Written by Jay Turo on Wednesday, January 28, 2015
This week, Axial came out with a great report on the challenges and opportunities facing small and middle market businesses in 2015.
Compiled from interviews with over 100 CEOs, it is chalk full of great nuggets like:
The #1 Thing keeping CEOs up at night is "finding capital to grow their businesses." This challenge has many dimensions - from receivables and cash flow, to commercial banks (in spite of the strong economy) still mostly on the sidelines, to the availability of private equity and other forms of risk capital to fund growth initiatives.
Also ranked high on the list was properly "training, educating, and rewarding" employees.
A great white paper by AGC Partners sheds modern light on this challenge, specifically how technology innovations are “incentivizing and enabling individuals to monetize their skills, time, and possessions like never before.”
Companies like Odesk, 99Designs, and Guru are empowering skilled designers, coders, consultants, and marketers to offer their services to buyers directly, on an as needed, per project basis.
How does this relate to the talent challenges of small businesses?
First, by the simple fact that a lot of talented people - who 10 to 15 years ago would have been available for / interested in traditional W-2 employment - are now effectively out of the traditional work force.
Second, the ease with which buyers (business & consumer) can contract for services with providers and cut out “middlemen” companies that "hire and mark up" creates a whole other level of pricing and other competitive pressures.
Luckily, far outweighing these two challenges is the massive opportunity created by this “collaborative economy” for smaller businesses to access types and qualities of talent like never before.
As I have talked about previously, entrepreneurs and executives that master the art of finding and utilizing outsourced, "shared talent" from around the world - and that let go of fixed ideas of what a company is / should be - will have business model and market opportunities open to them like never before.
Finally, the Axial report shares the startling fact, even though the overall economic prognosis for 2015 is about as good as it can get, that 66% of the CEO’s surveyed rank "market forces” and the overall buoyancies of the US and abroad economies as a top worry.
To this, I would suggest a reading of Nobel Laureate psychologist Daniel Kahneman’s seminal work on negativity bias, where he found “that people regret mistakes twice as keenly as they relish successes.”
When it comes to growth planning, Phil Libin, CEO of Evernote, summed it up best when he noted that "When you point out what can go wrong, you sound smart and sophisticated, and when you emphasize what might go right, you sound naive."
It all kind of fits together: exude and embody optimism (and fight the natural propensity we all have to the opposite), conceptualize and take chances on new business models, and the money will follow.
And this is what CEOs really want, isn't it?
Written by Jay Turo on Wednesday, January 21, 2015
Especially this time of year - when so many of us are assembling and committing to our professional resolutions and goals, questions arise as how to best develop financial (growth, revenues, and profits) projections for our businesses.
Should projections be “realistic” – i.e. feel “doable” and in line with past results or…
…should they be “aspirational,” not hot air by any means but also representative of goals that make us feel more than a little anxious as to our ability to attain them?
What is the actual “projections-making” process? Is Microsoft Excel my only “tool” option? How much research into customers and competitors should I do?
And perhaps most poignantly, if there is not a regulatory or shareholder requirement, why even put them together in the first place?
A great way to think about the process and purpose of financial projections is via what I call the “HMCBW” approach, i.e. examining the Historical data, then the Market conditions, then the Competition, then the “Bottoms-Up” assumptions, and finally and most importantly what management Wants.
It looks like this:
5. Let History Be Our Guide. The first thing to do in assembling projections is to evaluate what was, and was not, financially accomplished by the business in the past.
While the previous period (most usually the previous year) is usually most indicative, there is also great wisdom to be had in looking back to more chronologically distant periods as well.
This is especially important in good economic conditions like we have currently (see here and here), where the more relevant historical period might be say - the 2006/2007 period – i.e. one of similarly “frothy” macro-economic conditions.
4. How Big is My Market? Undertaking a formal and comprehensive study of a business’ industry, market, and competition usually leads to one of two results - either the target market is much smaller and less lucrative than surmised or…
…it is defined so imprecisely and broadly as to uncover faulty strategic thinking / an unsound business model.
Either outcome, both painful, naturally lead to the kind of hard introspection and business model re-positioning upon which solid financial projections (and yes ultimate business success!) depend.
3. How is the Competition Doing? We live in this most amazing time where our competitors - as part and parcel of their sales and marketing strategies - just post to the Net their business models for all to see.
Additionally, amazing tools like CapIQ, Hoovers, IBIS World, LexusNexis, Statista, and Follow.net give us inexpensive access to often shockingly accurate financial data (even profits!) on even the smallest and most secretive of private companies.
Utilizing this data as benchmarks for our projections is incredibly powerful. We do not need to be wed to how our competitors do it, but we would be foolhardy to not study and learn from them.
2. Bottoms-up! The business analytics revolution - as represented by the dozens of SaaS business process applications and productivity tools (with their incredible reporting functionality) - allows for the assembly of Bottoms-Up financial projections with an “actual data” specificity like never before.
This might look like building revenue projections based on the conversion ratios of web traffic to inquiries (phone, e-mail, text, etc.) to proposals, to sales, to retention, to ongoing revenue.
These bottoms-up models, in addition to being powerfully predictive, are also highly insightful as to the performance of various aspects of an enterprise - its marketing, its salespeople, the quality and efficacy of its products and services, etc.
1. What Does Management Want? The fuzziest - but also by far the most important factor when developing projections is just asking what management and ownership want to see happen.
What kind of revenue and profit projections will inspire and embolden? Will force to the forefront the need for breakthrough business model thinking and doing?
Answering these “inspirational” questions is massively important in assembling projections that serve the objectives of managers and owners, and not the other way around.
Historicals. Market size. Comparables. Bottoms Up. Want.
Follow this five step model in building your growth, revenue, and profit projections and watch the Manna from Heaven flow!
Written by Jay Turo on Wednesday, January 14, 2015
Last week, I wrote about how some very positive economic factors - ranging from low oil prices to low interest rates to US technological leadership to just good old-fashioned confidence are coalescing to set up 2015 as one of the best years ever for US business.
Now, positive “macro” conditions are nice, but all they really do is create the opportunity - but by no means the promise - for entrepreneurs and executives to prosper and profit.
Now, paraphrasing the famous Bard of old, our business fates lie in ourselves and in the “micro” of our day-to-day mindsets, projects, and to dos.
What should those mindsets, projects, and to dos be?
While of course they are different for every business, here are five universal ones, applicable for almost all companies looking to break out in 2015.
5. Push the Risk Envelope. As so eloquently proved in Michael Raynor's masterpiece, "The Strategy Paradox," the vast majority of executives take too little short term risk, and by so doing subject themselves to far greater longer-term dangers.
As I described in my "Breaking Free of No Man’s Land” post, this is because most usually the real danger for a business is not its sudden or dramatic failure, but rather slowly sliding into technological obsolescence, commoditization, and a low to no profit economic model.
While this conservatism is more pronounced in times of recession, in good times it is doubly insidious because both the opportunity costs of overly conservative and the likelihood of risky initiatives being successful are so much greater
A great shortcut question to ask yourself is: If I had no considerations of time and money, what would I do?
The answer will usually point you to the riskier, and more often than not, the more strategically correct business decision.
4. Embrace New Technologies. In the past two to three years, we've reached a tipping point as to the ability of companies of all types and sizes to earn quick ROI via implementing and utilizing business process technologies that allow for the completion of work more quickly and cost-effectively, and at a higher level of quality and consistency.
Cloud-based, on demand, proven and inexpensive technologies are available now for almost all business processes - from sales CRMs, to marketing analytics, to project management software to HR, accounting, and finance.
And because of an almost overwhelming number of great software companies building new business process services (and because of SaaS, improving the ones they have almost daily), the cost of these tools continues to drop while their quality and efficacy rises. Truly a golden age.
3. Pursue Global Markets. As I described last week, the volume of US exports is hitting new records year-after-year, and is projected to easily cross the $2.5 trillion mark in 2015.
Never before has it been a) easier to sell products and services globally b) have there been so many customers with money to spend the world over and c) has the reputation of US companies for technological leadership, quality products and ethical dealings been greater than it is right now.
So if you have a global growth strategy, build on it. And if you don't, get one.
2. Be Organizationally Creative. The maturation of business process technologies combined with the “flattening” and full-on “virtualization” of most modern work has created extraordinary opportunities for every company - no matter how small - to profit via organizational evolution, outsourcing, and fractionalization of work.
Things like organizing one’s enterprise via a mix of W-2 employees, 1099 contractors and outsourced technology, project administrative work flow partners from around the globe.
My experience is that most of us intuitively get how this stuff works (as evidenced by how much of work we all now do on our mobile devices), but are still held back by a sense of how a “real” company should be organized.
The heck with that! All that should matter in decisions like this is whether it works - i.e. does it deliver higher quality at a lower cost? Everything else is just noise.
1. Have a Plan. Conditions are good. The world is our oyster. Let's commit, in writing, that we're going to make the most of it.
In the immortal words of Goethe, once a commitment is made, Providence moves too.
The spoils and thrills of victory in our so competitive but so opportunity-laden world go to those who devise bold plans of action and then go out and do them.
So let’s make great plans - organizationally creative ones that leverage technology, take intelligent risks and pursue and win opportunities around the world.
That sounds like a great 2015!
Written by Jay Turo on Wednesday, January 7, 2015
With a little luck, 2015 could go down as one of the best years ever for American business.
Here are seven reasons why:
7. Low Oil Prices. For both businesses and consumers, $50 per barrel oil and $3 per gallon gas have both strong real and psychological benefits.
Real, as in lower input costs for businesses and more disposable income for consumers, and psychological in removing that sense of scarcity and dread that high prices at the pump bring.
6. And It’s U.S. Oil. And, oh yes, as opposed to that oil coming mostly from a collection of unsavory, overseas actors (see Putin, Vladimir), now for the first time in decades the U.S. is poised to be a net oil exporter. These dollars staying home naturally multiply themselves - perking up manufacturing, construction, real estate, travel, tourism, etc.
5. Low Interest Rates. Predicting the direction of interest rates is one of the great fool’s errands, but it does certainly feel like we have made a long-term transition to permanently low rates.
A key factor driving this is Federal Reserve's Chair Janet Yellen’s political philosophy - well-documented over decades - that employment is the most important matter of monetary policy and any “tightening” that might lead to rising unemployment is to be avoided at all costs.
And then there is simple supply and demand -- all the “safe” world currencies (Euro, Yen, Pound) sport extraordinarily low rates too so there is no “currency flight” pressure to drive tightening.
4. U.S. Technology Leads the World. In so many of the growth industries of the 21st century - Mobile, BioTech, HealthcareIT, Robotics, Social Media, Internet of Things - U.S. companies continue to lead the way.
In addition to the massive flows of capital and wealth created and distributed by the top tech. companies (to employees, vendors, shareholders et al.), this leadership also attracts the best and the brightest scientists, engineers, and developers from around to the world to our shores.
And from this human capital new technologies and new companies are born. And new wealth created.
3. Record Exports. U.S. Exports reached $2.3 trillion in 2013, both a new record and up more than $700 billion since 2009. And the soon to be in 2014 numbers will show another record year.
Why? Well for one, U.S. companies, aided greatly by an English language and America-dominated Internet, every year become more and more effective in marketing and selling to global customers (while global customers in turn become far more comfortable in purchasing across the wires).
This powerful trend will only continue to accelerate in the years to come – opening new markets and profit opportunities for U.S companies big and small.
2. Cash Piles on Sidelines. With $1 trillion in cash sitting in the coffers of U.S. private equity firms and $515 billion on the balance sheets of leading tech. companies (try Microsoft with $88 billion, Google with $60 billion, and Cisco with $52 billion), and with this cash in our low interest rate environment earning only fractions of pennies of return, there is a high probability we will see a lot of it pour into growth opportunities this year.
And there are no better growth investments than U.S. entrepreneurial companies, especially the smaller, private ones, that over decades have consistently yielded double digit returns for those brave and foresighted enough to invest in them.
1. Momentum. Good times beget more good times. The solid, economic, political, and social news and results we have had for a few years running now are building themselves into a powerful crescendo for the new year.
Yes, more than a little luck is always needed - mostly in the form of no large, negative political or environmental shocks.
Barring that, on balance for entrepreneurs and executives out there seeking to make their mark, 2015 is looking nice and juicy.
Here's hoping we all make the most of it!
Written by Jay Turo on Thursday, January 1, 2015
The ending of one year and the beginning of another is a natural time to take stock of all that was accomplished in the past 12 months, and more excitedly, to dream and plan on the great promise of the New Year.
In this spirit, below are a few of my favorite quotes regarding dreaming, planning, goal-setting, and "Going for It!”
"You see things; and you say, 'Why?' But I dream things that never were; and I say, 'Why not?'"
- George Bernard Shaw
(My comment: reflects the essence of the entrepreneurial spirit)
"What is not started today is never finished tomorrow."
- Johann Wolfgang von Goethe
(My comment: the "fierce urgency of now" must always inform and drive us. We live in too fast-moving a world, too merciless a marketplace, to in any way dawdle or delay.)
"Success is not final, failure is not fatal: it is the courage to continue that counts."
- Winston Churchill
(My comment: The most accomplished executives and entrepreneurs that I have worked with have impressed me as much with their fortitude and resiliency as they have with their “glamorous” attributes - brilliance, connections, salesmanship, etc.
"Really great people make you feel that you, too, can become great."
- Mark Twain
(My comment: This is the essence of leadership in modern, collaboration-driven organizations. The best managers build alignment and focused energy around shared goals and objectives.
"Goals are dreams with deadlines."
- Diana Scharf Hunt
(Our comment: The great ones dream it and do it NOW!)
Happy New Year, and may 2015 be the best year of all of our lives!
Written by Jay Turo on Wednesday, December 17, 2014
December is a natural time to reflect upon the accomplishments of the past 12 months, and to set goals and objectives for the New Year.
In doing so however, most of us think too much about next year, and too little about our longer term and multi-year business horizons.
There are some benefits to this, I mean who can really forecast market and competitive conditions and customer wants and needs beyond just a few months these days?
And, given high rates of personnel turnover endemic to our ever-increasing “low switching cost” workplace, it can feel even more difficult to do so from a “bottoms-up” resource and organizational chart basis.
But forecast we must.
Because it is only through thinking and planning long-term that we access the reflective cores of our minds and spirits to “come up with” breakthrough business ideas simply inaccessible from the “reactive” present.
• How to better leverage our company’s intellectual and brand assets to develop new products and services
• How to lay the ground work for new marketing campaigns, targeting new customers in new markets (with more favorable competitive conditions)
• How to expand globally
• Rethinking our companies’ organizational charts (and rewriting job descriptions)
• How to access outsourced and virtual pools of human talent to scale quicker and more cost-effectively
• Re-languaging our organizations’ value propositions (More pithily describing the features and benefits of our product and service offerings)
• Redrafting our mission and vision statements (and by so doing re-motivating and re-focusing ourselves and our organizations)
• And perhaps most importantly, defining with a laser like precision The Exit Plan for our organizations and for everyone in it (and getting out of No Man’s Land!)
Figuring out how to pursue opportunities and how to overcome challenges like these is almost always best done with a Start at the End approach: visioning out to the future and working backward from there.
How far to look out? I think Three Years is best.
It is long enough to get to that space of the “unbounded future” (reflect on being three years older than you are right now), while being short enough that the projects and action items arrived at very much need to be “gotten after” right away.
So, let’s all use this special time of year to reflect longer term on our more idealistic and on our bigger opportunities…
…the pursuit of which will transform our sometimes humble and prosaic day-to-day work into something far more profound.
Happy Holidays to You and Yours!
Written by Jay Turo on Wednesday, December 10, 2014
Why not truly have it all this holiday season?
Spend great time with family and friends and enjoy the blessings of the season that those that work hard in building and leading businesses so richly deserve….
…while developing a steely resolve and a solid plan to profit from the awesome opportunities and possibilities that the New Year is sure to bring.
Here are seven ideas on how to really have our cake and eating it too these next few weeks.
#7. Complete 2014. Before the New Year can truly be started, the old one needs to be closed out.
For sure, this often involves administrative, accounting, and other practical matters.
But it also means appreciating the accomplishments and the victories of the past 12 months, and fully mourning the things not done and the defeats.
Celebrations, in the form of holiday parties and travel and technology “sabbaticals” (Getting off the grid!) are great ways to do both. Quite simply, the benefits of taking the time to "sharpen the saw" through closure should not be underestimated.
#6. Stop the Beeps! Every year it gets more difficult to find the "Signals in the Noise" and distinguish frenetic activity from actual accomplishment.
The sometime melancholic end-of-year energy is tailor-made for taking stock, reconnecting with the mission and vision of one’s enterprise, and reflecting on where we wish to go in the New Year.
So like they say now at the movie theater before the start of every film, this holiday season when those never ending texts and e-mails hit, respond with a deep breath and say "It Can Wait."
5. Get Data. Reflection and a mission-focused mindset are great, but when combined with data-driven decision making, real business magic happens.
Proof of this will come to many of us in the next few weeks in the form of a little (or hopefully big!) brown box. From Amazon.com.
A company that has built an ecommerce empire nonpareil by combining an overriding mission on the needs and wants of the customer with an otherworldly command of its business data and analytics.
Be like them.
#4. Get Help. This is a golden age of advisory firms that help organizations of all types and sizes find and follow their best and most profitable paths.
The best advisors now combine the complementary aspects of the “CEO Whisperer” approach with the technology - enhanced strategic planning disciplines of traditional management consulting (McKinsey, Bain, BCG, et al).
Just like the best coaches help the best athletes run faster, so do great advisors help organizations succeed more and better than the competition.
#3. No False Choices! False choices are “logical fallacies that involve situations in which only two alternatives are considered, when in fact there are additional options.”
And for many entrepreneurs and executives around the holiday season, false choices abound.
Like business or family - very many of the most successful entrepreneurs and executives have more than enough time and energy for both.
Like ethics or winning - in our completely transparent Yelp, Reseller Ratings, BBB online world of ours in the short term some folks may “get away with it” but in the long run only the ethical survive and win.
#2. Think Big!
"Make no little plans; they have no magic to stir men's blood and probably themselves will not be realized. Make big plans; aim high in hope and work."
- Daniel Hudson Burnham
A fresh, open and inviting year is about to be left in all of our care.
Why not do something big and grand and great with it?
In so many ways, all great breakthroughs have, as their original seed, a childhood imagining.
Let's use this time of year to re-connect with the sense of awe and wonder of our youth.
And to dream about doing and being something far bigger than we have ever before.
#1. Focus on Opportunities NOT Problems. My favorite of Peter Drucker's Eight Practices of highly effective executives is one of the greatest gifts we can give ourselves.
Focusing less on what we don't have and what we can't do, and more on what we can and will.
We live in the most magical, global business opportunities – filled time in human history.
Let's go out and grab them!
Why not us? And why not now?
Let's do this!
Written by Jay Turo on Wednesday, December 3, 2014
I met this week with partners from the Newport Board - an organization of former CEOs and senior executives that "guides companies through No Man's LandTM" - that unfortunate place where the vast majority of businesses eventually settle…
…doing well enough to press on but not even close to being either a) a source of significant cash flow for its owners or b) an attractive acquisition candidate for a strategic or financial buyer.
Companies stuck here face a daunting array of vexing business challenges, described well by Newport Board partner Ferey Feridian as the “Four M’s” - Money, Management, Model, and Marketplace.
Breaking free of No Man’s Land requires getting all four of these right.
Money. Most small and mid-sized businesses fight an ongoing, Sisyphean battle with money - pushing the cash flow boulder up the hill month after month, only to see payrolls, rents, insurance, materials and marketing & sales expenses drag bank balances down again and again.
Losing at the money game, however, is almost always a symptom of deeper problems than a cause in itself.
So when money problems arise, usually the best thing is to not focus on them but rather to confront their root cause, which almost always can be found in one of the remaining 3 “M’s” below.
Management. As described in my The Living Company post, in the end, a business is simply a “Collection of Humans” temporarily united toward a common cause.
As such, the “productive vitality” of the relationships between these humans is the most important indicator of its ultimate success, and can be well measured by answers to the questions below:
1. Would / do the people in the company recommend it as a great place to work?
2. Would / do true leaders view it as a place where they can build their careers / make their mark?
3. Does a productive camaraderie exist in the organization such that that those within it do more and better work than without?
If the answer to any of these questions is no, then a hard and sober look at the company's management and leadership is required (And, in all likelihood, the problem starts and ends right at the top).
Model (Business). I had the great fortune recently to lead a change management assignment for a large, urban hospital here in Los Angeles where Mr. Charlie Munger - Warren Buffet's famed partner at Berkshire Hathaway – is Executive Chairman.
Mr. Munger's philosophy and credos were well steeped in the organization, of them my favorite was that for Mr. Munger all businesses – no matter the size, industry, or focus – could be evaluated as to their answer to one question, namely:
"Does the business consistently deliver high quality at low cost no matter the field of endeavor?"
Honestly measuring how one’s company ranks on this cost / quality spectrum relative to competition is a great predictor as to its long term success.
Marketplace. Following on Mr. Munger's wisdoms, try on one of Warren Buffet's most famous quotes:
“When an industry with a reputation for difficult economics meets a manager with a reputation for excellence, it is usually the industry that keeps its reputation intact."
Now, when it comes to industry and market analysis, most small and medium-sized companies undertake it anecdotally, if at all.
An investment of time and resources which almost universally yields a high ROI is to have an outside research firm undertake for the business a formal industry, competitive, market, and customer analysis.
It is almost impossible to pay too much for such work, as helping managers gain stronger focus as to what their right market positioning is (and what it is not!) is worth its weight in something far more precious than gold, opportunity cost.
Money. Management. Model. Marketplace.
Successful businesses get the last three right and the first naturally follows.
Advisory groups like the Newport Board work with CEOs to get them right faster.
And, as they do, companies break free of No Man’s Land and recapture the promise and excitement of the business' earliest days, but now with the cash flows and equity value that makes all of the hard work worthwhile.
Written by Jay Turo on Wednesday, November 26, 2014
Thanksgiving is the quintessential American holiday.
It acknowledges the best qualities of our blessed land - hard work, diversity as strength, and a focus on solutions not problems.
Whenever I am feeling down about America’s prospects in this brave new world of ours, I reflect on Thanksgiving’s timeless lessons.
As every schoolboy and girl knows, Thanksgiving traces its origin from a 1621 Pilgrim harvest feast to celebrate surviving an extremely difficult first winter in the New World.
The Pilgrims owed their survival to the goodwill of the Wampanoag Indians - the original inhabitants of the area - who taught them how to grow corn and how to fish in the very unfamiliar New England soil and seas.
As a gesture of thanks and goodwill, the Pilgrims invited the Wampanoags to sit down and break bread in a spirit of friendship and camaraderie.
What a story! First, let's reflect on the guts, tenacity, sense of adventure, and just “never say die” hard work and perseverance of the Pilgrims.
Think about it - if they can make it then with their oh-so limited 17th Century resources, what can we do / where can we go with our virtually limitless 21st Century ones?
And let's reflect on that happy day of brotherhood and be justifiably proud of the powerful diversity of modern America.
Doubt me? Then spend a Saturday with me and my 7 year-old son’s AYSO soccer team.
With its Hawaiian coach.
Its son of Ethiopian refugees star player.
And its African - American, Mexican - American and suburban white kid players all happily frolicking in a melting pot scene not to be duplicated anywhere in the world.
Soccer with my sons is a welcome break from what I am sad to say has become a bad, gossipy vice – keeping up with the “news.”
Between the dire talk of tepid economic recovery, government gridlock, perpetual Mideast crisis, disease scares, and impending environmental doom, if you don't catch yourself you can't help but feel sorry for yourself, the country, and the planet.
It is 99% bunk.
Both the world and America have NEVER offered more opportunities for a larger percentage of
us to live affluent lives, to do self-expressive, remunerative work, and to be amazed daily by the wonders of modern technology than it does right now.
On Thursday, let’s give thanks for all that and more.
Happy Thanksgiving to you and yours!
Written by Jay Turo on Wednesday, November 19, 2014
Every day I see entrepreneurs trying to find that right balance between keeping their intellectual property and business models confidential while sharing and promoting themselves to the investors, partners, and customers 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 “everything end up 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 very 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 just too ethical and decent that 999 times out of 1,000 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 usually more subtle than the fear of idea theft.
You see, for the vast majority of companies without eight figure+ R & D 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 non-disclosure derives not so much from the threat of a nefarious competitor stealing an idea as it does from how the aura of confidentiality bestows on an idea that “fascinating aura” that draws people and resources to it.
And from this aura 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 nor television nor 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 mystique - deprived people of North Korea must unconscionably suffer through every day of their lives.
And then come back and tell me that mystique doesn’t matter.
So let’s appreciate mystique - that beautiful elixir of the modern marketplace – for its own sake as the incredible gift and blessing it is.
And as marketers, as salespeople, as product designers, as entrepreneurs let’s gracefully use confidentiality and discretion to help create it.
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