Growthink Blog

Entrepreneurial America - NOT Shutdown


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Watching the disaster of a process that is the D.C. budget drama, I found myself with a curious reaction.

And maybe even a little bit of a selfish one.

It was, by golly, how happy I am that I get to work in this so dignifying world of business and free enterprise and not have to waste my precious life energy on such nonsense.

And then feeling a bit more generous, I felt happiness for the hundreds of millions if not now billions of people worldwide that are able to do likewise.

To work in or at a business, just a plain old simple business.

A restaurant.

A software development firm. A medical device company.

An accounting firm. A roofing company. An insurance agency.

A tanning salon. A yoga studio. A specialty retailer. A freight forwarding company.

Walmart. A donut shop.

Now don't get me wrong, government is important.

And that those that work in it often are mostly truly public servants and we should be thankful for their service.

And yes, our vexing public policy challenges require our attention and concern.

But it isn’t that important.

So much of the real action in this world of ours takes place in the micro.

In that wonderful world of business production.

The world of multi-billion dollar companies like Cisco utilizing information technology to accomplish the accounting miracle of closing their books each and every day.

The world of General Electric growing great managers and business leaders time and time again.
 
The world of amazing customer service at places like Zappos and how that service dedication translates to strong profits that fuel our world.

The world of that sumptuous donut fresh out of the oven.

The world where, with a click of a button on my phone, I can buy a mobile app that sends me my text messages as e-mails (but don't ask me why I want this).

The world where I order new leather seat covers for my car, from Greece, on Ebay, and at a fraction of the price of what the dealership is asking.

And oh yes, by doing so making a small dent in that nation's debt and fiscal crisis.

And it is the world of my own business’ unique processes and project tasks and how we will profit from this burgeoning new world of global service exports.

Yes, the real and meaningful action is in this amazing 21st century global world of ours of hundreds of millions of points and more of concentrated business production.

That creates for all of us, this transcendent potpourri, this never-ending buffet, of essential, helpful, frivolous, sometimes conspicuous, but so blessedly diversified consumption.

And you know what else? 

History has taught that the more folks focus on getting great at what they particularly produce, no matter how great and glamorous or small and prosaic it might be.

Well, it is by so doing that all of our fiscal cliff and other challenges as if by some magical hand just seem to take care of themselves.


Fed Easing: Three Winners


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The word from the Fed last week that it would continue with its quantitative easing - purchasing approximately $85 billion per month in U.S treasury bond and de facto continuing to expand the country’s money supply - signaled that that the era of extremely low interest rates will continue.

Predictably, stock markets worldwide cheered along with it being seen as a very positive signal for the well-recovering US housing market.

Now, as to what it means that the Fed has, since 2008, expanded the U.S. Money Supply almost 400% - from $800 billion in 2008 to over $3.5 trillion today?

Well, it doesn’t take a Nobel Prize in Economics to reliably predict the inevitable outcome…

Inflation.

Now, in spite of its strong negative connotations, an inflationary economy while extremely painful for very many, also offers opportunities to profit and win.

Here are three:

Winner Number One: Debtors. This is obvious, but easy to overlook. Those owing money at set interest rates - homeowners with 30 year fixed mortgages and companies issuing bonds - will benefit enormously as the inflation train rolls in.

Let’s look at a worst but not overly improbable case - a hyperinflation period where all prices rise 10X, resulting in a $500,000 home able to be credibly listed for $5 million.

It sounds crazy, but over the years in countries where hyperinflation has hit, this has not been an uncommon occurrence.

Now let’s say that home was financed (or refinanced) with a $400,000, 30-year mortgage at a fixed rate of 3.5%.

Well, with its price increasing from $500,000 to $5 million - while the amount owed on it remains fixed - all of a sudden the house’s equity to debt ratio skyrockets from 20% to 92%!

Winner Number Two: Companies with Pricing Power. Businesses with the ability to increase prices quickly without seeing sales plummet - think luxury goods and easily adjusted staples like gasoline at the pump - will hold significant advantages over businesses constrained by “stickier” prices.

Examples of the latter include services like mobile phones contracts and gym memberships, and the classic example of restaurants not increasing prices because of the cost of printing new menus.

Winner Number Three: Private Companies for Sale. My favorite, as there is no greater form of an entrepreneurial, economic success than a sale of a business at an attractive price.

In a world of rising prices, the acquisition appetites of larger companies increase as their cost of money - as driven by their valuation multiples - decrease.

This is most evident for public companies, now trading at a rich 18x earnings (S&P 500), who are able to buy smaller, usually private companies with the relatively cheap currency of high multiple public equity.

This frothiness also drives the financing environment, where buyers (investors) and sellers (entrepreneurs, companies seeking capital) more easily strike higher risk, higher valuation deals (see Fab.com, HootSuite, and scores of others) with an ease that isn’t there in a flat or deflationary environment.

So, if you're an entrepreneur, think about accelerating and intensifying both your financing and exit planning efforts.

And for investors, remember that the worst strategy in an era of rising prices is to be standing still and sliding away in fast depreciating cash.

P.S. Click here to complete our survey on investing and entrepreneurship and have a free cup of coffee on us!


Private Equity and Your IRA: The Pathway to Tax-Advantaged Returns


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Individual Retirement Accounts, or IRAs, in all their forms - traditional, Roth, 401k, Defined Contribution, Simple, SEP, 403(b) and 457, have become increasingly popular vehicles for private equity investing.

For the individual investor, investing in private equity via a "Self-directed" IRA has a number of key advantages:

First and foremost are tax savings - both at the time of investment and as the investment appreciates.  In some circumstances - for pre-tax contributions via a SEP-IRA for example - up to $49,000 can be invested on a pre-tax (i.e. tax deductible) basis.

Secondly, the power of tax - free compounding of interest, dividends, and capital gains - via both traditional pre-tax IRAs as well as the increasingly popular (and increasingly tax-advantaged) post-tax Roth IRAs is enormous.

In high-return and payout scenarios, where there are larger cash dividends and/or capital gains paid on an annual basis, the value of tax free compounding can lead up to a doubling of total investment return when compared to taxed compounding.

And thirdly, investing in private equity via an IRA addresses "de facto" arguably the key negative of private equity investing - its illiquidity.  This is because, to encourage a long-term, retirement-focused time horizon, under the IRA umbrella there are significant, structured penalties for early withdrawl.

In short, IRAs are ideally designed to house long-term investment assets with high capital appreciation potential.  This is, of course, the core objective of almost all private equity investing.

 


This Ain't No Party, This Ain't No Disco…


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Last week, I wrote about the power of business intelligence dashboards.

How, for the first time, smaller businesses can harness the power of big data to more efficiently and profitably manage their companies.

Some readers expressed skepticism that this "stuff" actually works.  

That it is just more "noise” that causes entrepreneurs to get “lost in the weeds” versus long-term thinking and planning.

There is some truth to this.

Heck, “Big Data” at its worst is probably best personified by Wall Street “quant jocks” who equate positive expected value "bets" with larger, more foundational truths of right and wrong, and of good and bad.

To these concerns, let me offer a few suggestions as to how to best utilize business data to support, but not drive, leadership and managerial decision-making.

The first point is that for the vast majority of small businesses “getting lost” in the data is the least of their concerns.
 
A far bigger one is simply analyzing anything more than the barest minimum of balance sheet - "i.e. How much money is in the bank?" and profit and loss statement - i.e. “What were our sales last month?” data.

And when broader data, like the number of incoming leads, sales proposals, average call hold time, marketing spend per action, e-mail open and click-through rates, is analyzed…

…so much of it is either incomplete or just flat-out incorrect to make doing so an exercise in futility.

AND the data that is complete and accurate sits in so many places, Excel worksheets on the sales manager's computer, deep in a little understood (and used) CRM, in the reporting functionality of software as services like Grasshopper, IfByPhone, Constant Contact and Google Analytics to name just a few…

…that a way too high percentage of the time and energy set aside to analyze it is outright wasted in simply accessing the reports from the data sources that house it!

The simple answer to these challenges is to utilize a best-of-breed business intelligence dashboard that:

•    Automatically collects and updates all the data in one easy to access place;
•    Has alerts built-in to flag incomplete or way-out-out-the ordinary data; and,
•    Is arranged and presented in a visual and formatted way that works for the executive reviewing it.

But it goes deeper than this.
 
You see, leading and managing a business based on proper data collection and analysis is no longer a choice - it is a necessity. 

Because all of our best competitors are doing it.

And doing so along with proper and appropriate strategic repositioning as the consistent and correct interpretation of the data allows, affords, and demands.

Or, as David Byrne of the Talking heads once so famously said “This ain't no party…this ain't no disco…this ain't no fooling around. “

You see, when it comes to data-driven decision-making, it has become a matter of going big or staying home.

As in admitting that one is really not that serious about growing and sustaining a business of lasting value - one agile enough to adapt and evolve in the face of technological and marketplace change, and of competitive threat.

Now, I don't believe this.

No, the best entrepreneurs I know are as serious as they can be about not just surviving but thriving in this massively opportunity-filled world of ours.

Just take it one step, one click, one API integration at a time.

Sooner than you think, your business will be running more responsively, more nimbly than ever.

Then watch the profits follow.

 

P.S. Like to demo the Growthink Business Intelligence Dashboard?  Then click here to learn more.


Vistage


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This past week, I had the pleasure and honor to present to John Morris' Woodland Hills, California Vistage Group.

For those that don't know it, Vistage is one of the world's largest CEO and business owner organizations, with more than 17,000 members in 15 countries.

This is an impressive group - leaders of companies with average sales revenues of $32 million and competing and prospering in industries that run the gamut - from services and manufacturing, to construction, retail, and real estate.

At the core of Vistage are their peer advisory groups -"Mastermind” meetings of 10 to 15 executives that over time develop a productive and high-trust dynamic through which to attain breakthroughs of insight and accountability around and about strategic, tactical, and management challenges.

Expertly moderated by trained chairs like John - a tour de entrepreneurial force in his own right as co-Founder and Chairman Emeritus of the Tech Coast Angels - Vistage groups are where the hard, methodical work of small business building and growth gets done.

I was asked by John to present on best practices, as they apply to smaller companies, of data-driven decision making and business intelligence dashboards.

It is obviously a very timely topic - as “BI” tools and software have matured in the last few years to become for the first time truly easy to use, effective, and affordable for smaller companies and organizations.

In my presentation I talked about how the companies getting the highest “BI ROI” connect the dots between their "old" and "new" school strategic planning and thinking.

They are old school (in the absolute best, non-pejorative sense of the term) in that they recognize that strategy

…arrived at through Mastermind get-togethers like Vistage, through board and advisory board meetings, through corporate “retreats” and through any form “step back and reset” get togethers - remains fundamental in attaining and maintaining long-term business success.

And they are new school in their leveraging the very many best-of-breed business application software as services to arrive at this strategy.

Tools like CapitalIQ, Simplycast, The Resumator, Box, Grasshopper, Wufoo, Smarsh, IfByPhone, SnapEngage, Docusign, Hootsuite, Infusionsoft, and Interspire that automate traditionally laborious and repetitive business functions.
 
And, as they do, collect massive reams of data on much of the marketing, sales, operations, finance and management activities of a business.

And, for the first time, the technology has finally matured to where all of this collected data can be automatically organized, standardized, and consistently presented on an always-on, always-accessible, and graphically “Appleized” Dashboard.

I was thrilled that John offered me the opportunity to present both Growthink’s "Old School meets New School" business intelligence philosophy, along with our dashboard offering.

And as I did, I truly felt blessed to live and work in a time when technology has created such promise and power to allow companies to run better, easier, and more in alignment with their missions than ever before.

And as they do, well…

…the best numbers on the best dashboards are starting to show increasing piles of profit and cash, too.


Private Equity Investing: Secrets of Doing it Right (Part I)


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(Click HERE to complete my survey on investing and entrepreneurship and have a free cup of coffee on me!)

Last week, I talked about the communication breakdowns that occur when investors and entrepreneurs talk about risk.  

Well, in most forms of angel and early-stage private equity investing, these breakdowns flow from a misunderstanding of the power and nature of outliers.

The concept of outliers and how they apply to early stage private equity investment was best described by the Lebanese thinker and writer Nicolas Taleb, in his best-selling books "Fooled by Randomness" and "The Black Swan."

In the Black Swan especially, Taleb described the nature and importance of outliers in a modern, inter-connected economy:

“What we call here a Black Swan is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."

Taleb continues, "I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives."

Less famous, but more helpful when it comes to designing an effective private equity investing strategy is Taleb's theorizing on how technological interconnectedness vastly intensifies Black Swan impacts.

This idea of technological interconnectedness is related - though not exactly the same – as that of the much ballyhooed Network Effect that is so much at the heart of many of the biggest technological and investment success stories of the last 15 years, Facebook, Twitter, and LinkedIN, being first and foremost amongst them.  

In its simplest form, the Network Effect posits that the value of a network increases exponentially with each new user on it.

Or, in other words, the primary reason why folks use Facebook, Twitter, and LinkedIN is because there are a lot of other folks that use Facebook, Twitter and LinkedIN too.

And, as more users join, such the value for others to join grows that much greater.

And so on and so on.

Thus, one of the first screens that the intelligent early stage investor should utilize is the degree to which a network effect is present in a company's business model.

Now, let’s get to the rub of the matter as to how Taleb’s interconnectedness concept both informs and signals danger for the thoughtful investor.

Simply put, global technological inter-connectedness drives the winning business models to heights never seen before …

…and because of this, there are a lot fewer of them.

Simply put, the winners are bigger and happen faster than ever - Facebook's IPO was bigger and faster than that of Google’s which was bigger and faster than that of Microsoft’s, which was bigger and faster than that of Apple’s.

And because the winners are bigger, there are less of them.

So that giant sucking sound you hear is the consuming of so much of the energy and return in the deal economy into fewer, bigger and more lucrative deals.

To put it another way, turning $500,000 into $1.8 billion in seven years as Peter Thiel did as a small minority investor in Facebook is just not beyond extraordinary - it is also unprecedented.

And, correspondingly, returns of this scale crowd out and widely skew the distribution to fewer, higher returning deals.

Now, how should we respond to this brave new and highly challenging investing and entrepreneurial world?

Well, one obvious response is to proceed extremely carefully.

Investing in early stage private companies can be great fun and you can make money beyond your wildest dreams if the stars are aligned right doing it….

…but the probabilities of doing so in any one company or deal are low…and getting lower.

And unfortunately, this is true no matter how enthusiastic, how passionate, how hardworking, how brilliant the entrepreneur that is pitching his or her deal happens to be.

So does this mean that early stage private equity investing is for the birds? And that we all should just stay away?

Of course not.

You just have to do it right.

Next week, we’ll share how today’s most successful investors and entrepreneurs do just that.

 


Are YOU an Investor – Entrepreneur?


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A joy of my work is that I get to connect often with smart, “out-of-the box” and impressive businesspeople that can be best described as "Investors – Entrepreneurs.”

The most talented of these fine folks evaluate opportunities through the complementary perspectives of the two mindsets.

As investors, they do so dispassionately - with the lenses of risk and reward, and of expected value.

As entrepreneurs, they are more operational, more tactical.

They know that numbers on financial statements are byproducts of collective, human effort - of sales, marketing, and operational strategies and project plans, all underpinned by cultural commitments to excellence and to winning.

Now, when things get dicey is when these Investor - Entrepreneurs don't properly distinguish in their otherwise able minds where investing and entrepreneurship do NOT intersect.

The problem reveals itself in a number of ways.

For the entrepreneur, it is a cognitive dissonance, a denial of the simple fact that an incredibly large percentage of their net worth and earnings power is often concentrated in a single, and very high risk asset - i.e. their own business.

For the investor, it is the dark and dangerous side of that usually, admirable human quality of commitment and consistency.

This is the tendency we all have to stick to decisions that we have made in the past even if and when the original evidence that underpinned those decisions has changed dramatically.

The classic example of this is basing an investment decision on the original purchase price of an asset, its sunk cost, even though the faulty logic of doing so is almost self-evident.

Yet, following this truism, because of our emotional human wiring, is always far harder to do in practice than in theory.

So, how should - let’s call them “Entrepreneur Mind” and “Investor Mind” - properly work together?

Here are three ideas:

1. For Investors, view with an extremely jaundiced eye records and claims of past performance.

Let's be clear, doing so is extremely hard.

Both because of the aforementioned “human wiring” matter, and because the brokerage and insurance industries have a massive, vested interest in manipulating and exploiting this wiring to prevent us from doing so.

To best resist this manipulation, invest like an entrepreneur - pointed toward the future and leaving the past where it rightfully belongs, in the past. 

2. For Entrepreneurs, just for a few moments, step in the space of not believing one’s own propaganda.

This too, is hard as what makes entrepreneurs who they are is their unshakeable and often irrational self-belief, in spite of often much evidence to the contrary.

This self-belief serves them well as leaders and as creators, but as shareholders not so much.

And as shareholders, the irrefutable principles of diversification, of long-term and global planning, and of the overriding importance of small differences in return, multiplied over time, so fundamentally apply.

3. And finally, as Investors - Entrepreneurs, to recognize good professional guidance as a success requirement, for the simple reason that one’s most dynamic competitors are getting it.

And if you are not, then you are wanting.

And in both investing and entrepreneurship, this wanting, this disadvantage, even if small, multiplied over time is usually the difference between failure and success.

What does this look like in practice?

Well, for one, a best-functioning team of professional advisors should include a great strategy and exit planning advisor, a great accountability coach, and a great wealth manager.

And they should all work together, especially and effectively toward that most natural and glorious and appropriate goal of all entrepreneurs and of all investors.

Which, of course, is asset building and earning power.

Built both slowly and methodically over time as an investor and in sudden, large green and creative shoots as an entrepreneur.

P.S. Click here to complete our survey on investing and entrepreneurship and have a free cup of coffee on us! 


Positive, Immediate, Close, Specific, and Shared


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My column last week, where I praised leaders that channeled legendary Green Bay Packers football coach Vince Lombardi’s “tough love” leadership approach, prompted a lot of responses - some nice, some not so nice (and not just from the Minnesota Vikings fans out there!).

The most thoughtful ones came back and said, “well that style maybe all well and good if you are running a factory in China, but when it comes to managing younger people (i.e. Millenials - those born after 1982) in modern service businesses, to be effective a "softer" touch is needed.

Points well-taken, so do let me offer here five "Managing Milllenials" best practices:

#5. Revel in the Importance of Company Culture. In a world where everything can and is easily and quickly borrowed, copied, and sometimes just plain old stolen - the only sustainable competitive advantage is how a company organizes and aligns, inspires and challenges its people.

Or, in a word, its company culture.

Taking it further, the modern manager is doubly vexed by the unsettling (yet exciting) reality that the plan today will almost certainly not be the plan tomorrow, and as the plan changes, so must change both individual roles and team dynamics.

And thereby so must the culture change.

Please let’s not jump over this point too quickly. It is all too easy for the ambitious, hard-working, and often older manager to just throw up his or her hands and lament over “these kids” and how “if they only knew how things were like when I was starting out” that they would think and act differently.

And how they should be just happy to have a job and not just be so – well young and self-absorbed.

Well, that is dead-end talk.

Building high-performing 21st century teams requires winning hearts and minds and doing so each day anew. The best managers REVEL in this challenge as opposed to shirking from it or whining about it.

#4. Empowering and Coddling are NOT The Same Thing. Some may read the above and shake their heads and think that this is a “coddling mindset” or entitlement culture and is exactly what has gotten us in America in trouble in the first place and a big part of why China is kicking our you know what every which way.

This is where leadership and administrative creativity are of such importance in building win-win work structures that both inspire and challenge the younger worker to work harder and get better faster. 

AND allow for balance and acknowledge those aspects of work that are not so “goal-driven.”

What are these? Well, that sense of community and common cause and healthy friendship and competition that make the best workplaces, for lack of a better word, fun.

And fun, as high-performing cultures like Southwest and Richard Branson’s Virgin have demonstrated so inspirationally is - surprise, surprise - very good for the bottom line.

#3. Understand that Entrepreneurship and Youth Go Hand-in-Hand. Most ambitious young people today don’t grow up dreaming about getting that “good state job” or to work for the same company for 30 years.

Rather, and following up on that overriding sense of “specialness” with which we now raise our children, young people want their star to shine. They want to come up with the new, great ideas, and to be acknowledged and rewarded for it.

They, in essence, want all of the recognition and empowerment and self-definition and financial opportunity that attract people of all ages to become entrepreneurs.

This is a great and good thing, and is at the heart of why we live in golden, global age as young people the world over are being raised with the right kind of high self-esteems to dream and act BIG.

BUT many of even the best of them on balance do not want the headaches and heartaches and vexing, painful choices and compromises that are just as much part and parcel of the real entrepreneurial “lifestyle.”

So how do you work with this? The deep desire and burning ambition that all companies desperately want in their people on the one hand, and a wariness and even a distaste for all of the prosaic, “not fun” stuff on the other?

Well surprise, surprise, this is tough.

A general rule here is as opposed to fighting this energy, go with it and reframe the “tough stuff” as opportunities for personal and professional growth and then profusely recognize and acknowledge these “less fun” challenges are taken on.

Not easy to do for sure, but it is this leadership that both modern organizations and younger workers desperately need and want.

#2. Recognition is Key. Having 2 young sons has helped me immeasurably in understanding the sometimes gentle psyches of younger employees. Long gone are those days of fear and punishment-based parenting and schooling. Rather, understanding that a recognition-based milieu is how most high-performing young people have been raised and schooled is a key to effective organization-building.

The best guidance I have seen on effective “recognition-based” leadership  comes from authors Chester Elton and Adrian Gostick in their awesome book “The Carrot Principle.”

They describe recognition done right as being “positive, immediate, close, specific, and shared:”

Positive - managers sometimes mistakenly use a recognition presentation as a time to talk about how far someone has come, or how they could have done even better. This is not the time or place. Comments must be positive and upbeat.

Immediate - too often by the time a worker is recognized for a job well done, weeks if not months have passed. The closer the recognition to the actual performance the better.

Close - recognition is best presented in the employee’s work environment among peers. Invite team members and work friends to attend.

Specific - a great presentation is a time to point out specific behaviors that reinforces key values.

Shared - typically, recognition comes from the top down; however, recognition that means the most often comes from peers who best understand the circumstances surrounding the employee’s performance. Peers, as well as managers and supervisors, should be able to comment during the presentation.

#1. Embrace Fluidity. This is perhaps the hardest reality and where the rubber really hits the road with building 21st century, knowledge-based entrepreneurial organizations dependent on younger people.

They just get up and leave.

On a moment’s notice and often for the simple and defensible reason of valuing experience and variety over the often hum-drum and slow career - building that is part of staying and growing with one organization over time.

Again, as opposed to fighting this energy, go with it. Work to design the organization and refine the business model based on relatively short tenures - say 3 years or less - and with the ability to plug new people in and have them produce quickly.

To accomplish this requires strong and well-defined training styles and processes, clearly defined and “bounded” roles and responsibilities, and a knowledge management system that captures and processes the intelligence of the organization so that it doesn’t walk out the door when that “year overseas” calls.

How About Investors?

As for investors looking for emerging companies to back, my strong suggestion is to evaluate these softer “above the line” qualities in a corporate culture and a leadership team as much as the below line technology and balance sheet factors that are usually at the forefront of an investment evaluation.

For it is the right company culture - one that gets the best out of people of all ages - that both endures and provides for success for the long term.


A Pat on the Back or a Kick in the…?


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Green Bay Packer tackle Henry Jordan once famously described legendary football Coach Vince Lombardi’s coaching style as “He’s Fair.  He treats us all the same – like dogs.”

Well, with the Big Data, “Moneyball” and “Freakonomics” management and investment revolutions, where it is a matter of high faith that you get the behaviors that you reward and that you measure, we are seeing a clear and strong movement back toward high accountability, no excuses “get it done or get out” management practices and cultures.

For entrepreneurs looking for organization structures to model and for investors looking for companies to back, here are four trends to watch:

1.    Look for Companies That Harness the Power and Avoid the Danger of “Corporations of One.” Never before in human history has the world afforded more opportunities for talented individuals to work for themselves, by themselves.

The amazing tools of modern, virtual collaboration – text, email, video conferencing and every cloud-based business productivity application that you could ever dream of (and ever use) available in the palm of your hand - have eliminated most of the collaboration advantages of the traditional corporate form.

The smart, modern company understands when to marshal their power - in the form of utilizing contractors to fulfill bite and mid-sized projects - and when to resist it.

How? By focusing vigilantly on building distinct and equity - filled brands, strong barriers around their customers, and company cultures and management styles that demand and reward high performance and results.

2.    And Ones That Let Virtuality Touch Them, but not Kill Them. With the now universal business adoption of “everything and more that was once only on your desktop is now in your pocket” mobile phones and apps, all of us worldwide are truly on line 24/7.

Books like Jason Fried’s “Rework,” Tony Schwarz’ “The Way We’re Working Isn’t Working,” and John Freeman’s “The Tyranny of E-mail” address from various angles the promises and drawbacks of virtual work.

A common theme is almost universal doubt regarding email and other tools of instant communication and the “react versus respond” culture they foster.

What to do about it? Well, continue to look for “end of email” company movements and cultures to continue to gain steam and social currency, and for social networking mainstays like Facebook, Twitter, and LinkedIN to slowly but surely lose their business luster.

Companies that embrace this re-emerging “culture of the deliberate” will have the leg up where it really counts – in more thoughtful strategic positioning and consequently, more sustainable profits.

3.    And Ones That Are Learning Organizations. The pressing need for organizations to innovate or perish, and of young workers equating quality work environments with ones offering intense personal and professional development almost makes the definition of a successful company as one that propels its people forward.

This company as a learning organization motif is an old one, but never before have the reductionist pressures of virtuality combined with young worker expectations made it so paramount for companies to either grow their people or see their businesses shrink.

4.    And Finally, Look for Leaders that Channel Coach Lombardi. There is a fine line between an encouraging company culture and a permissive one. Inspired by the success of high accountability cultures like Amazon, Apple, and FedEx, smart investors are backing leaders that give BOTH pats and kicks on the backside.

In a paradoxical way, the typical, high encouragement environment in which most young people (i.e. the Millennials) were raised and educated has created in them a deep desire for structure, to be told exactly what is expected of them and the consequences for poor performance.

Leading “tough” like this is hard, draining work, but is a key and easy-to-identify quality in a company poised to breakout.

Find, back, and grow with companies that embody the above and winning will be more of an everyday thing for your business and your investments.


The Fascinating Aura of Mystery, Awe, and Power Surrounding A Business


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Every day I see entrepreneurs trying to find that right balance between keeping their intellectual property confidential while sharing and promoting their business model - especially to investors - whose interest they so very much need to pique.

My bias generally falls strongly on the side of transparency - both because it is a virtue unto itself - and because it takes a lot of effort in our “post your business on the Internet for all to see” age to truly maintain confidentiality.

However, I have a more fundamental reason why I generally advise entrepreneurs and investors not to worry all that much about confidentiality.

Supply and demand.

Quite simply, there are so incredibly few entrepreneurs out there with the “right stuff” to actually build profitable businesses.

And those that have it are on balance, either too busy, too rich, and/or my favorite - of the should be expected ethical type that 999 times out of 1,000 – that as opposed to the problem being someone of substance stealing a business idea, that the far more likely reality is a vast and unrelenting sea of apathy toward it.

Now, this does not mean that there is no place for confidentiality in modern business.

But the reason why it is important is almost always more subtle than the fear of idea theft.

You see, for the vast majority of entrepreneurs without eight to nine-figure research and development budgets, the reason why confidentiality is important has to do with the under-appreciated context of mystique.

Oxford defines mystique as "a fascinating aura of mystery, awe, and power surrounding someone or something."

I would combine this definition with one of my favorite lessons from my long ago MBA marketing class – namely that in a modern marketplace there is zero difference between "actual" and "perceived" value.

So, in these contexts, the value of business confidentiality derives not so much from the threat of a nefarious competitor stealing an idea.

Rather, it is how the aura of confidentiality can bestow on a business that lovely element of mystique that draws people and resources to it, and does so in such a way that a nicely high perception of value follows.

And from this perception flow many wonderful things: brand equity, pricing power, and marketing effectiveness being chief among them.

Now for those who say that this is quite the cynical view of things, I would encourage them for the next seven days to not take in any entertainment media - no movies or television or Internet - nor to appreciate the lovely design of an iPhone, and certainly to not gaze fondly on an elegantly dressed and coiffed woman or man.

In other words, to suffer for just one week like the terribly poor, extraordinarily unfortunate and very marketplace mystique - deprived people of North Korea must unconsciously suffer through every day of their lives.

And then come back and tell me that mystique doesn’t matter.

So appreciate mystique - that beautiful elixir of the modern marketplace – for its own sake as the incredible gift and blessing it is.

And you entrepreneurs understand how confidentiality and discretion, when utilized gracefully and not ham-handedly, can help create it.

As for investors, look for this “you know it when you see it” quality in entrepreneurs and business models to back.


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