Chances are that many readers had to do one of those things as corporate employees or as members of any large organization that asks management consultants for help: brainstorm on a vision, formulate a mission statement, create a business plan. As an aspiring start-up business owner you cannot escape trainers who tell you need a have a logo designed by professionals, hire MBAs as CFOs, hire more professionals to dream up a great marketing strategy, and execute That Great Plan based on Your Sincere Belief in That Great Singular Idea.
This does not resonate with my experiences as an entrepreneur though. You might expect correctly that I would rather go for antifragile ‘dilettante’ tinkering – and all those buzz words make me remember that eerie documentary of brave new corporate world.
It is refreshing to find confirmation by a very successful founder of start-ups. I have linked Frank Levinson’s Top 10 Things You Must Have to Start a Business so often – it deserves a dedicated post. As usual I point out some resemblance with Nassim Taleb‘s ideas.
Note to readers who might miss the physics in this post: Frank Levinson is a physics PhD and self-educated programmer. He has given an extensive interview about his career to the Center for History of Physics of the American Institute of Physics – the transcript can be found here. I was most impressed by his ability to deal with failure – he founded his successful venture Finisar after he had been fired as a CEO of a company he had founded himself. Levinson called it Finisar as he hadn’t finished anything before.
You Need Comfortable, Cheap Furniture – It doesn’t matter how you look but what you do.
This is in contrast to all that advice about branding and (online) reputation. Customers should not be jealous of your Porsche company car or suspect that those high rates they are charged for go into hiring designers that tweak your corporate identity every month.
Remember the coconuts!
The German title of Monty Python and the Holy Grail is: Knights of the Coconut. Horses were replaced by coconuts for budget reasons and this joke has gone viral. Monthy Python were creative and innovative because of constraints and necessities.
Levinson believes that therefore entrepreneurs need not enough money. In addition, the best money you can use is customer’s money – found the company on an existing revenue stream. Or literally use your own money.
After all, it is about what Nassim Taleb would call Skin in the Game.
Pride of a Fat Baby and 1000 Ideas
Which pride does a fat baby have? Exactly: None. In contrast to Focus on Your Core Business and Go for that Great Idea (probably accompanied by Follow Your Passion) Levinson advocates accepting project requests appearing as tangential to your aspired core business. His company did contract engineering for some years, then delivered bad products we considered good ones and finally manufactured really good products.
This is Taleb’s Optionality. Those seemingly odd projects allow for interaction with real customers, collection of feedback from the real world. Levinson also advises to love your tough customers – those who complain about the product – because they are really interested.
Non-core-business projects might give you new ideas and turn change your so-called business plan based. Actually, you should be generous with ideas and give away 1000s of ideas (for money), e.g. in contract engineering, rather than believing you have stumbled upon that singular idea – knowing exactly what the world really needs, based on your impeccable market studies.
“Common Sense”: You Need Customers
Sounds trivial, but isn’t. Frank Levinson’s key message is that customers are people who place an order and pay for services or product received. Customers are not: People who like your idea, would love to get free samples, and do co-development.
It is so simply but yet it cannot be overstated when you read it ten times a day in articles tweeted how important it is to grow your network, exchange ideas, find partners.
It resonates with my experience: The most enjoyable business relationships start with a client really in need what I offer – I do it – the client is happy and pays in due time. Actually it always was those business relationship that naturally morph into friendships. But the alleged friendships with people who want to discuss market potential over a coffee hardly ever turn into business.
Sure, customers need to know you exist. But as Levinson I feel that advice for start-ups over-emphasizes the importance of marketing to the point of replacing the requirement of having a very product with sophisticated marketing! Professional marketing, business plans, Vice Presidents (suits) should materialize very late in the company’s growth process – before an IPO, thus probably never if you decide to remain a small privately owned business.
Social media can help to connect with potential clients – your mileage may vary depending on the very nature of your business. Yet I believe Levinson is still right in being wary about the significance of a website as engineers are shy and hope to replace face-to-face customer contact by virtual online communications.
But watch the video yourself – 19 minutes well spent!
20 Comments Add yours
Rings very true. Includes elements of “Lean Innovation” and “effectuation.” In my experience with startups in the dot.bomb era I found that many of the successful ones did consulting work early to help self-fund. Thanks Elke!
Thanks a lot, Gary! It’s good to have some confirmation by a seasoned practitioner!
Given that I have never had anything to do with big business I’m not sure I can comment Elke. Perhaps I can say something about higher education … in particular I can say something about what certain folks think fosters the educational experience and what I believe does so most effectively. I think many believe that flashy laboratories and the newest equipment lead to a better educational experience. I would argue that good, engaged, faculty and students who are eager and willing to invest in their education is what leads to learning. I think, however, that some are convinced that the sparkle and flash of ‘new stuff’ is somehow the key to success. How frustrating. Moreover there seems to be a continual need for new programs, new approaches, (and oh, how I dislike the word) new rubrics. What’s wrong with the way I learned … was there something wrong with that model? Does this relate in any way to anything you said about business? Perhaps. D
Your comment absolutely makes sense in relation to this post, Dave. Actually I had my very first revelations on those management mantras when I was an employed scientist (Not higher education, but R&D owned by government by the majority). I have then seen the same Powerpoint slide and talk about efficiency, growth, quality control, business plans, standardized methodologies etc. in numerous contexts and industry sectors – and they are always the same, no matter if this is an MBA-type course for high-powered managers or a quaint business for freelancers at a small local college.
So my theory is (and I am backed up the accounts of the polemic philosophy professor I mentioned in our recent conversation, on my previous post) that these management mantras are created in some business schools … and then trickle down to … anything! Incl. schools and universities. After all those MBAs’ existence need to be justified. Checking out universities’ websites today I feel much, much more personnel is employed in marketing, administration or quality assurance. It seems there is at least one manager per productive unit (just as in large corporations, BTW). Though I have only anecdotal insider insights into academia I also feel it does not help – rather the opposite. Teachers and researchers are bothered with mind-numbing bureaucracy and ever changing new fashionable “management tools”.
I have been a succesful entrepreneur in the past, but these days, I’m just self employed. I have always put my children first, so that meant that last Friday I went to school by 2.30pm to see the youngest’s new dance on wearing fluo colours to school. One of my now pensioned customers told me recently that he never saw his children grow up. Now there are many reasons for this change from ‘cool’ business to ‘lukewarm’ self-employed freelancer. The most important must be that I have changed a lot over the past 20 years. Trying to apply my ever changing philosophy in what I do. Another one is our government, seeing a criminal in every businessman. So I do break even, but not a penny more. I already pay enough taxes. Don’t take my profit, I don’t want to make any. I also never wanted to become a slave of employees, so I never wanted to employ any. For every 1000eur they get in their hands in Belgium, ‘we’ would have to make 3000eur.
So now I’m a freelancer, trying to make a living that is just enough, enabling me with enough free time (although it still doesn’t come when I want it, but when the customer has no money) and time to deliver new ideas to the students I teach, and hopefully they will be more important to our economy than I have been in the past 5 years.
Thanks, Bert! I can relate – any I have heard similar stories like this from colleagues … who started companies at a freelancer, then “grew the business” (as the marketing gurus demand) and finally felt slaves to their companies, accountable for employees, entangled in all kinds of long-term contracts, and even were less profitable in terms of their own income.
It is a deliberate, valid and reasonable choice not to “grow a business”. That’s why I find it even more ridiculous that those mantras about “vision” and “marketing plans” seem to be taught in every business 101 course for freelancers, too.
An extremely refreshing point of view, Elke as the world tends to worry more about perception than reality these days. Marketing and promotion is no panacea for a substandard product or lousy service. Inevitably word of mouth and now word of social media will catch up with any glossy website.
Thanks, Judy! Yes – I am also hoping for and actually believing in a gradual change… a subversive bottom-up movement, actually :-)
It’s true! In the end all that really matters is that your balance sheet comes out on the right side of zero. Back in the early eighties–I think it might have been the winter of 1982–my university residence roommate was in the business faculty and about t start a work term (most of the professional schools at Memorial University follow a co-op model where they alternate academic terms with work-terms,. Those were the days before oil so the economy was not that great here. There were not enough job placements for all of the students so the co-op office was struggling and was offering the option of sort-of (chaotic) academic terms to most of the students. Not my roommate! “I’m getting myself a job!” he announced and stamped off on the first morning. That evening, when I returned back to res for the evening there it was in the middle of the floor: A “Filter Queen” Vacuum Cleaner. He would be selling them door-to-door.
And he did.
He was successful–probably made the most money of any work-term he had! Here’s how he did it: (1) knock on ten doors before expecting any kind of reception (2) for each customer who lets you demonstrate you have a 1 in 3 to 1 in 5 change of making a sale and (3) CLOSE THE SALE.
He’s gone on to become a successful business person but he still tells me that he may have learned the most important lesson of all during that work term, namely that you need to close the sale. You cannot learn that in a classroom.
I would add one thing, though. I think he is taking it a bit too far when he states that you just need cheap comfortable furniture. Yes, customers will judge you on the quality of your work but prospective customers will also to some extent judge on appearances. So, while you do not have to get expensive furniture it is still important to pay enough attention to appearances. Now, “enough” does not mean an expensive makeover involving interior designers and such but it does mean a clean and well-maintained place to work that is safe, comfortable and which gives the impression of people who care about their work, themselves and their environment.
There is one exception: in the world of big business where people do judge by appearances, elaborate, expensive offices and suits are the difference between customers and no customers. That’s not the case in small business, though, where “clean, tidy, safe and comfortable” is the rule :-)
Oh, and if you want cheap furniture buy used–cheap new furniture is useless crap that falls apart :-) Lots of good used stuff out there, though!
Thanks, Maurice for sharing that great story! The door-to-door vacuum cleaner salesman is quite an icon – probably a living cliché! :-) I think your mileage may vary – I could not for my life sell a packaged product such as a vacuum cleaner, but people told me I’m good at selling my services. The problem with those sales / networking gurus’ advice is that they believe there is a one-fits-all approach (and that approach needs to be put in grand ‘academisized’ language to get people attend your business courses).
I think the Cheap Furniture argument is a bit tongue-in-cheek ;-) It is a great symbol – illustrating that you should care about substance first and the details of refined appearance later. We have cheap (new) furniture, too, and clients usually say our office really looks great (I think they mean it :-) ). I think you don’t notice the difference unless you look very closely.
I believe the world of big business is changing, too, as corporations become more ‘virtual’ literally. I know employees of large corporations who don’t have a corporate office anymore – they work in their home offices. The ‘suity’ rituals are of course still important when you try to close a deal based on formal rituals (Request for Proposals, related presentations,…) I have heard about purchasers who enjoyed ‘torturing’ their potential clients, that is: Having suppliers lined up in suits in mid-summer while dressed casually themselves. Yes – it is finally about the ultimate show-off of power and archaic rituals.
I’ve been thinking about starting my own company for long and have always been deterred by all the “marketing strategy” and “Great Plan” talk. So I found this one really refreshing. It actually resonates with something I read in this book about negative thinking (which is basically a rant against “positive thinking”) which basically says sometimes the ability to improvise and use feedback effectively is more important than goal-setting. After all, if it’s your first business, you really have no idea what to expect, so all this business plan/goal setting is just a castle in the air.
Thanks, David! Yes – I think the Great Plan Talk is particularly silly when it comes to freelancers and very small businesses. And Levinson even debunks it for basically any business not intending to go public.
“[C]ustomers are people who place an order and pay for services or product received. Customers are not: People who like your idea, would love to get free samples, and do co-development.”
Bingo! ;) That’s something that a lot of marketing and networking gurus overlook.
Especially the How-to-get-more-followers-on-social-networks gurus :-)
I always enjoy your business posts, Elke. Much of my own experience leads me to agree with you. It is good to be reminded by Levinson that the process of pleasing clients is a process, which means misteps and changes of direction, communication and collaboration leading to the finished product which, we hope, meets their needs and grows our skills set at the same time. I am a little out of sorts with some of the networking models I’ve encountered, the ones of free give-aways which never seem to generate a solid set of feedbacks for meeting that potential client’s needs.
Thanks, Michelle! Yes – I agree. I might not have believed it if somebody told me but it always was either 1) a very easy and information relationship based on a clearly uttered question by a customer ready to pay or 2) endless dreadful discussions, bureaucratic procedures and/or attempts to seize know-how for free, like: three “presentations” or “concepts” to be prepared (for free) when responding to a Request for Proposal… no.3 detailed at a level that allows the customers to finally complete the project on their own. However, I had always been blessed as 2) was very, very rare.
Anecdotal evidence… but it seems to be the same if a large corporation gives free consulting hours as a “teaser” to potential clients: Those clients who never would pay for consulting would try to squeeze out all knowledge of that consultant until the free hours have been consumed – end of story.
I am not against networking in the sense of “informal conversation is the best basis for business” – but according to my experience the best networking is happening when you are working paid contracts: I was often engaged by company 1 and onsite I met and worked with people from company 2. If company 2 had a related issue later they would contact me. It is invaluable as people know how you work – under real-life conditions, under pressure etc. – in contrast to having met you at a “networking event”.
Yes, I agree that there is a lot to be said for gauging others and allowing yourself to be measured via the work you do, rather than the discussion about the work you can do. Perhaps because I’m more reluctant than some of my colleagues to hang out at the coffee bar, I do prefer the work to dictate the rhythm… work is endless, but conversations that run dry pause in uncomfortable silence.
Also, because I’m taking the weekend off except for those brief pauses when clients are contacting me today (something I confess, I enjoy), I am working out a blog post… and then, because I’ve had The Black Swan sitting on the edge of my desk for a month, I want to start it!
Looking forward to any post that might be triggered by The Black Swan. I have just promoted Antifragile to one of the books that changed my life (on Twitter).
I like your phrase: “I do prefer the work to dictate the rhythm” – I like being driven by work, too. Probably that’s why I love troubleshooting and debugging. For a long time I believed this isn’t good, but passive and reactive – I am responding to clients and doing what they want. But finally I have come to the conclusion it is the right thing to do for that very reason. And I am not a party freak, either. I guess, I have said it before: My priorities are: My own real life, real hard work – at night, under pressure if necessary,…[probably something else I can’t remember right now]…,networking events.