When hiring ATM Operators at a Big Dumb Company (BDC), assessing each candidate’s ability to execute predictable tasks is of paramount importance. As such, the recruitment process revolves around applicants’ resumes, which highlight what they have previously done in their professional careers.

What is important at a BDC, because most duties performed at mature entities are repetitive, structured and involve minimal ambiguity. Thus, evaluating the tasks a candidate has previously performed is a valid methodology when filling job openings in relatively static organizations.

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Who Not What

When you are interviewing candidates during the early stages of your startup, who is far more important than what, because the tasks the candidate previously performed may be only partially applicable to the role they will play in your adVenture. In addition, the ever-evolving responsibilities associated with their new position will likely be ill-defined, multi-disciplinary and relatively ambiguous.

As noted in Inventors vs. Innovators, early-stage hires do not have to be wide-eyed inventors. In fact, a company filled with inventors would be a dysfunctional mess. However, such early hires should be Bank Robbers with the innate qualities that will allow them to resolve challenges with minimal resources. Reasonable people will attempt to make the best of the status quo – unreasonable entrepreneurs with the proper dose of Confidence, Courage and Conviction will shape the status quo to facilitate your adVenture’s ultimate success.

What a Long, Strange Trip It Will Be

As made clear in Optimistically Pessimistic, most entrepreneurs’ experiences are not linear. Many emerging entrepreneurs have fractured, seemingly random careers. Look past the strange pit stops and extended detours and seek to understand who the candidate is and how you can leverage their disparate experiences to achieve your startup’s goals.

You may inadvertently dismiss a talented contributor if you solely rely on what a candidate has previously done. At Expertcity (creator of GoToMyPC and GoToMeeting, acquired by Citrix), I hired salespeople with disparate backgrounds, including: a bar-band drummer, a customer service agent, a venture capitalist, a financial analyst, a county employee and a technician from a Kinko’s-like store. Per their respective resumes, none of these individuals had relevant experiences which suggested they would excel at selling sophisticated software to technically proficient professionals. Yet, all of them, save the drummer, were successful salespeople during my multi-year tenure as the company’s sales leader.

In order to find out who the candidate is, not just what they have done, consider the following issues:

• How did they accomplish the tasks outlined on their resume? Did they build a team, did they go solo, did they dive into the task with relish or did they take on the mantel of a martyr?

• Why did they make their professional life choices? Are they willing to admit when they’ve made a mistake? Is their explanation reasonable and thoughtful, given their stage in life and the other choices that were available to them at the time? Do they internalize their failures or do they attribute their setbacks to others?

• What did they learn from their life choices? If the applicant cannot articulate meaningful lessons learned, they may not have the self-awareness necessary to Maximize Their Value at your startup.

Three’s Not Charming

I never hired anyone who was involved in three failed ventures. Great people can turn chicken poop into chicken salad. Adequate people can turn lemons into lemonade. Losers can turn fresh angel food cake into rancid devil’s food cake.

One or two failures spread over the course of an extensive career are not relevant. In fact, failures teach self-aware entrepreneurs many lessons that are impossible to gain from successful outcomes. However, people with three or more failures in their history either: (i) have poor judgment evaluating startup teams and opportunities, or (ii) are incapable of salvaging difficult situations. In either case, shun such unfortunate wantrepreneurs.

An exception to the Three’s Not Charming rule is successful serial entrepreneur who has been involved in a series of successful ventures, which far outweigh occasional failures. Gather as many of these successful serial entrepreneurs onto your team as possible, as executives, addVisors and Board Members.

Hiring Is Like Comedy

In comedy, one of the most important elements is timing. The same is true when hiring. A person who would be a great fit for a company in its early stages may not be an effective employee during a company’s expansion stage.

As shown in the chart below, there are various periods in a venture’s life in which certain types of employees are best suited. This may seem obvious at first glance, but properly leveraging this insight in the real world can be extremely challenging.

Several factors contribute to the difficulty of hiring the right person at the right time. For one thing, it is tricky to properly map candidates to the categories noted below. Candidates are complex and two rational, intelligent interviewers could reasonably differ regarding the proper categorization of a particular applicant.

Another factor complicating the startup hiring process is that most adVentures mature in a lurching, organic fashion. As such, it is often difficult to recognize when your company evolves from one stage to the next. The transitions between the various maturation stages are especially challenging, as the definition of the right person changes as the company evolves from one stage to the next.

For instance, in a company’s early stages and during a turnaround, Bank Robbers are an ideal hire. However, as a company moves into the expansion stage, toward its ultimate exit, hiring ATM Operators is appropriate (as shown below). If you hire Beach Volleyball players when you should be recruiting their indoor counterparts, your company’s morale, productivity and culture will suffer dramatically. 

Job One

At a BDC, the hiring process is straightforward.  A conscribed position exists, candidates who have previously performed the appropriate tasks are interviewed and one of them is hired to fill the open position.  At a startup, recruiting is a much more nuanced process. Rather than searching for applicants based on their resume credentials, the primary objective is to recruit candidates who are wily, tireless, and highly talented, irrespective of the specific tasks they have previously performed.

Each early employee, irrespective of their role, will have a material impact on your culture and your company’s ultimate success. Demonstrate to your team the importance of thorough recruiting by ensuring that at least one member of your Core Team meets with all prospective new hires until it becomes impractical to do so (i.e., once your startup exceeds 100-employees).

Just like the entrepreneurs you seek to hire during the early stages of your adVenture, be unreasonable when you recruit. Do not be satisfied with applicants who have outstanding track records but who are only looking for a job. Adapt the world to your reality by drawing together a team of talented winners, including those with seemingly tangential resumes and unconventional track records.

When interviewing such entrepreneurs, set their resumes aside and determine who they are, rather than what they have done.  Happy hiring.

Article first published as Guerilla Marketing Fail – What I Learned From The Austin Police on Technorati.

Acrobatic ninjas, the Austin Police and several livid tradeshow executives – a perfect recipe for a reality television show, but not a great combination for Seth Epstein’s startup, Social Stay.

Seth discusses below what happened in Austin when he tried to rock the largest hospitality tradeshow of the year and what he learned from this humorous, but stressful experience.

You can watch my interview with Seth below or on YouTube here: http://youtu.be/O9TEOY-QYhs

To hear Seth verbally describe this enlightening story, watch the video. Below is a guest post in which Seth tells the story in written form. Both the video and Seth’s post are excellent primers regarding how to deal with guerilla marketing gone wrong. I suggest you check out both the video and Seth’s entertaining depiction below. Note: the story takes place in Austin, not Dallas, which I incorrectly reference in the video.

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Parcours Ninjas Vs. The Austin Police
By: Seth Epstein

As John Greathouse noted in his blog entry, Putting “Trade” Back Into Tradeshows, several years ago, I pulled off a guerilla marketing coup at a large tradeshow by hiring actors to portray monks. The “monks” paraded around the show floor in a conspicuous, but understated manner. Each day their antics became more animated until the final day, in which they wore large medallions emblazoned with my company’s logo while chanting my company’s name: FUEL, FUEL, FUEL, FUEL…The impact was tremendous, culminating the keynote speaker asking a crowd of 1,200,  “Who the heck are these FUEL monks? What’s up with that?” For less than $10,000, we became the talk of the show and closed several new clients directly attributable to our faux monks. If you have not read John’s article, check it out, as it provides an informative contrast to our failed attempt to recreate this impact. 

Fast forward to Socialstay, my current mobile start up which allows guest centric venues (hotels, conferences, dorms, etc…) to build and deploy custom mobile apps.

This year, the annual Hospitality Technology conference was held in Austin. As SocialStay is a young company on the rise, I figured that slight twist on the Monk stunt would be a perfect disruption to an otherwise staid industry. 

Here was the idea: Hire a bunch of people to dress up as ninjas – and in a ninja-like way, appear all around the conference center, hiding behind trees, sneaking around, tip toeing across cross walks – you know, stock ninja moves. With each progressive day of the conference, we would reveal that the ninjas were in fact from Socialstay…making a memorable impact.

So we placed an ad on craigslist, which was hilariously written by one of the gals on our team. Eventually, we got an interesting response from a guy who runs the Texas Parcours Group – Parcours is a combination of acrobatics, running, jumping, and climbing in and around urban environments – which has caught fire on YouTube. 

We were ecstatic – what are the odds of placing an add on craigslist for a ninja and getting a modern, urban, acrobatic team on board to help you out for 11 bucks an hour?

I met with the ninja team Sunday evening when we arrived at the conference center in Austin and gave them the following ground rules:

1. Do not scare anyone

2. Be playful but not aggressive and do not interact with anyone, be stealth

3. Do not, whatever you do, step foot on the conference center grounds

The final point was essential, since our contract stated, “you may not promote your company anywhere outside of your booth on the property.” We figured if we were on private or city property that was NOT part of the conference center grounds, we would not be in violation of this provision.

After I gave the ninja team direction, our point of contact said, “Oh, by the way, I am not going to be here tonight for the first run, but “Dude” (not his real name) here is going to be in charge”. 

Dude was a likeable guy but he was a little aggro and perhaps a bit too enthusiastic. He had brought yellow goggles and was excited to get out there. In hindsight, he also clearly was not listening to the instructions while I explained them to the group.

The opening keynote that evening was Randi Zuckerberg talking about Facebook and social media. I explained to the team that the attendance would be solid and it would be a good first run before the opening of the show to get people exposed to the ninjas. Right before they went out, I made what ended up being a critical mistake, I handed them ninja headwear, the kind where there is an opening just for the eyes….

The ninjas went off to do their first run and that was the last time I saw them face-to-face.

Michael and I continued setting up our booth. A couple hours later, we were nearly done when Michael paused and motioned that there was someone was behind me. I turned to face a lineup of 4 executives in suits and 2 armed security guards just behind them. One of the executives was a heavy set guy who was clearly high-strung, sweating, twitching and clearly was going to lose his sh*t. I knew this was bad news.

Our exchange went something like this:

“Are you Mr. Epstein?” asked one of the executives in a thick southern drawl 

“Yes”, I responded.

“Son, we have a real problem here. We have detained some young folks who are being held by the State Troopers and they gave us your card – the police had to chase them down the hallways.”

“Mr. Epstein, are these young people under your direction?”

“Yes, I take full responsibility for whatever happened.”

“Mr. Epstein, we are considering arresting you for what transpired. Your ninjas were running up and down the hallways scaring people – they were wearing full head masks – people were really shaken, they thought they were terrorists.”

“They were IN the conference center?” I asked.

“Yes, just outside the keynote session upstairs and people are really shaken.”

I was stunned. How the hell did these guys miss the instruction, “you cannot be anywhere on the convention center property”?  To make matters worse, they were outside of the hall where the sister of Facebook’s founder was about to speak – with their faces covered and Dude wearing the yellow goggles I had asked him to take off.

All I could do was apologize and take full responsibility. I told the executives that the ninjas did not follow my directions and our intention was to be outside of the show and be light and entertaining. The show executives “took a point away” for future shows, which means I will have the worst booth in the place and said they were considering kicking us out of the show. 

Finally, they informed me they would let the kids go, but that they were precluded from coming within 3 blocks of the convention center or they would be arrested. Although I will never know for sure, I believe that my willingness to take responsibility and not confront their anger is the reason we were allowed to remain at the show.

After they left, I turned to Michael and we both were dumbstruck. Admittedly, I was a bit shaken – but more importantly, our primary marketing tool has just imploded, big time.
We started to think about alternatives, other ideas that might produce the desired result, other stunts, other outside of the box ideas –  and nothing we came up with had the subtly or marketing build up required to make the necessary impact at a huge tradeshow. In the end we focused on the tradeshow itself and doing our best to meet as many people as possible. 

My take away, looking back at it 2 months later – is that it was a blessing in disguise. I believe everything happens for a reason, in fact I choose to approach everything that way. 

Fundamentally, being an entrepreneur is a constant exercise of turning lemons into lemonade.

Lessons Learned

In retrospect, there are several things I should have done differently.

Go With Your Gut – I noticed that the guy with the wigged-out yellow goggles was not listening when I was gave them their instructions. I should have stopped and had everyone confirm and repeat back the ground rules, especially yellow goggles guy.

Tactics AND Strategy Matter – Don’t expect other people to get the subtlety and nuance of your vision. The ninjas did not understand how to act or why they needed to subtle. We provided them with our tactics, without explaining our strategy. When the leader of the team informed me that he would not be involved that evening, an alarm should have sounded in my head. He was the guy I had communicated with the most and he best understood what we wanted to accomplish. His absence contributed to the overall lack of communication between me and the ninjas.

Sharks Ain’t Dolphins – I hired PARCOURS guys and gals…. they run around and flip and jump. Why the hell did I think they would do anything differently? Don’t expect a shark to behave like a dolphin. A shark is a shark. A parcours runner is a parcours runner. My bad for expecting subtlety from aggressive acrobats. 

Failing Boldly Is OK – Always be bold, especially when you are the underdog, the small fish in the pond. The saying “boldness has genius, power and magic in it” is an essential mantra for any start up entrepreneur.

Stay tuned for future guerilla marketing campaigns. Although our Austin experience was unfulfilling, we will continue to fly close to the sun in order to gain outsized exposure from our limited marketing expenditures.

If you have guerilla marketing stories you care to share, please do so in the comments below.

Seth

Seth Epstein is the Co-Founder and CEO SocialStay, and former Founder and CEO of FUEL (acquired by Razorfish), Emmy winner for work on X-Games and re-brander of ESPN’s Sport’s Center.  Seth attended UC Santa Barbara, but dropped out to start a denim company. 

TestFlight’s mission is to reduce app developers’ pain. The company effectively leveraged this credo at Apple’s 2011 Worldwide Developers Conference (WWDC).  As Ben Satterfield, TestFlight’s CEO explains in the interview below, for the cost of some T-shirts and tacos, TestFlight was able to dominate the mindshare of many WWDC attendees.

As Ben points out, successful guerrilla marketing is predicated on creativity and clever execution, not a huge budget.

You can watch my four-minute interview with Ben below or on YouTube here: http://youtu.be/RzSrfTE87EY

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According to Ben, “Our main audience is developers and this is the one chance each year where all the iOS developers are in once place at one time. We wanted to do something that matches the spirit of TestFlight…getting rid of (developers’) headaches.” As such, Ben and his team set out to alleviate some of the pain associated with queuing up for the conference’s keynote speaker.

People routinely begin lining up at 2:00 AM to ensure a good seat. Per Ben, “So you’re out there freezing. You have to take turns to use the bathroom or get a coffee.” In short, it is a real pain.

Enter the TestFlight taco truck. The day before the keynote, while people picked up their badges, TestFlight employees handed out TestFlight T-shirts. If this was all they had done, no one at the show would have noticed their presence. However, TestFlight effectively linked their free T-shirts with the company’s goal of alleviating developers’ headaches.

As they handed out each shirt, they told the attendees, “If you wear this shirt tomorrow while in line to attend the keynote session, we will bring you breakfast.”

The next morning, Ben and his team showed up with a Food Truck, provided by Seoul on Wheels, tricked out with TestFlight’s logo. Using a bullhorn, they played Flight of the Valkyries, to reinforce their aeronautical theme and add to the festive nature of their stunt.

After handing out breakfast burritos to everyone wearing TestFlight T-shirts, the team then began giving shirts to anyone who had TestFlight installed on their phone, as well as attendees who agreed to Tweet about TestFlight. (FYI East Coast people, burritos are soft tacos.)

The result of their efforts was a convention hall full of TestFlight T-shirts, including a number of people in the front row and in full view of Steve Jobs and the rest of Apple’s senior executives.

Since the team had rented the truck for the entire day, that evening they parked in front of one of the convention’s largest parties and gave away four different types of Korean tacos to the folks waiting to get into the venue.

Ben summed up the T-shirt and Taco adventure as follows,
“It was a lot of fun. It was the one marketing move that actually jived with what we try to do as a company. It was a playful thing, a guerrilla tactic. It was doing a lot with a little.”

Most surprising of all, the owner of the Korean taco truck had previously used TestFlight when developing the app he uses to promote his business. From taco truck owners to the world’s biggest gaming companies…TestFlight is satisfying them all, one burrito at a time!

Note: Ben and his team would like to acknowledge the help of Roaming Hunger (roaminghunger.com) in pulling off their T-shirt and Tacos stunt. Roaming Hunger has created an app that allows users to track there whereabouts of food trucks.

In part I of this series, I discussed how you can teach your children to make something from nothing by sharing with them Marcia Brown’s Stone Soup. There are a number of other children’s books that also serve as good platforms from which you can impart entrepreneurial values and lessons.

One such book comes from a surprising source, the notoriously left-leaning Theodor Geisel, better known as Dr. Seuss. He inadvertently drafted the salesman’s manifesto in the form of Green Eggs and Ham, utilizing 50-different words, 48-of which are one syllable. Not only will your children understand it, it is even accessible by the average salesperson.

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The Plot
Our protagonist, Sam, is an androgynous creature, which fits well with his / her asexual name. This depiction will make Sam’s appeal universal to either your son or daughter. Man or woman, the tactics deployed by Sam are applicable to any sales situation and can be put to use by any salesperson, irrespective of their gender. For sake of grammatical convenience, I will refer to Sam as a male in the remainder of this entry. However, if you are reading this to your daughter, explain to her that Sam is short for Samantha.

The story begins with the unwitting, future customer relaxing and reading the paper. Sam-I-Am enters stage right, riding a Seussian creature and holding a sign which reads, “Sam-I-Am”.

This is Sam’s cold call. The last thing on the Prospect’s mind is buying something from Sam or anyone else. Sam is undaunted. He introduces himself to his Prospect wearing a large, sincere smile.

Sam is smiling because he knows that he has something the Prospect will love and eventually thank him for bringing to his attention. He is so confident in his green eggs and ham product that he cannot help but smile.

The Prospect’s initial reaction is rather predictable. He is irritated at being interrupted by an unsolicited salesperson, just like you would be if you received a telemarketing call during dinner. Thus, without knowing who Sam is or what he is selling, the Prospect lashes out and tells Sam that he, “does not like him”. Right from the start, Sam must endure the most painful of all forms of sales rejection, the personal attack.

However, Sam remains undeterred. He continues smiling and deploys a rudimentary sales technique. Instead of acknowledging the personal repudiation, he poses a simple question in a form which cannot be answered with a negative response. He asks the Prospect if he would like the product “here or there”, pointing to two spots on the ground while displaying his winning smile.

Despite being a children’s book, Green Eggs and Ham, makes for painful reading, as Sam is repeatedly rejected, at times in a vicious manner. However (Spoiler Alert) Sam’s persistence pays off. In exchange for sitting through a demonstration of the product, he asks that Sam to agree to leave him alone thereafter. Sam happily agrees, as he knows he will not have to continue selling, once the demo is completed. After trying the product, the Prospect grins broadly, puts his arm around Sam and tells him, “Thank you. Thank you. Sam-I-Am.”

Sam-I-Am Lessons Learned

There are a number of practical sales lessons you can impart on your children from this opus, including:

Persistence – Every sales handbook emphasizes that there is no substitute for persistence. Sam exemplifies this truism. Until the moment the Prospect finally experiences the product, it appears to everyone but Sam that he has no chance of success. However, typical of an Optimistically Pessimistic entrepreneur, Sam never loses hope, and does not give up.

Research – Sam’s persistence is not born of ignorance.  He is highly confident that his product will provide value to the Prospect and thus it is his duty to ensure that the Prospect experiences the product’s value first-hand. This resolute attitude is crucial to a salesperson’s ultimate success. You must have enough confidence in your product to push through baseless objections and ensure that your Prospect utilizes your product, and thereby evaluates it on its merits, not solely on unfounded preconceptions.

An effective way to bolster your confidence is to pre-qualify and fully understand the congruence between your product’s capabilities and the Prospect’s needs. In Sam’s case, he knows that the product will deliver real value to the Prospect and that the Prospect will ultimately “thank him” for introducing him to the product. This knowledge fortifies Sam against the litany of rejections he must face before closing the sale.

No Drama – Sam also realizes that the Prospect’s reaction is not personal. Rather, the Prospect’s kneejerk rejection of Sam is a coping mechanism that many people utilize to deal with the competing demands on their time.

Thus, Sam is undeterred by the Prospect’s emotional responses. Instead, he remains focused on encouraging the Prospect to experience his product without internalizing the rejection on a personal level.

Affability – Sam remains affable throughout the entire sales process. Even when the prospect personally attacks him, and is downright rude, Sam realizes that the ultimate payoff (i.e., his commission, the Prospect’s satisfaction and his company’s revenue) more than compensates him for the short-term discomfort associated with a rejection born of ignorance.

Listen and Adapt – Sam listens to his Prospect’s objections and adjusts his tactics to best suit the evolving conversation. He probes to better understand his Prospect’s needs with questions like, “would you like the product, in a box, with a fox, on a train, in the rain, with a mouse, etc”. In each instance, Sam actively listens to his Prospect’s responses, and attempts to satisfy all of his needs by creating third-party bundles that offer his Prospect holistic solutions. Effective salespeople strive to satisfy all their prospects’ needs, even those needs which extend beyond what their product can fulfill on its own. Such value-added selling elevates the salesperson’s role to that of a consultative partner.

Manage Expectations – Sam does not tout his product’s features, nor does he oversell his product. Instead, he focuses on the immediate objective – to get his Prospect to demo the product. By avoiding puffery and overselling, Sam is able to reach his goal of performing a demonstration while following the precepts outlined in Great Expectations. Proper expectation management significantly contributes to the Prospect’s eventual positive user experience.

Inexperienced salespeople frequently oversell. Thus, by the time their prospect finally tries their product, they are often disappointed. Conversely, by remaining positive and passionate about his product, without overly embellishing its capabilities, Sam’s delights his Prospect, once he partakes in the product.

Humility – Sam exhibits a Humble Pride and remains committed to his Prospect’s satisfaction throughout the sales cycle, even after the Prospect becomes a customer and admits that he loves the product.

Once the sale is completed, it would be tempting for Sam to say, “I told you so”. However, he realizes that he is forming a long-term relationship with his customer, which must be based on mutual respect. Any insinuation of, “I told you so” could engender animosity that would undercut the positive rapport that Sam has worked so hard to establish.

Teach Your Children That “Sell” Is Not A Four Letter Word

Silicon Valley is filled with entrepreneurs who, as children purchased candy in bulk and sold it piecemeal to their classmates at school. I was no exception. The math was too simple for me. When I was in Junior High, I purchased packages of Bubblicious gum at the 7-11 next to my bus stop for 25-cents each. Each package contained five pieces. I then opened the packages and sold each piece for 25-cents. I returned my entire investment on the first sale and the remainder was pure profit, which I used to purchase more gum. I quickly learned the value propositions of convenience and instant gratification, as my Junior High target market happlily paid my 5x markup.

By eighth grade, kids were routinely lined up at my locker before I arrived at school. Finally The Man, in the form of the school Principal, shut me down. He was relieved to learn that I was not selling drugs, but still unhappy that I was selling candy (by then I had extended my product line to include a variety of sugary treats).

My very conservative mother was called into the Principal’s Office, along with me, to hear about my shenanigans. She patiently sat through the Principal’s lame tirade and thanked him when he was finished, assuring him that her son would no longer sell candy at school.

As we left the Principal’s office and walked to our car, I was convinced I was going to be punished. After all, I had embarrassed my law-abiding mother. Before we got to our car, looking straight ahead and fighting to keep a smile off her face, my mother said, “I don’t think it’s a big deal, but stop selling candy at school.”

Despite the fact that my mother was a life-long government worker, with no proclivities to take risks or sell anything, she saw that I was driven to do such things. Rather than attempt to squelch such proclivities, she simply asked me to do them outside of school. I have always loved my mom, but I especially loved her at that moment.

Lessons Learned

Green Eggs and Ham is an excellent primer for teaching children the basic precepts of effective selling. It also allows you to reinforce to your children that effective salespeople are problem solvers and that problem solvers are always in demand.

Point out that Sam does not attempt to trick his prospect. Rather, he is persistent and honest. Like most real-world salespeople, he does not fit Hollywood’s hackneyed stereotype of the shifty, malevolent huckster. In addition, help your children internalize the fact that salespeople are an important element in our society and that selling is a worthwhile, fun and honorable profession.

Many tedious books have been written about sales, some technical, some strategic and some tactical. However, Green Eggs and Ham is only the only book you need to read on the subject. Move over Zigler, Carnegie and Gitomer and make room for Dr. Seuss.

For more suggestions regarding parenting an entrepreneur, check out parts I, III, IV and V of this series.

Entrepreneurs who are self aware and have the Whole Package are less prone to being successfully grin screwed. However, even the most enlightened entrepreneur can unknowingly waste valuable time and energy pursuing non-qualified prospects. Thus, developing an ability to identify Grin F☺☺kers is a startup skill worth cultivating.

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Great Meeting Or Just A Good Lunch?

In fifteen years of executing and managing sales and business development, I never had a “bad” meeting with a prospect. Never has someone stood up and said, “John, this is the most ridiculous idea I have heard in years. Take your laptop and get the hell out of here.” Even though, no doubt, some people had these very thoughts, they never verbalized them. Instead, they smiled, nodded and feigned an interest in whatever I was hocking.

I was frequently frustrated when I asked one of my salespersons, “How did your call/meeting go?” Without exception, the response was, “Great.” I would then have to ask a number of questions to determine why the call or meeting was so “great.” Often, all I learned was that the prospect was, “a great guy.” This inability for otherwise intelligent and effective salespeople to differentiate between a pleasant social interaction and a substantive business meeting was continually disappointing.

One reason it is difficult to objectively evaluate the effectiveness of a particular conversation is due to the Bad Date effect. In many cases, when someone realizes that the person they are on a date with is not for them, they tend to do very little talking, a lot polite smiling all the while striving to end the date in an expedient and socially acceptable manner.

Consider a job interview in which it is clear within the first few minutes that the applicant does not have a prayer of being granted an offer. Most interviewers become more agreeable than normal to avoid extending the duration of the interaction and to emotionally compensate for the bad news they know will befall the applicant after the interview. Rather than probing about the applicant’s talents, interests and proclivities, such interviews are polite and circumspect and generally end with the parties drawing very different conclusions about each other’s future actions.

Entrepreneurs should Go For The No (GFTN) and determine a prospect’s intentions as quickly as possible. One way to know when you should continue to cultivate a relationship or when you should GFTN is to objectively assess the relative value of each of your interactions with a prospect.

What follows are clues by which you can attempt to cut through the bogus smiles of Grin F☺☺kers and quantify the true impact you had in a particular social interaction.

Active Participants – Did the prospects make meaningful contributions to the conversation that drove the deal closer to consummation?

GFTN if you and your team did most of the talking, as the deal is probably no nearer to completion after the meeting than it was prior to it.

Cultivate if the prospects proactively discuss potential next steps and/or volunteer to perform tasks that will advance the sales process.

Objections – People who do not care about your proposal will offer few objections. Buyers will challenge you with probing questions because they are engaged in defining a path to your collective success.

GFTN if the prospect unconditionally exclaims with wonderment regarding your solution while sucking down free drinks.

Cultivate if the prospect identifies challenges or obstacles that must be overcome to achieve your mutually desired outcome.

Pleasantries Ratio – Small talk describes the empty pleasantries that begin many professional conversations. Small talk can be an effective icebreaker. However, qualified prospects will not overly engage in such inconsequential dialog. 

GFTN if the prospect repeatedly turns the conversation to non-business topics.

Cultivate if the ratio of substantive topics to small talk skews in the direction of meaningful conversation.

Overtime – Qualified prospects will generally allocate adequate time when they are discussing something which they view as a near-term, high priority.

GFTN if your prospect ends one or more discussions prematurely or repeatedly reschedules your conversations.

Cultivate if the allotted time for a meeting ends and your prospect extends your discussion or immediately schedules a follow-up meeting.

Specificity – The more definitively your prospect discusses your solution and its implications, the more likely they are to implement it in the near-term.

GFTN if your prospect repeatedly speaks in generalities with respect to potential implementation dates, budgetary availability, etc. 

Cultivate if your prospect articulates the terms, dates and milestones associated with the acquisition and implementation of your solution.

Graphight Clarity

Graphight is a startup founded by Andy Wilson and John Slade which helps dealmakers better assess the quality of their business interactions. While the solution is more complex than simply evaluating the quality of a particular meeting, it does allow you to differentiate between a polite conversation and a meaningful interaction that has a high propensity of resulting in incremental business.

By Listening closely and deploying tools like Graphight (with whom I have no affiliation), you can wipe the smarmy smile off your Grin F☺☺kers’ faces by focusing your time and attention on cultivating qualified prospects that object, frown, and ask you hard questions. 

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The Winklevoss Twins Strike Again

As highlighted in the movie The Social Network, the Winklevoss brothers are embroiled in a protracted lawsuit with Mark Zuckerberg, Founder of Facebook. They claim that Mr. Zuckerberg “stole” their idea of creating a social network for the Harvard student community. The related question was: “What should the Winklevoss twins have done to protect their idea?” My corresponding response is shown below.

John Greathouse, Entrepreneur, Investor, Professor and Freshman In The School Of Life 348 votes by <redacted>   Can you identify this image? How about this one? The first one is Oswald The Lucky Rabbit, Walt Disney’s first hit character. After some initial success with Oswald, Universal Studios (who owned Oswald’s copyright) severed its relationship with Walt Disney, hired the majority of his creative team and began creating Oswald cartoons. Although an additional 140 Oswald episodes were produced over the next 14 years, none of them was nearly as successful as the first 26 installments, which were developed under Walt Disney’s tutelage. As shown in the second picture, Walt dusted himself off, shortened Oswald’s ears so he looked like a mouse, and went on to kick Oswald’s ass.  Universal thought the key was Oswald (the idea), whereas Disney knew the key was in the execution of the cartoon. I write a bit more about how entrepreneurs can protect their ideas here: Spilling The Beans

So What?

I was shocked that my pedestrian answer was so well received. Upon reflection, I realized that I leveraged many of the tactics routinely used by advertisers, politicians and other professional communicators to engage their audiences, including:

Question Within A Question – Numerous ads lead off with a question, as do professional speakers, in an attempt to connect with their audience at the outset. I did not do this deliberately – my use of this technique was happenstance. Even so, by asking readers, “Do you know who this is?” they were apparently intrigued enough to ponder the figure for a moment. After investing a few seconds of psychological energy attempting to recognize the character, many readers were willing to read the rest of my response in order to learn the figure’s identity.

Pictures – I used two pictures, so I suppose they were worth two thousand words. Advertisers have long known that images cause a reader to hover their gaze, as eye candy is generally more appealing than text.

Deeper Meaning – Rather than directly answering the question, I offered an esoteric response, which clarified that the Winkelvoss brothers created nothing of value to “protect.” Listing a variety of bread-and-butter IP protection tactics would not have been as compelling.

Analogy – As readers of this blog know, I enjoy drawing connections between seemingly disparate people, historical events and pop culture minutia because it is entertaining and can facilitate learning. The analogy of a cartoon character’s “worth” is an interesting way to point out the inherent lack of value in the “idea” of a Harvard-based social network.

Brevity – My Quora responses are usually brief, primarily because I am a bit lazy. In this particular instance, I was tired and about to sign off for the night. My fatigue worked to my advantage, as shorter entries are less daunting. I am sure that some of the lengthy, text-heavy responses on Quora are valuable, but I would not know as I generally skip them. As such, eschew verbosity.

Simple – Avoid words such as eschew and verbosity! As described in Buzz Kill, many college-educated professionals tend to write at a level that is uncomfortable for most people (including college graduates) to read. When writing anything that you want people to effortlessly internalize, use simple words and avoid industry jargon.

As I said at the outset, all of these insights are essentially common sense. In addition, there are obviously other factors which dictate an answer’s relative popularity.  An interesting, topical question will obviously generate more views and thus the associated answers will have a higher probability of receiving votes. Timing and luck also play a role. Even so, it remains worthwhile to examine the components of an effective Quora answer, as the lessons learned are applicable any time entrepreneurs communicate in writing.

Future of Quora?

I encourage emerging entrepreneurs to utilize Quora. Post sincere questions and provide authentic answers, rather than gaming the system . An artificial, forced approach will eventually backfire, as online crowds nearly always ferret out bad actors and punish them for attempting to distort the system.

Thus, I am not suggesting that you emulate the characteristics cited above in an effort to generate votes for your answers. Rather, I am reinforcing the fact that entrepreneurs are always well served to communicate from a position of authenticity. Combine sincerity with pictures and simple language and your message will likely be well received – leave the arcane jargon to the folks at Big Dumb Companies. If your Quora responses become formulaic, not only will your social status suffer, but so will the entire Quora ecosystem.

______________________
John Greathouse has held a number of senior executive positions with successful startups during the past fifteen years, spearheading transactions which generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.
______________________

Copyright © 2007-11 by J. Meredith Publishing. All rights reserved.

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The Internet Should Be Free

In addition to the “eyeballs at all cost” mindset of 1999, there remained a very strong feeling within a subset of the tech community that, “The Internet Should Be Free.” Other than the access fees charged by Internet Service Providers, the era of paid Internet services was nascent.

BuddyHelp was launched in this proto-Internet environment and was immediately used by businesses to provide hands-on technical support. At companies such as SaskTel, Gateway and Cablevision, customer support agents used BuddyHelp to access their customers’ computers and handle their technical support issues.

As shown in the screenshot below, the initial launch of BuddyHelp did not restrict commercial usage. Anyone, including well-healed, Big Dumb Companies, could offer state-of-the-art technical support for free. Wonderful… except we were stuck paying the bandwidth charges, purchasing servers to handle the growing load of users (in those pre-Cloud days) and fielding support questions – all from a group of users that generated not a single dime of revenue.

As noted in B-side Entrepreneurial Hits, Expertcity’s initial business plan of allowing independent experts to utilize our technology for the purposes of providing technical support proved to be a great business model for raising money ($34 million at a pre-money valuation of $80 million with zero revenue), but a lousy business model for making money.

Thus, we became one of the first ASP (aka SaaS) companies, by selling subscriptions of our screen sharing technology to customer service departments – the same market segment which had adopted BuddyHelp. One would assume that once we began licensing our technology, we immediately shut down BuddyHelp and effectively forced the freeloaders to pay for our commercial offering. Unfortunately, there was a contingent within Expertcity, which believed that BuddyHelp should remain a free service, even after we launched DesktopStreaming (the genesis of DesktopStreaming’s terrible name is described in, Lousy Products Might Break Your Bones – But A Name Will Seldom Hurt You).

In order to jumpstart our DesktopStreaming licensing efforts, it became imperative that since we intended to continue offering BuddyHelp at no charge (which was not my preference), we had to transform the free service into a source of qualified DesktopStreaming leads.

The first step was to identify who was using the service. As we did not require users to sign in, we were forced to correlate IP addresses with company names, which, in 1999, was an inexact and very manual science. Once we located a company that we suspected was using BuddyHelp for commercial purposes, we then sent emails to any senior executive we could identify (using the techniques described in Infiltrating Big Dumb Companies), hoping to eventually contact someone in the customer support department. Not surprisingly, our success rate was abysmal.

After some healthy wrangling with the “The BuddyHelp Should Be Free” folks, we eventually made a slight modification to the site, as shown below.

We still allowed anyone to use the service but we added text indicating that BuddyHelp was a consumer product in the hopes of making corporate users feel slightly guilty about ripping us off. This change did cause a handful of companies to contact us and license our commercial solution. Unfortunately, most of the freeloading entities continued to use the service and ignored our plaintive emails, which simultaneously encouraged them to license DesktopStreaming while threatening them with potential legal action if they did not stop using BuddyHelp commercially.

After more cajoling, those of us interested in generating revenue convinced the “BuddyHelp Should (Still) Be Free” contingent to place an email address field in the page flow. Even though this field was not required to use the service, many users assumed that it was a prerequisite for use and provided us with a surprising number of valid email addresses. We then sorted these email addresses by company and initiated targeted sales campaigns wherever we identified a critical mass of users.

For instance, if we identified a group of users from IBM, we contacted them as a group, and notified them as to which of their peers were also using BuddyHelp. We then asked them to encourage IBM to license DesktopStreaming on their behalf. Although this approach was imperfect, it allowed us to leverage BuddyHelp as an inelegant source of qualified DesktopStreaming leads. In the course of a few months, despite the cumbersome sales cycle, we finalized deals with a number of former BuddyHelp users including CompUSA, Blackbaud and Cox.

With the release of GoToMyPC in January 2001, we finally drove a stake through BuddyHelp. Not surprisingly, we received a litany of hate email from freeloaders admonishing us for taking away their free service. Shame on us for allowing people to believe BuddyHelp was an entitlement we were obligated to provide for free and in perpetuity. In its final days, the site continued to drive substantial traffic from would-be freeloaders, which we leveraged by displaying advertisements for DesktopStreaming (now known as GoToAssist) and GoToMyPC.

Ways To Make A Freemium Service Work

The concept of a Freemium solution was not well founded when we launched BuddyHelp. Precursors certainly existed, including games such as Doom, which allowed players to access the first few gaming levels at no charge. The Freemium approach is now widely recognized as an effective product rollout strategy in which one version of the solution is offered at no charge, while other versions of the product require payment. However, in 1999, the free-to-paid rules were still largely unwritten.

Just because we did a dismal job of turning BuddyHelp into a revenue-generating asset, does not mean that it was impossible. Experience is what you get when you do not get what you want and we got a whole lot of experience from BuddyHelp. In fact, the lessons we learned allowed us to effectively convert the majority of our 50,000 free GoToMyPC Beta users into paying customers.

With the advantage of hindsight, listed below are a number of actions we should have taken to convert BuddyHelp from a channel conflict nightmare into a lead generating machine.

Clear Communications – The primary reason we caused our BuddyHelp users so much angst is because they perceived that we changed the rules in the middle of the game, which, in fact, we did. GoToMyPC was a successful free Beta because we made it clear from the outset that it would only be free for a limited time. Thus, when we flipped the switch to a paid service, no one was surprised. We failed to apprise our BuddyHelp users of our plans to charge for the use of our technology, thereby eliciting their wrath and feelings of betrayal.

Logical Upsell Plan – We were forced to change the rules on our BuddyHelp users because we launched the service without a strategic plan. We literally said, “Let’s put it out there and see what happens.” What happened should not have been a surprise. We gave away a valuable service and our users revolted when we tried to force them to pay for it. Avoid this mistake by crafting a logical plan by which users are charged for the service, either after a trial period or in exchange for other benefits, such as no advertisements, more features, extended use privileges, etc.

Consistent Rules– Freemium services result in satisfied users who have a higher propensity to pay when they feel that the rules are clear and consistent. Most users are ethical and willing to pay once they begin using the product in a manner which they know qualifies as “commercial use.”

Make Cheaters Work – Resign yourself to the reality that some users will pride themselves on cheating. These users will sign up for multiple free trials with a variety of email addresses and user names simply to avoid payment. Such unscrupulous users will never pay. Thus, it is not worthwhile to erect barriers to impede committed cheaters as such constraints will undoubtedly cause friction for honest users. Hold your nose and make it difficult, but not impossible, for such nefarious users to freeload.

Prop Up Your Value – A convenient and effective way to segment Freemium users is to denude the value prop of the free service. However, as noted in MVP², care should be taken to not reduce your value prop so much that your free offering besmirches your overall brand. A worthless / worth-little free product will be an ineffectual lead generation tool.

There are a variety of ways to reduce the utility of a free service, such as:

• Limited usage – Dropbox offers 2GBs of storage free and eFax allows users to send 30-pages free each month.

• Limited features –  LogMeIn offers remote access for free, but charges for additional features.

• Market segment – Give .edu and .org users free access, but make users with a .com email address pay

RightScale combines the last two approaches by conscribing its free product’s use to individuals and limiting its functionality

Making Free Users Pay

The most common method of transforming free customers into paying customers is by offering a free trial for a limited time period. If you decide to offer a free version of your solution and elect to not utilize a trial period as a means of spurring paid usage, seek non-intrusive ways to monetize free users, at least to the extent that you negate the costs associated with delivering the service. There are a variety of ways in which you can generate income from otherwise free users, including:

Lead Gen – As we learned once we began to effectively harvest BuddyHelp users, free users can be an inexpensive source of paying customers. Such users have self-selected your solution, are familiar with its value proposition and (hopefully) have received utility from your free offering. As such, the sales cycle can be compressed by calling upon such pre-qualified users.

To effectively execute this strategy, ensure that you obtain sufficient information before users can access your freebies, similar to the email field we put into BuddyHelp’s screen flow.

Advertising – Companies such as, eFax and YouSendIt generate significant revenue by presenting relevant ads to their respective free users. However, this model requires large numbers of users to generate meaningful revenue.

Co-Registration – When users sign up to your free service, offer them complimentary services from a select group of partners. You can generally negotiate meaningful cost per acquisition rates for such co-registered users. Such revenue can offset some of the costs generated by free users.

No Help From BuddyHelp

Properly launched, BuddyHelp could have been an effective Freemium lead generation source for Citrix. However, because of the BuddyHelp Should Be Free vestige that underlied much of our 1999 thinking, we angered and frustrated most of the BuddyHelp community with our inconsistent messaging and lack of a thoughtful plan. Despite our repeated blundering, BuddyHelp did generate some substantial commercial customers. However, a proactive coordinated approach would certainly have led to fewer frustrated customers, more qualified leads and less internal discord.

Imagine how difficult it would be to score in hockey if you were required to rely on someone who is not your teammate to convince another third-party, whom you have not met, to take a shot on your behalf.

As crazy as this scenario sounds, it is very similar to the “scoring process” companies engage in when they track Net Promoter Scores.

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Net Promoter Scores (NPS) are the darling of many Big Dumb Company (BDC) product marketing and customer support executives. Created by consultants to generate additional fees, such scores attempt to rate a company’s overall customer satisfaction. The score is calculated by asking customers, "How likely is it that you would recommend our company to a friend or colleague?" Answers are based on a scale of 0 – 10. The higher your company’s NPS, allegedly the higher your customer satisfaction.

Rather than obsessing about an indirect gauge of customer satisfaction, entrepreneurs should focus on improving their Net Profit Score. BDCs can afford to fixate on such esoteric measures, while startups must generate tangible financial results. A Net Promoter Score of 10 and a bank account of 0 equal a failed venture.

Turning Net Promoters Into Net Profits

Shockingly, some of the recommended tactics pitched by NPS gurus could actually decrease your sales by solidifying a propensity to not promote your solution. As noted in Cialdini’s landmark book, Influence – The Psychology of Persuasion, the Consistency Principle is a powerful predictor of a consumer’s future behavior.

Commitment is firmly established when a consumer verbally responds to an inquiry. For instance, if you ask a consumer the NPS question and they reply, “Zero, I will never recommend you to a friend or colleague,” you have actually increased the chances that they will never make a future recommendation on your behalf, even if you subsequently rectify their initial complaint or concern.

Cognitive dissonance results when a person’s commitments are in conflict with their actions. In this case, the commitment was “never” and thus the respondent’s most likely future actions will remain consistent with their verbal commitment. As such, consider not asking customers the NPS question when such inquiries might compel them to future negative actions, such as after a customer complaint or unsatisfying technical service call.  

Despite the indisputable reality of the Consistency Principle, NPS consultants frequently advocate assessing a company’s NPS following contentious situations. Rather than blindly follow this advice, consider measuring your NPS after unpleasant customer interactions, via a web form. Non-verbal responses do correspondingly influence future behavior, but to a lesser extent than verbal responses. However, irrespective of the manner in which you broach the NPS question subsequent to a contentious interaction, understand that you do so at your peril.

Wrong Question

The indirect and passive nature of the NPS question is also problematic in the results-driven environment of the typical startup. Thus, rather than asking, “how likely are you…?” consider a more actionable inquiry, such as, “Will you recommend our company to a colleague or a friend?” Startups should Go For The No and avoid spending extraneous time cultivating lukewarm prospects. A quick “No” is far more valuable to a busy entrepreneur than a nebulous NPS response of “five.”

A binary question will help you identify which customers are more likely to lead to future prospects and which will not. “Yes” responses are prime candidates for future references. A positive response to a declarative question will enhance the customer’s commitment to actually make the promised referral.

Going Beyond The Question

Once a customer commits to a recommendation, proactively ensure that the referral actually occurs. As noted in Personal Pitch, entrepreneurs must make it easy for others to help them succeed. For instance, you can facilitate your customers’ ability to provide you with references by giving them an email template they can readily forward.

Reciprocity is another well-documented persuasion technique. Entrepreneurs should never underestimate the power of a sincere Thank You. Leverage the power of Reciprocity by sending customers who agree to make a referral a small, thoughtful gift in advance of the actual referral. By thanking your customer for a referral they promised to make, you may prompt them to act when they otherwise would not.

If you do not hear from your customer after you send the gift and it is unclear if they actually made the promised referral, follow-up to, “ensure that they received their gift.” In the course of your follow-up, politely ask them for the contact information of the person they referred to you so you can ensure that the prospective customer receives your highest level of service.

Shots On Goal

Net Promoter Scores are a godsend to BDC executives who live in a world of PowerPoint graphs and endless ethereal analysis. However, entrepreneurs are not well served by estimating the probability that a third-party will attempt to score for them at some undefined point in the future.

Hockey fans and entrepreneurs understand the importance of a high number of shots on goal. The hockey teams and startups that take the most shots often emerge the winner. When a startup focuses on assessing the propensity of someone to make a customer reference, they are hoping strangers will score on their behalf. Successful entrepreneurs Hope Less and shoot more.

______________________
John Greathouse has held a number of senior executive positions with successful startups during the past fifteen years, spearheading transactions which generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.
______________________

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Copyright © 2007-10 by J. Meredith Publishing. All rights reserved.

Sherlock Holmes in “The Adventure of the Blue Carbuncle”

Too many entrepreneurs stress about their competition without having enough information to make informed decisions. They need to move beyond the emotional aspects of competing and develop multiple, largely free, sources of competitive information.

There is no need to hire an expensive consultant. As noted in, “Competing From the Fringe,” dedicate a senior member of your team as your “Watson” (you cannot afford a Sherlock, after all). Watson’s role is to diligently and consistently mine the readily available data sources noted below and periodically communicate the state of the competitive landscape to your Core Team.

Securing Information

There are a number of ways you can obtain information regarding your competition without breaking any laws or compromising your ethics. One common mistake is that competitive monitoring is often performed sporadically, usually when a particular competitive event causes alarm. A more effective approach is for Watson to methodically and systematically gather competitive data, leveraging the following sources, most of which are free:

• Competitors’ Customers
• Competitors’ Former Employees
• Prospective Employees
• Lost Prospects and Customers
• New Customers
• Tradeshows
• Partners
• Media Interviews
• Online Resources
• Unsanctioned Blogs
• Student Projects

Let’s explore each of these sources of competitive information in a bit more detail.

Competitors’ Customers - One effective way to draft your competition is to attempt to persuade their current customers to switch to your product. In this way, you can leverage your competitor’s efforts to educate the market and convince prospects of the efficacy of their solution. This approach is particularly effective in emerging markets in which awareness of the product category is low and therefore the emerging technology’s value proposition is not well understood.

Customers that recently completed a purchase within your product category have demonstrated with their dollars an understanding of the emerging technology’s value proposition. In some cases, their purchase agreement may afford them the ability to terminate the purchase, especially if they are experiencing issues with your competitor’s solution. In addition, as they just completed the sales experience, the events will be fresh in their minds and thus more accurately recounted when you debrief them. Competitive drafting is discussed further in Competing On The Fringe.

Competitors’ Former Employees – As discussed in, Turncoats Are Turncoats, it is a dicey proposition to hire a competitor’s former employee. The fact that they are willing to turn on their fellow comrades is not a trait upon which you can build a healthy corporate culture. However, you should interview such candidates and attempt to learn as much as possible regarding your competitor, including: their shared vision and common worldview, the personalities of the leadership team, their thoughts regarding your company and the rest of the competition in general, how they plan to address specific market challenges, etc. You are not looking to extract trade secrets. Your goal is to gain a window into your competitor’s soul, albeit filtered through an ex-employee who may have an axe to grind.

The one exception here is with respect to hiring your competitors’ quota-carrying salespeople. Hire these folks all day long. They generally have a low loyalty threshold and they know how to sell the competition’s solutions. As such, they also know your competitors’ weak points and thus how to best sell against them. Ideally, you will have access to at least one former salesperson from each of your significant competitors as a means of training your team and acting as the category expert regarding their former employer.

Prospective Employees – Competition comes in a variety of flavors. For instance, you are indirectly competing with all the high-tech firms in your entrepreneurial ecosystem who are also attempting to hire top-tier employees. With this reality in mind, you should always ask a prospective employee, “Who else are you speaking with?” This will give you a good idea of who is hiring in your local area and it will help you properly position your adVenture’s opportunity vis-à-vis the other opportunities the prospect may be considering. Understanding who these firms are, what sort of offers they are making and what types of positions they are looking to fill is valuable information which you can utilize when deploying your recruiting resources.

In the event that the prospective employee also interviewed with one of your direct competitors, you can learn a bit regarding their hiring plans, open positions and other surface level operational issues. You can also learn your competitor’s perception of your firm and obtain an insider’s view of their recruiting process.

Lost Prospects and Customers – If you lose a prospective or current customer to a competitor, you must obtain objective, honest feedback regarding why you lost the deal. Were you simply outsold? Did the competition cloud your message? Is your feature-set lacking or did your salesperson inadequately communicate your firm’s value proposition? Such information may be the most important competitive information that you ever obtain.

Your primary objective is to determine why you were beaten. You lost – whether you lost for a good reason or a bad reason is not relevant. Your job is to gather enough information so you can avoid a similar loss in the future. If your competition finds a formula by which they can consistently beat you, you can bet they will attempt to replicate their success over and over. Thus, you need to identify and short-circuit any successful competitor tactics as quickly as possible.

Approach these discussions with your proverbial arms wide open and make it clear up-front that you are not selling anything, nor are you trying to win back the account (although you are always looking for an opening which could result in such a possibility). Make it clear from the outset that your goal is to determine how you can improve your business and serve your customers better. This sentiment is like Mom and Apple Pie to most reasonable business people and thus it is hard to resist.

Once you get the lost customer on the phone, fight the urge to be defensive and launch into sales mode. If you start selling, you have violated the premise of the call and the conversation will likely terminate quickly, leaving the lost customer with a lingering bad feeling about you and your company. Even if it becomes clear that you lost the deal because the prospect misunderstood some aspect of your solution, resist the temptation to educate the lost customer. Follow-up the call with a thoughtful “Thank You” email in which you address any misunderstandings or other issues that arose during the sales process. Review the Listen entry for other tactics you can deploy to make these interactions more impactful.

This is not a job for Watson. You cannot delegate the task of obtaining this feedback, especially not to anyone associated with the customer loss. Your status as a senior executive will add credibility to the fact that your call is solely for the purpose of collecting data and that you are not trying to sell anything. Also, by calling directly, you avoid obtaining filtered information from anyone involved in the tactical aspect of the sale. If you rely on the salesperson to obtain the feedback, it is unlikely you will learn anything negative regarding the sales tactics deployed by your team, such as whether the product was oversold, someone on the sales team was unresponsive, etc. This is a call that MUST be made by you or another member of the Core Team.

New Customers – Just as a member of the Core Team should call all lost prospects and customers, a similar feedback call should be made to all new customers. Ostensibly, you are calling to welcome them to your growing family of customers. However, you can also use the call to determine what they like and do not like about your product, what features they think should be in the next product iteration, their perception of your sales tactics and, most importantly, how you stacked up against the competition and why they selected your solution.

You are seeking repeatable tactics by which you can beat your competition. As such, ignore responses that do not represent repeatable opportunities, such as, “The competition’s sales guy was a jerk.” You are looking for systemic issues that are applicable to the majority of your competitors’ prospects.

Such calls are the corollary to the lost customer calls. Your goal is to understand what your salespeople are doing correctly and determine which tactics resonate best with new customers. Once you gather this information, communicate it to your sales team and incorporate it into your sales strategy.

Tradeshows – Tradeshows are a great way for you to efficiently gain market intelligence on a variety of competitors. Gain an understanding of how prospects react to your competitors’ sale messaging, new products, etc., by walking the floor and speaking with as many prospects as possible.

Do not allow Watson to resort to rookie ploys, such as covering up his nametag and engaging your competitors’ salespeople in a dialog. He will not learn much and this high-risk approach could backfire and ruin your company’s good-old-boy persona, which is advocated in Competing From The Fringe. Besides, this approach is lame and downright wrong. It is sufficient for Watson to walk the floor with his eyes and ears open and talk with as many prospects as he can collar.If your competitors are utilizing large, glitzy booths, do not hang your head in shame. On the contrary, make like Bobby McFerrin and “don’t worry, be happy.” The bigger your competitors’ booths, the bigger your smile should be. With each additional square foot of booth space, the lower the likelihood they will ever see a positive ROI from the show. See Best Of Show for tips regarding how to maximize your tradeshow expenditures.

Partners – Another great source of competitive data are your partners. As described in The Bro Factor, if you have appropriately Bro’ed Up with your partners, they may be inclined to share non-confidential information related to one or more of your competitors. Unfortunately, anything that you tell a partner, even items which should be covered in a non-disclosure agreement (“NDA”), could potentially be leaked to a competitor. This is especially true when one or more of your competitors also shares a close relationship with one of your partners, such as when a number of parties are involved in an industry trade group or other similar corporate alliance. If a particular partner has loose lips in your presence, you have to assume they will also freely share your information with their other partners.

Media Interviews – As boring and banal as they may be, Watson should make it a point to read or listen to every interview given by all of your competitive Senior Executives. Most people cannot shut their mouths when a microphone is placed in front of them and they often say things that they would otherwise never want their competition to hear.

If you follow the “Keeping Your Enemies Close” advice from Competing From The Fringe, you may know the person being interviewed on a personal level. This will allow you to better interpret the context that underlies their statements and thus gain more market intelligence from their blabbering.

Conversely, when you are interviewed, picture your arch rivals sitting across the room taking notes. This does not mean you cannot provide a compelling and engaging interview. However, the image of your note-taking rivals should act as a check when you feel the urge to prematurely disclose a future initiative that could hurt your competition.

You should also avoid giving your competitors motivational fodder when you are interviewed. Many a coach has motivated his team by posting on their locker room walls belittling comments made by their opponents. Ensure that nothing you say will end up posted in your competitor’s lunch room as a means of rallying their troops against you and your adVenture.

Online Resources – Online sources are fairly obvious, but they bear mentioning due to the accessibility, timeliness and richness of the associated data. Watson should sign up for RSS feeds, using your competitors’ companies and product names as keywords. Watson should also systematically review key competitors’ sites, with an eye for shifts in messaging, new product information, hiring initiatives which can give you a glimpse into their near-term Action Plans, funding events, press releases, etc.

Unsanctioned Blogs – Personal blogs written by your competitors’ employees can also be meaningful sources of data. Even though such sites are not intended to disclose confidential information, they often can give you a peek into your competitors’ worlds. For instance, if the uber-geek engineer notes, “I have been drinking more than my usual share of Red Bull, trying to meet the unrealistic product launch goals laid out by our marketing nimrods,” then you have some insight regarding the timing and status of their next product iteration.

Such blogs also offer you a window into the state of your competitors’ corporate cultures. Numerous postings which castigate the competitor could represent significant discontent that you might be able to leverage in your recruiting efforts, sales tactics, etc. Watson may have to do some digging to find these blogs, but searching on competitive employees’ names will often yields surprisingly fruitful results.

Student Projects – Sponsor a group of MBA students to prepare an analysis of your industry. The report should be made available to all participating companies. Control the nature of the questions to ensure the MBAs gather data that is of the most use to you. As you are the study’s sponsor, it is appropriate for the students to brief you regarding all the information they gather, even that which is not included in their published report. Such information will provide you with competitive insights that might be impossible to otherwise obtain. The degree to which you elect to highlight the fact that you are sponsoring the project is at your discretion, as discussed in the following section.

Going Over The Line

I do not advocate directly engaging a competitor under false pretenses, as this crosses my ethical line in the sand. However, such determinations will differ among reasonable and honest people. In any event, be sure to clearly articulate your ethical boundaries to Watson, in order to avoid a potentially embarrassing situation.

In one of my ventures, we determined that a prospective customer was actually salesperson employed by one of our competitors. This prospect was very quizzical and was given several demos. We eventually outed him because of the inconsistencies in his story which led us to trace his IP address to the competitor’s headquarters.

Ethical issues aside, I was most angered by the fact that this charade negatively impacted my sales team’s productivity. I called the competitor’s CEO, who disavowed any knowledge of the salesperson’s actions and indicated that he would address the issue. I never knew if the employee was disciplined, although he continued to work for the competitor for several years following the incident.

This entry outlines a handful of sources of free and nearly free competitive information. Irrespective of the specific tactics you deploy, assign a Watson to the task and require them to periodically report their findings to the Core Team.

The good news is that competitive data is all around you. There is no need to pay high-dollar consultants or hire competitor analysis agencies (see Beware The Consultant); Watson will do just fine. Once you start sleuthing, you will find that gathering information about your competitors is indeed, elementary.

Charles Dickens, Great Expectations

A: You win a $20M lottery. Several days later, you learn that four other people also had the winning number and thus your actual winnings are reduced by $16M to a total of $4M.

B: You win a $2M lottery. Several days later, you learn that due to an accounting glitch, your initial winnings were misreported. Your actual winnings increase by $1M to a total of $3M.

In which situation would you be happier?

High School Algebra

You would likely be relatively happy winning the lottery, irrespective of the ultimate denomination. Winning is winning. However, in the first instance, many people would experience a sense of loss, as the winnings were reduced by $16M. In contrast, in the second instance, the ultimate size of the winnings was increased by 50%. Even though the net gain is still significantly larger in the first instance (i.e., $4M vs. $3M), the manner in which the events unfolded contributes to a sense of either fulfillment or failure.
In High School, we learned that Slope is defined as, “the ratio of the altitude change to the horizontal distance between any two points on a line”. Entrepreneurs on The Fringe know that in business, the expectations Slope is dictated by the manner in which you manage your Stakeholders’ expectations.

As the Lottery example highlights, you can enhance a Stakeholder’s satisfaction by delivering results that exceed their expectations.

This concept underlies one of the most over-used phrases in business: under promise and over deliver. In the startup world, this is far easier said than done. As described in Personal Pitch, Entrepreneurs constantly battle numerous competing interests in an effort to entice Stakeholders and Donors to lend assistance to their adVentures. For some entrepreneurs, the temptation to oversell the future in order to attract near-term resources is overpowering.

The graph on the left represents negative slope. Expectations were initially set at Point B, a significant movement up the slope from Point A. Unfortunately, expectations were subsequently reset at Point C, falling short of the previous expectations.

This graph on the left illustrates how effective expectations management can result in Positive Slope. As in the first graph, Point C falls midway on the line. However, in the second graph, the attainment of Point C represents positive progress from the expectations set at Point B, rather than a regressive, disappointing downward movement.

Bagging The Sand

There is a fine line between managing your stakeholders’ expectations and outright deception. Deception arises when you already know a particular outcome, yet you misrepresent or withhold your knowledge. Deception is not the essence of expectation management. As noted in Time Wounds All Heels, entrepreneurs on The Fringe know that they cannot win in the long run if they engage in dishonest behavior.

Managing expectations involves guiding people up a positive slope when the results are unknown. For instance, if you are speaking to a venture capitalist and you are confident that you will close 15 new customers within the next 30-days, indicate that you hope to have 10 new accounts within the next 45-days.

This conservative approach will minimize the risk that you impair your credibility by missing your forecast. It also offers you the opportunity to guide your Stakeholders up a positive slope. It is unusual and refreshing for Stakeholders to hear an update from an entrepreneur who has missed her forecast because she underestimated her results.

The obvious challenge is to communicate meaningful and compelling objectives that will motivate and excite your Stakeholders, while ensuring your team a high probability of success. If you set the initial expectations too low, you may damage your credibility and be labeled a sandbagger. You may also fail to capture the would-be Stakeholder’s interest if you represent the potential opportunity as too modest.

Establishing reasonable and highly attainable financial projections at the outset of your adVenture will also help you avoid a down round investment. Such investments arise when a company significantly misses its financial goals and must seek additional financing. In a number of instances, the Founders and employees take a significant dilution hit as the company’s valuation in a down round is, by definition, lower than in its most recent prior funding round. In addition, such negative slope rounds may also contain financial ratchets which allow investors to participate in the down round at highly advantageous terms – advantageous for them and detrimental to the owners of common stock (i.e., Founders and employees via stock options).

Negative Selling And Positive Surprises

When you establish reasonable but relatively low expectations, you may find that your Stakeholders will encourage you to aggressively revise your projections. For instance, you may hear statements such as, “Come on, you should be able to sell twice that much.”

Offset such well-meaning attempts to prematurely pull your forecasts up the expectation Slope with a bit of negative selling. Rather than countering with an emphatic denial that such results are impossible, make it clear that you and your team will work to achieve the best results possible. However, remind the Stakeholders that it is prudent for the company to publicly commit to a forecast which has a high confidence factor so you can maintain positive slope momentum and a high level of morale within your team.

All surprises should be positive, even if they really are not surprising to you. For instance, if you are properly managing expectations, you will periodically have the opportunity to communicate a surprise sale, partnership, alliance, etc. to your Stakeholders. If you communicate every potential deal to your Stakeholders, not only will you inundate them with too much information, they will often focus their inquiries on the potential deals you previously trumpeted but which never came to fruition. By undersharing the specifics of your deal flow and sales pipeline and not overselling the scope or timing of a particular deal, you can avoid the inevitable sense of loss associated with the deals that got away.

Positive surprises instill confidence and cause Stakeholders to wonder what other positive surprises you have waiting in the wings. This is far more advantageous than causing Stakeholders to wonder why you keep “losing so many deals”. The law of averages dictates that you will lose more deals than you close. As such, keep your Stakeholders out of the kitchen and only serve them finished meals. This approach will be good for your indigestion, as well as that of your Stakeholders.

Snapshots

Many Stakeholders’ exposure to your adVenture is in the form of episodic snapshots, such as monthly Board of Directors meetings, quarterly customer reviews or periodic all-hands employee meetings. The nature of such episodic meetings is to review what was previously discussed, present the company’s current results and then explore the company’s future opportunities. If you are properly managing your Stakeholders’ expectations, you will be able to quickly recap the past projections (which hopefully you have exceeded) and focus on how the company will continue progressing on a positive slope.

If you mishandle your Stakeholders’ expectations, you will be forced to spend most of your time explaining why the company missed its projections and what changes you have put in place to ensure you will not miss them again. Not only will this demotivate your Stakeholders, it will also limit the time available to discuss your growth plans and how your Stakeholders can help you meet your future objectives. By establishing meaningful goals which are readily achievable, you can ensure that the present will consistently be better than the past and that the future will, in turn, be better than the present.

Segment the data you share with your Shareholders, based upon their respective roles. For instance, I often maintained internal and external sales forecasts. I used the internal forecast to manage the performance of my sales team, establish their quotas, bonuses, etc. My external forecast, which was less aggressive, was our commitment to our Board and served as the basis for our expense budget. As such, we motivated our sales team to meet the internal sales budget while limiting our spending to that which was in line with our less aggressive, external forecast.

This duel forecasting approach ensured that: (i) we communicated conservative and figures to our various external Stakeholders, and (ii) we maintained a solvent cash position by basing our expenses on our more conservative, external sales projections.

Capitan Rollercoaster

The highs are higher and the lows are lower at a startup. Due to the long-hours, uncertainty and never-ending pressure to survive, your team is likely to overreact to both small wins and small losses. As Capitan of the Startup Rollercoaster, you must modulate such company-wide mood swings. As noted in Bang A Gong, do not attempt to smooth the highs and lows by maintaining a stoic, unemotional response. On the contrary, create a tempered, judicious culture of celebration.

Managing expectations is a constant balancing act. Your Stakeholders will remain happy and applaud you from the sidelines as long as you maintain an increasing ratio of the altitude change to the horizontal distance between any two points on the line. It is as simple as High School Algebra.