed 2,392 Americans age 18 and up to see how much they knew of some basic tech terminology. Remember, these are the people who might show up on your doorstep one day to apply for a job:
- Eleven percent thought that HTML was a sexually transmitted disease, not code used to write websites
- More than three-quarters (77 percent) didn't know what SEO (search engine optimization) means
- Blu-Ray was a marine animal to 18 percent of those surveyed
- More than a quarter of them (27 percent) identified a gigabyte as a South American insect
- Fifteen percent thought software was comfortable clothing
- A motherboard was the deck of a cruise ship to 42 percent of people
- Twelve percent identified USB as a European Country. Like the EU, you know?
- What's an MP3? To 23 percent of people, it's one of those cute Star Wars robots.
- Finally, two percent said that tablet computers were specialized devices that tell you when to take your medicine.
Not only can't Johnny code, but he probably confuses the CD tray on a desktop computer with a cup holder. (Don't laugh: some years ago a number of tech support people told me that they ran into this scenario on a regular basis.)
Here's one small takeaway from this study: If you make a product that uses technology, for heaven's sake, stop talking in acronyms and jargon. If not, you're going to find that someone bought your widget thinking it was a warm and fuzzy cap.
And if you interview someone, be sure to ask if he or she answered a survey for Vouchercloud and, if the person did, immediately put that resume into the circular file. Chances are, it belongs there.
The startup portion of the massive conference in Austin will serve up a host of fascinating talks with entrepreneurs and big thinkers. Here are the ones you don't want to miss.
For many in the tech world, the calendar in early March is dominated by one thing: South by Southwest Interactive.
The 21st annual tech festival officially starts on Friday, bringing an expected crowd of 30,000 people, including some of Big Tech's biggest names, eager entrepreneurs, savvy investors, and tech groupies, to Austin, Texas. Over the last decade, the festival has become the launchpad for startups (including Twitter) and is generally considered a celebratory morass of tech geekdom.
This year, the five-day event has over 800 sessions, and common themes throughout include 3D printing, wearable tech, and privacy issues.
But if you're looking for a quick hit list of the big highlights, here's what you need to know:
Sophia Amorouso's secret to fast growth. In a conversation with Inc.'s own Christine Lagorio-Chafkin, the NastyGal founder will reveal Saturday how she turned her eBay store into a full-fledged, $100 million retail powerhouse. But it's not just a talk about scaling: the cheeky entrepreneur is known for her badass attitude which has also built her a brand to be reckoned with.
Alexis Ohanian's rebel call. In an event dubbed "Be Awesome Without Their Permission," reddit cofounder and Internet activist Alexis Ohanian will talk Sunday about the distinct advantages startups have when it comes to bucking the rules--and making big impact.
Whistleblowers Edward Snowden's and Julian Assange's satellite speeches. In an 11th hour surprise, SXSW announced this week that fugitive Edward Snowden will be speaking via satellite feed on Monday. Snowden will be interviewed by the ACLU's Ben Wizner. According to CNN, Snowden "wants to talk to a tech-focused audience about the importance of building the next generation of online tools that protect user privacy." And on Saturday, Wikileaks founder Julian Assange will have a "virtual conversation" with the Barbarian Group's Benjamin Palmer, in which they will discuss the "Internet Nation" and the role of classified documents in the public arena.
Ben Horowitz's take on the dark side. The cofounder of Andreessen Horowitz sits down on Sunday with the hip-hop star Nas to discuss the emotional struggles startups face as they enter into a rapid-growth phase, and how he himself has personally faced some of these struggles.
Chelsea Clinton's health keynote. The Clinton Foundation Vice Chair (and daughter of arguably two of the most influencial politicians of our time) will take the stage Tuesday to talk specifically about global health issues and the programs aiming to stop them.
Okay, all the keynotes. Of course, you'll not want to miss any of the keynote talks this year. The list includes Mythbuster's host and science geek Adam Savage and astrophysicist Dr. Neil deGrasse Tyson, to name a few. Here's the full line up.
Biz Stone's one-on-one. The cofounder of Twitter and current cofounder of the high-profile image discovery platform Jelly will speak on Tuesday. Though there's not much detail about what the conversation, which is hosted by author Steven Johnson, will cover, so far we know it will at least cover the broad areas of "connected society, the science and nature of collaborative networks, creativity, and how great ideas are born into existence."
If you'd like to comb through all 800 sessions yourself to find more, you can check out the SXSW website.
The five-step process to keep boredom from dragging down performance.
When you’re at the top of your game, you know it instinctively. What is more challenging is identifying, and then understanding, the cause for mediocre performance -- and using those lessons to help you win again.
We live in a black-and-white, goal-oriented world when it comes to performance: You are either winning or losing. What we often don’t know is why. In a recent post I shared 15 questions to ask yourself to help understand the why behind past performance, which is critical to understanding what creates those winning moments. With this post, I want to dive more deeply into losing -- and what you can learn from it.
But what if not reaching peak performance -- "losing" -- is less the result of being a failure and more often a result of boredom? We easily forget that when we aren’t interested in something, we don’t put everything we have into it. And that often leads to a less-than-stellar result.
While this may seem obvious, the reality is that boredom can creep in at unexpected moments--and can feel like failure. Imagine this: You are tasked with a prestigious, high-revenue project. If you succeed, your company succeeds. However, the project doesn’t leverage your core strength. You procrastinate, you aren’t excited about the work, and then you feel like a failure because you can’t seem to muster up any energy to put into it. In short, you’re bored.
I am not saying that you have to be engaged with every single thing you do -- that’s not realistic. But if you are bored with the bulk of your work, you will fail. The key is to know what engages you and make that the bulk of your responsibilities. If you are engaged 80 percent of the time, the 20 percent of work that is not engaging is easy to manage.
How can you reach that 80/20 balance? The questions below can serve as a guideline to help you navigate if your next disappointing performance is due to boredom or real failure:
1. What happened to cause the lack of great performance? (Be specific: who was involved, what tasks were you in charge of, what was the timeframe?)
2. Was the skill required something that you are naturally good at?
3. If yes, then what were the conditions that may have prevented you from feeling energized? How can you begin to alter those conditions next time? (In this case it was most likely a failure and consider what you can do to improve for next time.)
4. If no, was your lack of performance a result of not feeling engaged and feeling apathetic in general?
5. If this work is unavoidable, is there a way to do less of it, or can you hand this part of your work over to someone better suited?
How does this play out in the real world? Jim is the founder and CEO of a 15-person company. He has his ideal job. Jim, however, wants to perform at his best more frequently. He notices that there are moments in his work week that are not as productive and energizing as others, and that these moments come during certain meetings. Using the questions above, he discovers that he is bored during these meetings: The content doesn’t leverage his core strengths and he can’t impact it. He decided to hand over the management of those meetings to one of his direct reports. Jim is now more aware of the cause of boredom -- and can avoid it. He also has more time to spend on other projects where he can use his talent more effectively, thus creating better performance.
If something’s not going right at work, stop and ask yourself why. Figure out if you are bored. Boredom is easily fixed; failure is a different story.
It's vital to take advantage of LinkedIn and Twitter to connect with prospective customers and stay on the radar of previous ones.
Whether you're a sales manager or sales rep, chances are you've heard of social selling. At first glance the trendy phrase is intuitive--selling via social media channels. But while the definition might be straightforward, understanding how to effectively use social media to generate leads and make sales is a much more crafted, considered process.
As a business's operations and overall presence become more digital in nature, so do sales activities. More of the sales process happens online versus in person than ever before. This transition isn't exactly replacing the art of making things happen, though. Selling is still about relationships and knowing how to influence and persuade people to action. Social media is just a new frontier where salespeople can foster and activate those relationships.
By now sales reps should know the first step to social selling is to create quality profile pages, especially on LinkedIn and Twitter. Make connections to establish a strong network. Partake in the digital conversation. But these are only introductory steps at best. Below are a few tips to help you go well beyond that level.1. Make initial connections on LinkedIn
What's the key to sales and networking, regardless of whether or not you're online? Making strong connections. Beef up your LinkedIn connections as much as you can on your own, but don't be afraid to ask a colleague (or old coworker, boss, friend, even uncle!) to make an introduction on your behalf to a prospect you're trying to connect with online. As long as the introduction is genuine and personable--not overtly promotional--it actually works.
It's also important to note that LinkedIn is not only great for making those connections, but setting up first touch points. For example, if you're having a difficult time reaching a prospect over the phone, simply view their LinkedIn profile. Our sales reps have great success with this tactic, as the LinkedIn page visit alert gets the sales rep's name on the prospect's radar and increases the likelihood of a returned call. Of course, a short message and/or connection request can also work well in cases where you're looking for something stronger than a page view.2. Find shared interests and backgrounds
Before you begin pitching people over LinkedIn, or even communicating via Twitter, take the time to do your homework. Did you go to the same college, grow up in the same area, or know some people in common? Look for similarities that could open a relevant conversation that's unrelated to your business. Find meaningful information on your prospect that might establish a personal connection. Then begin your outreach online by citing that shared interest or background.
If you don't have a shared connection, you can also just leverage any information that the prospect is likely to be passionate about. For example, it's almost time for March Madness, and most people who went to large universities have great pride in their alma mater. Find out if any of your prospects attended one of the schools in this year's NCAA Tournament, and open your introductory pitch with a line about the upcoming games.3. Audit your LinkedIn appearance
Most people on LinkedIn display profile pages indicating they're looking for employment. Create a profile instead that cements your expertise. Let contacts identify your online presence as belonging to a thought leader, not a job seeker.4. Become part of ongoing Twitter conversations
On Twitter, make sure you're able to keep up with discussions and respond to industry-related posts in real time. Don't publish tweets solely featuring your own thoughts, either. Have conversations, and retweet regularly. For every tweet you publish, there should be at least three tweets that come from other sources, such as those mentioning or linking to trending articles, good quotes, or interesting statistics. Communicate with prospects and clients, comment on hot topics, or even share some of your sales team's fun personality with more casual posts.5. Don't limit social selling to prospecting
At its core, social selling certainly helps sales reps identify and pitch new leads, but social media channels can impact sales throughout the entire process. For example, say a contact has started to fade or become increasingly less responsive. Retweet them, or comment on one of their LinkedIn posts to get back on their radar. Social media channels offer another touch point between sales reps and those key decision-makers.6. Automate social media monitoring in sales, too
It's a misconception to think that monitoring social media chatter is a function only for marketing departments. Sales reps should always monitor social media streams around their contacts to track conversations and engage accordingly. This can be helpful for staying in touch with prospects and staying in the loop on what's happening in client organizations.
Social selling isn't a replacement to the traditional sales process; it's a complement. By leveraging social media channels optimally, sales reps can foster more relationships and close a lot more deals.