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4 Failure Points that Can Undermine Your Business – Failure Point 2: Concept Validation Is Not Enough

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At the time we launched my second business, Sigma Communications, and its flagship magazine, The National Register of Commercial Real Estate, the biggest issue facing chief financial officers and real estate executives was their surplus real estate. Capital was extremely scarce, and interest rates were extraordinarily high. The nation was awash in unsold and unleased commercial properties. Malls and office buildings sat empty, ushering in the term “see-thru buildings.”

These circumstances made the market ripe for our business idea – a central exchange for commercial real estate. We first tested our concept for The Commercial Property Exchange with a targeted group of real estate executives from Fortune 100 companies. We also made a point to engage insurance company executives because their companies had been the major underwriters of real estate development in the United States. We knew they were anxious to unload their holdings.

Since the Internet was still in its infancy, our business model called for selling classified print ads in the form of commercial real estate listings, traditional display ads, and subscriptions. For the first time, a buyer in San Francisco could easily learn about a building for sale in New York without engaging a broker. Corporations with headquarters in Atlanta could discover properties on the market in Denver without flying to the local market.

Don’t Confuse Concept Validation with Preorders

Virtually all of the real estate executives we interviewed said they could use a central exchange for surplus real estate. One executive was particularly enthusiastic. “We need a vehicle to let buyers know what we have.” With encouragement like that, we were convinced that Sigma was going to become a quick hit because it so clearly filled a need to make the market more efficient.

With validation of our concept, I made the fateful decision to launch the magazine without first testing our business model by securing preorders. With the huge number of commercial properties available, we figured we’d be raking in the advertising dollars very quickly. As it turned out, this assumption was dead wrong. Even a market flooded with surplus property needed time to adjust to a new way of doing business.

In the end analysis, I took a huge gamble on a concept business with an untested business model. As a result, we lost the opportunity to establish a paying customer base and generate an early revenue stream. This oversight cost us precious time and made our path to profitability that much more challenging.

Looking back, I realize that our neglect to prove our business model by lining up preorders for listings prior to launch was Failure Point #2.

About the Author

Ed “Skip” McLaughlinEd “Skip” McLaughlin is the founder of four businesses and is currently running Blue Sunsets LLC, a real estate and angel investment firm. He bootstrapped his first business, United Systems Integrators (USI) Corporation, a corporate real estate outsourcing firm, and grew it into an Inc. 500 company. In 2001, Ed earned Entrepreneur of the Year honors from Ernst & Young. In 2005, he sold USI to Johnson Controls, a Fortune 100 company, and at that point, became CEO of JCI’s Global Workplace Business for the Americas. A member of the Board of Governors for Tufts Medical Center, Ed founded its David E. Wazer Breast Cancer Research Fund. He graduated from the College of the Holy Cross, where he is a member of the Board of Trustees. Active in philanthropy, Ed lives with his wife in Connecticut and has three adult children. Contact Ed at [email protected] or connect with him on Twitter @purposeisprofit.

Wyn LydeckerWyn Lydecker is the founder of Upstart Business Planning, where she works with entrepreneurs to develop plans that answer the questions investors ask most often. Previously, she was Managing Director of Business Plans International in New York and Co-Director of the Small Business Resource Center at Norwalk Community College. Wyn has an MBA in finance and marketing from the Wharton School of the University of Pennsylvania and a BA in economics from the University of California at Santa Barbara. She serves on the board of a local nonprofit she helped found, At Home In Darien. She lives in Connecticut with her husband and has two adult children. Contact Wyn at [email protected] or connect with her on Twitter @upstartwyn.

The Strategic Leader’s Roadmap

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The financial situation for Japanese automaker Nissan Motor Company could not have been more dismal in 1998. The company had chalked up losses in seven of the past eight years, and it was now paying a billion dollars annually just to service its $19-billion debt.

Not that Nissan’s management had not been trying to make the right decisions to staunch the losses. It had earlier set an ambitious target of taking a quarter of Japan’s auto market, but to achieve that, the chief executive had said that the old way of making and selling cars would no longer suffice. A new strategy was required.

The CEO called for a redoubled effort to resurrect its ailing American arm, a market where customers had been flocking to sports utility vehicles. The company, the Nissan chief had urged, must also focus more on earnings than sales, slash its car “platforms,” and close its least profitable models. In short, he had warned, the company could never recover if it continued doing business the same old way. And his new way seemed the right way – providing he could deliver on it. But so far he had not. Nissan’s market share in Japan had stalled at just 16 percent, it was faring little better abroad, and losses were mounting everywhere.

Nissan sought an international partner, finally hooking up with France’s Renault. Renault agreed to infuse $5.4 billion into Nissan, but in return it required more than 36 percent of the company’s ownership and a commitment from Nissan to appoint Renault executive Carlos Ghosn as Nissan’s chief operating officer. With that, Renault inserted a very different kind of leader into the top ranks of Nissan – more confident, more determined, and more resolute.

Carlos Ghosn make clear that he had come to Japan “not for the good of Renault but for the good of Nissan,” and that would entail a new combination of not only a more aggressive execution of the company’s strategy but also a more demanding manager in charge of it. Under his leadership, Ghosn said, the struggling automaker would return to profitability in a year and halve its debt a year later. The company would close three assembly plants in Japan, increase factory utilization from 53 to 77 percent, cut suppliers by nearly half, eliminate 14 percent of the workforce, and reduce administrative costs by 20 percent.

Fifteen years later, Nissan under Ghosn’s strategy and leadership was indeed back on its feet. It had more than recovered to now outperform its industry in Japan, China, Europe, and even North America.

Nissan’s experience reminds us that firms with good strategy but weak leadership can remain rudderless. We also know that firms with good leadership but weak strategy can lurch directionless. Neither a restructuring strategy nor a turnaround leader alone could have engineered Nissan’s historic rebound. It required an individual who could both think and act strategically, a person who brought a strong sense for strategy and a personal capacity to lead its execution.

Becoming a strategic leader is an acquired capacity that can, in our view, be mastered by managers at all levels. As a prerequisite, it is important for aspirants to first appreciate the separate principles of strategy and leadership and then to combine them. We provide a six-step checklist for doing so:

The Strategic Leader’s Checklist

  • Integrate Strategy and Leadership. Master the elements of strategy and leadership both separately as a combined whole.
  • Learn to Lead Strategically. Pursue directed learning, one-on-one coaching, and instructive experience to develop an integrated understanding of strategy and leadership.
  • Ensure Strategic Fit. Arrange a strong match between the strategic challenges of a managerial position and the individual with the leadership skills to fill it.
  • Convey Strategic Intent. Communicate strategic intent throughout the organization and empower others to implement the strategy.
  • Layer Leadership. Ensure that leaders at every level are capable of appreciating strategic intent and implementing it.
  • Decide Deliberatively. Focus on both short- and long-term objectives, press for disciplined analysis, and bring the future into the present.

Adapted from The Strategic Leader’s Roadmap: 6 Steps for Integrating Leadership and Strategy, by Michael Useem and Harbir Singh, copyright 2016. Reprinted by permission of Wharton Digital Press.

About the Authors

Harbir SinghHarbir Singh is Professor of Management, Co-Director of the Mack Institute for Innovation Management, and Vice Dean of Global Initiatives at the Wharton School of the University of Pennsylvania.

Michael UseemMichael Useem is Professor of Management, Director of the Leadership Center, and Faculty Director of the McNulty Leadership Program at the Wharton School.

4 Failure Points that Can Undermine Your Business – Failure Point 1: Follow Your Passion at Your Peril

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The ideal formula for business success is when your passion and distinctive competence align. Only nine months after opening my first business, USI – a business based on my distinctive competence – I launched a second business called Sigma Communications Inc., or Sigma for short. Starting Sigma was the culmination of my long-standing passion to create a vehicle to more efficiently connect buyers and sellers of commercial real estate. The first product I envisioned was a high-quality commercial real estate magazine listing properties for sale, lease, and sublease. (I undertook this venture at a time when the Internet was not yet widely available for commercial use.)

The Birth of Sigma Communications

Sigma’s main purpose was to provide essential real estate information to the financial officers and real estate executives of the largest 5,000 companies in the United States through a single source. We set out to publish a high-quality, quarterly magazine, The National Register of Commercial Real Estate, to share ideas for dealing with surplus real estate and to efficiently link real estate buyers and sellers through the magazine’s centerpiece, The Commercial Property Exchange. The Exchange would list surplus commercial property that was for sale, for lease, or for sublease.

When we started Sigma Communications, we thought we had all the pieces, but we were wrong.

Passion vs. Distinctive Competence

When I launched Sigma, I believed that my passion for publishing the magazine would trump my lack of competence. That proved to be a costly assumption. The hardest lesson I learned from the Sigma experience is that a venture filled with passion is not enough. You will substantially increase your probability of startup success if you build a business based on your distinctive competence. Distinctive competence is your success record of relevant experience, applicable skills, and practical knowledge that you bring to your business.

Following only your passion can lead you to make decisions fueled by fervor for your business idea instead of the knowledge and insight that comes with road-tested experience. I learned this firsthand. I lacked the experience that I believe any new venture requires in its founder. I truly knew nothing about being a publisher. And my strong passion for becoming a publisher did not make up for that void.

Failure Point #1: Starting a business based on passion alone, rather than building a business based on distinctive competence.

About the Author

Ed “Skip” McLaughlinEd “Skip” McLaughlin is the founder of four businesses and is currently running Blue Sunsets LLC, a real estate and angel investment firm. He bootstrapped his first business, United Systems Integrators (USI) Corporation, a corporate real estate outsourcing firm, and grew it into an Inc. 500 company. In 2001, Ed earned Entrepreneur of the Year honors from Ernst & Young. In 2005, he sold USI to Johnson Controls, a Fortune 100 company, and at that point, became CEO of JCI’s Global Workplace Business for the Americas. A member of the Board of Governors for Tufts Medical Center, Ed founded its David E. Wazer Breast Cancer Research Fund. He graduated from the College of the Holy Cross, where he is a member of the Board of Trustees. Active in philanthropy, Ed lives with his wife in Connecticut and has three adult children. Contact Ed at [email protected] or connect with him on Twitter @purposeisprofit.

Wyn LydeckerWyn Lydecker is the founder of Upstart Business Planning, where she works with entrepreneurs to develop plans that answer the questions investors ask most often. Previously, she was Managing Director of Business Plans International in New York and Co-Director of the Small Business Resource Center at Norwalk Community College. Wyn has an MBA in finance and marketing from the Wharton School of the University of Pennsylvania and a BA in economics from the University of California at Santa Barbara. She serves on the board of a local nonprofit she helped found, At Home In Darien. She lives in Connecticut with her husband and has two adult children. Contact Wyn at [email protected] or connect with her on Twitter @upstartwyn.

How To Be More Influential By Negotiating Better and Reading Body Language

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Are you a small business leader or midlevel corporate manager that seeks to advance your business, or your career? Do you find your initiatives challenged by information and resource gaps by those that don’t “get you” at times?

If so, this article will be of value to you as it highlights ways to cast a greater level of influence, gives insight into how you can negotiate better, and raises your awareness per being able to read body language.

Let’s examine influence, how you acquire it, why you’re not influential at times, and how to use it once you have it.

What makes you comfortable? What makes those that you’d like to have influence with comfortable? How do they view you in comparison to those with whom they seek comfort when being around those people? All of these and more, are questions you need to pose to yourself to assess where you are in your mind per those questions, and where you might be perceived to be by others. Remember, people like people that are like themselves. Thus, the more you appear to be like those you wish to influence, the easier it will be to do so.

How do we acquire influence and what should we do with it once we have it? Influence is a state of mind whereby you’re able to get people to act on your behest. Take note of what just occurred! I gave you my definition of influence. It may be slightly or drastically different from yours or someone else’s. The point is, once you know how someone views a situation, or the definition they give to a word, you have insight into the way they think and the meaning they assign to aspects in their environment. Then, you need to couple that with their perspective of what value is for them. Once you’ve acquired that insight, genuinely match your request to a goal/quest that they wish to obtain. Let them feel the emotions of your sincerity while showing them the benefits of adopting/addressing your suggestions. That will lead to you becoming more influential and having others readily seeking to assist you in acquiring your goals and theirs.

How do we lose or not acquire influence?

With some people, no matter what you do, it will not be good enough to draw them closer to you. If you identify that you’re in such a situation get away from it, to the degree you can. There will be situations in which some people will not like you. That can be due to their unconscious biases or biases that they’re well aware of. In such situations, sometimes you have to leave an environment to have people appreciate you for the value you possess. The perception of your value is what will allow people to perceive you as being influential.

When it comes to negotiations, the way you set it up and the strategies you employ have a great impact on how successful you’ll be. Remember, you’re always negotiating. Thus, when setting up an official negotiation, take into account the activities you’ve engaged in with the person/people you’ll be negotiating with and the impact that past impressions will have on the current negotiation. As mentioned above with influence, in a negotiation, the more influential you appear to be the more trusting you’ll be perceived as being. Don’t squander that perception. In a negotiation trust is a major factor per how far someone is willing to believe in what you say, compared to what you’ll do. Thus, if you’re perceived as being trustworthy, the opposing negotiator may think that something might not work out, but they know they’ll be able to trust that you’ll make them whole. That one aspect will allow you to gain more from every negotiation than you otherwise would have been able to achieve. There are also negotiation tactics and strategies that go into ways to maneuver in a negotiation to reach more favorable outcomes (i.e. when to concede, how slowly to appear when doing so, etc.), but those purviews will be left for another article to explore.

Now let’s discuss a very small component of body language. Body language and nonverbal signals move us emotionally more than most people are aware. In general, watch for hand movements that are not aligned with the words being spoken (e.g. words-this is going to increase your sales, hand action-pointing downward), pace of speech (i.e. slowing down might indicate one being more reflective, speeding up might be a point of excitement), and when such occurs. In particular, take note of what you said that stimulated the person to perform the mentioned gestures. Therein will lie insight into how well their body language is synchronized with their words.

Remember, you’re always negotiating!

About the Author

Greg WilliamsGreg Williams, known as, “The Master Negotiator & Body Language Expert,” is the author of the newly released book Body Language Secrets to Win More Negotiations.

The Wrong Way To Innovate: When Unrealistic Expectations Meet Antiquated Management

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Innovation has always been culturally synonymous with ‘the latest and greatest’, the ‘next big thing’, and on the surface this true. Companies like to rollout their innovations at trade shows and industry events to garner attention and praise for their good work.

While there are a lot of best practices, many companies tailor their efforts to their corporate structure and industry. Innovation luminaries like Coca Cola, General Electric, Shell Oil innovate effectively because they have structural elements in common, and they work to avoid a number of key pitfalls executing innovation work.

Sprints vs. Marathons

Usain Bolt has never run a mile,1 and great innovation centers have similar focus. Innovation initiatives that lack focus will rarely be able to deliver exponential innovation – the kind of output that creates new categories and literally makes steaks from organization’s sacred cow. Phil Swisher, former Global Head of Innovation at Brown Brothers Harriman, told Innovation Leader that “to maximize impact and outcomes, you’re relying on the senior executive sponsor (ideally the CEO) to provide the permission and space for the team to go after the really big opportunities, including the ones which are threatening to the status quo of the company.” Without executive support expect your Innovation initiatives to deliver only innovations like new product features, colors, and line extensions.

A Kilo of Feathers or A Kilo of Bricks

Insists on using the traditional and standard measurements on innovation projects, and you get standard and traditional outputs. Be purposeful in defining value creation for your innovation practice. Know what kind of value you want and encourage it by design.

Coca Cola’s Vice President of Entrepreneurship and Innovation David Butler provided some insights to Innovation Leader on how he evaluates his center’s activities. David says “We track progress just like a VC does, in this case. We look right at growth metrics, the things that really matter.”2 This is a startup, so financial performance is never the first thing to measure. A sure fire way to discourage innovation is to expect immediate revenue.

Location, Location, Location

Where you locate your innovation center within your organization matters. Some companies like Trek Bicycles locates their R&D Skunkworks directly into their business units to accelerate buy-in. Alphabet (Google) moved their social innovation lab (Jigsaw) out of the organization so that it could operate independently. The American Cancer Society built it’s Futuring and Innovation Center within the organization to maximize connectivity. Avoid creating it under the auspices of a strict operational or financial leader determined to conform the outputs to legacy metrics.

Total Secrecy Is Totally Wrong

An innovation project can energize an organization – so showcase the great work to generate excitement and even a little bit of envy. When a employees see the work they’ll ask how they can get involved. The exponential value accumulates when you generate broad engagement – when your innovation center attracts inputs from across the organization. Diverse minds share diverse ideas that can generate new value. Having confidentiality is expected, but secrecy and needless exclusivity impede value creation.

Opening and operating an internal innovation initiative is a daunting challenge. It requires executive support, careful forethought and a leader with the courage to take risks. But if an organization can methodically plan and execute the stand-up and delivery they can realize exponential value creation.

About the Author

Randal C. MossRandal C. Moss is an award winning marketer who focuses on engaging organizations and applying technology to drive growth. He has over 12 years of experience including institutionalizing innovation development frameworks, and creating consumer engagement solutions for companies and clients across the CPG, Real Estate, and nonprofit sectors. Randal has spoken at conferences such as SXSW (3X), State of Play, National Human Services Assembly National Meeting, Disney Institute’s Digital Now, and the American Marketing Association Hot Topic Tour.

Randal’s first book, with co-author David J. Neff, is The Future of Nonprofits: Innovate and Thrive in the Digital Age (Wiley). Their newest book, IGNITE: Setting your Organization’s Culture on Fire with Innovation was released in August 2016.

References

  1. Usain Bolt Has Never Run a Mile (No, Really), Time, Staff Writers
  2. Innovation Leader Magazine Spring 2016
  3. Under pressure, Lockheed opens up about secret weapons unit, Reuters, Andrea Shalal and Howard Goller