Sunday, July 31, 2011

When The Best Of Times and Worst Of Times Collide

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way..."




   --From Charles Dickens, A Tale of Two Cities


One of the benefits of years of experience in a basic commodity business like tee shirts is that you grow very accustomed to "...the worst of times...." because it becomes obvious after a while that your best years are those years when the general economy suffers.  When the overall economy is "frothy" then you will struggle and when there is a general recession your opportunities for success grow.

You develop a totally different perspective toward business and you are constantly looking at your return on your investment (ROI) for any new endeavor; the concept of 'lean manufacturing' is ingrained in you out of necessity not because you took some class or seminar on the subject.

You come to realize that employees are truly stakeholders in your organization because they sacrifice along with the company; you realize that stability, security, and being a stakeholder are just as important of a motivation for employees as is pay, fringe benefits, and advancement.

I participated in an online discussion last week where the topic was ecommerce, inventory, and efficiencies and I have to admit that I was shocked at how what I considered to be basic common sense was treated as expert knowledge.  Yes, you want to layout your inventory so that order fulfillment is efficient, logical, and error free.  You want to lay it out with a starting point then have the organization match exactly how the goods will be listed on the packing list, from left to right and top to bottom; that way you have a constant forward movement of product.

Can't wait till we get to the session on turning one's inventory!  Not too many folks have any idea how the carrying cost of inventory is such a killer to a company.  Of course, I have to remember that the term is "just in time....."

I can't help but wonder how many screen printers, how many of these new lines of embellished tee shirts, actually know how to price the cost of screen printing into their product?  That would involve time studies...

The hardest thing to get across to ones accounting, sales, or IT, is that while they are critical aspects of the company under no condition will their tasks ever impede and or stop production;  if the computer system has to be brought down then it will be done after hours, if a month end audit has to be performed it will be done after hours.  The reality is with plants in Los Angeles and in Germany you end up with about a 4 hour window in the early morning hours when the computer system can be shutdown or everything waits till the weekend.

I really have no concept of what it feels like to work for a company at "...the best of times..." or to be a wash in cash to where decision making not just involved making a good decision but rather necessitated making the best decision.  Every decision should be made as if the future of the company is on the line.

I spend quite a bit of time monitoring business trends and the world of technology/internet start ups fascinates me because I have no idea what it would be like to have someone invest $20 million dollars into an idea; I always operated on the assumption that a start up should be 6 to 8 months and then you better have a self sustaining income stream.  At which point your goal is to grow your business and increase your margins.

In my industry, your goal is to turn your inventory six times a year at a minimum and never have your cost of goods total more than 60% of your net sales.  Obviously, with B2C sales the goals change and your cost of goods should be dramatically lower than 60%; but you should be able to establish the ideal based upon what percentage of sales are B2C vs. B2B and adjust your ideal cost of goods accordingly.

Customers become real important because keeping an old customer is a lot cheaper than finding a new customer and with the ever increasing pressure of rising wages, fringe benefits, and other commodities, you have to control any costs that you can.  Keeping great employees is also cheaper than attracting and training new employees.

Yes, outside the technology/internet start up industry there does not seem to be much sense of excitement, which probably explains why my views are such at odds with the majority of my counterparts; hey, if it was easy then where would be the sense of accomplishment?

Saturday, July 30, 2011

The Cost Of Doing Business

As hard as I try I have not been able to avoid the constant chatter about the "debt ceiling debate" that seems to have everyone mesmerised; now let me add that I have only voted 3 times out of the last 35 years that I could have voted so politics really doesn't matter that much to me.  But, I really don't understand how you can discuss spending money when you have no established goals.  How exactly does one determine if government is spending money efficiently and or effectively if one has no goals for government?
That's why I stay away from politics and focus on business; it just makes more sense to me.  Over the course of the last 25 years I have had the opportunity to deal with a few start ups, a couple of distressed companies, and a few subsidiaries that were losing money, and I also was quite the champion for change; for doing things "differently."
I always found myself going back to the basic question of, "why?"  Ever ask someone who is starting their own business why they want to start their own business?  Ever ask the management of a distressed company why anyone would work to get them back to profitability?  Take a group of managers from a wholly owned subsidiary to dinner and ask them one simple question, "...why keep pumping money into a losing proposition?  Ever ask your human resources department why you provide fringe benefits to employees?
At one subsidiary, that was losing money on every order it shipped, I sat down with the sales team and ask them why did we have 250 designs in our catalog and why they needed 2 new designs every three months?  The reality was that our top 10 selling designs accounted for 75% of our sales and before I was going to deal with production and inventory issues I wanted to establish what it exactly was we were producing and maintaining inventory of.  The truth was we ended up paying the sales men a higher commission for 1 month every quarter, because the new designs were nothing more than an opportunity for the salesmen to hit the road "with something new" and with the increase in commission rate they really got motivated to hit the road!
By cutting back on our offerings we were able to grow sales by shipping more orders on time and complete and cut our production costs.
I can't count the number of times the simple question of "why?" seems to bring everything and everyone to a complete stop and force them to look at the fundamental aspects of a business; of course its also will be considered the 'dumbest' question anyone has ever heard.
But if you look around your business, or your organization, if you just stop for a moment to observe and think; you cannot help but notice something that makes you ask, "why?"
So much of what we do we do because everyone else is doing it.  Look at your fringe benefits that you offer, you basically offer them because everyone else does and thus you get nothing more from them than what everyone else gets; its like the old saying, "...keeping up with the Jones'..."
So you find yourself with a social media campaign, and you end up doing exactly what everyone else is doing and getting the same results.  The cost of doing business does not include conformity.

I was reading a blog the other day and I came across this paragraph:
"In days gone by, this was called empowerment. It’s also called coaching and mentoring. So take any of those terms, and any of those theories, and it’s no stretch to consider what permission management can encompass. As a manager you give permission for your staff to do what they need to in order to succeed. They understand the parameters, the expectations, the goals and all that jazz."
Whether one is a manager, a business owner, or an individual starting their own company, you have to establish parameters, expectations, and goals and you cannot do that without asking one simple question, "why?"

I got a call the other day from someone I know who works for a very large tee shirt manufacturer and he wanted to know what was a "great" software for manufacturing tee shirts?  Well, first off, he works for a company that has a multi million dollar IT department so of course you cannot help but ask, "why?"  Of course he could not explain to me why he was asking the question and I explained to him that without knowing why he was interested in another software program how could I determine which one would work for him?

So many times I have been told to do something and I would explain that if I knew why some task was important then I could do a better job at the task.  Think how many times you have given instructions to people and not told them why they had to do what you ordered; only to be dissatisfied with the results.

The fundamental cost of doing business is being able to ask a fundamental question of everything you do: why?

Wednesday, July 20, 2011

Health 2.0 and Healthcare: Innovative Ideas

Of all the areas of business that I have dealt with during my career the issue of healthcare has been one I keep returning to over and over again.  As an employer and someone who has worked with insurance carriers and healthcare providers I have to admit that the amount of innovation that is occurring in the area of the internet and healthcare is rather disappointing; but I do realize that this is easily explained by the fact that our healthcare system is a dysfunctional system.

Now we are beginning to see an interest on the part of technology start ups and VC firms to fund innovation to improve, or at least simplify healthcare from a variety of fronts.  Here are a few very interesting and promising products:

SIMPLEE  


Simplee helps with medical bills by tracking medical expenses, managing health care costs, helping you pay medical bills, and finding the right medical plans and medical services for the consumer and their family.  While the focus has been on the ever increasing cost of health insurance, with premiums that have doubled in the last decade, we have not noticed that consumers are paying an additional 15% for the services that they use, even with insurance!  This "nickle and diming" costs the consumer an additional $3,000 a year on average and these additional costs and fees have increased by 50% in the last 4 years alone!



Health Tap is a program that allows one to gain accurate, timely, and personalized information so that consumers can begin to make better evidence-based healthcare decisions for themselves and their family.


ZocDoc is basically a service that allows you to find doctors in your local area and book appointments on line.



This new development is focused primarily on serving healthcare professions but allowing for the sharing of medical records on the internet.  I think it is innovative in the fact that it will allow medical practices to spend more time with patients, ensure that records are up to date and improve communications.  


This is the one innovation that I hope succeeds because it benefits both the employer and the employee.  Employers and health plans can now lower the cost of providing health care benefits, while offering employees and plan members a consumer-friendly way to get the most for their out of pocket costs.  From their website:

Castlight Health offers companies the following opportunities:
*   Reduce health care costs—guaranteed—so savings can be applied to other programs or                                                          to the bottom line
*  Successfully implement innovative benefit designs, including Consumer-Directed Health Plans, Reference-Based Pricing, and shared savings models
*  Make smart health care shoppers out of employees and plan members—empowering them to get the most for each dollar spent
Then, you can also review this slide show and note that their are some new applications where you can use your cellphone to monitor your blood pressure, check to see if a spot on your skin is cancer, or to remind you to take your medications!


While I have no experience with any of these programs and or products I do like to see that innovation is beginning to enter healthcare and hopefully eventually lead to empowering consumers, employers, and health care professionals!

Communities

The concept of "community" has always had two distinct meanings; one confined to living organisms and used by biology and the other referring to human beings.

As the term has evolved in its use in regards to the internet a hybrid of both meanings seems to be developing.  On one hand the concept of an online community is, like biological one that defines a group of living organisms that share a populated environment and on the other a group of interacting human beings that share some common values and enjoys social cohesion.

With the internet I think the key is to determine how one turns the concept of community from the biological definition, or as nothing more than living organisms that share the internet to one that involves human beings with common values and social cohesion; from a petri dish to a neighborhood as I like to describe it!

The long term success of virtual communities will be predicated upon their ability to create a social cohesion; at some point large virtual communities will have to become federations; on line communities start from the top down and at some point their success will depend upon their ability to transform themselves into the opposite. The appeal of communities in the physical world is that they are personal because they all start from a basic unit; the family.  From families neighorhoods are created, from neighborhoods comes towns and cities, from there come states, then regions and nations.  The whole concept of social circles grows from the most familiar and intimate to the least.

Loyalty to the largest social circle starts from the loyalty to the smallest.  If you look at Facebook, we know it is huge, with something like 700 million users, and it is overwhelmingly a success story.  But its success is not really due to anything it has done as much as it is due to the fact that users have actually met, face to face, with 89% of the people who they are "friends" with.  Thus, loyalty to Facebook is actually loyalty to the individuals who make up our social circle on Facebook.

I know one company that was a pioneer in the concept of communities and consumer centric business models.  They have a community that includes millions of like minded individuals but when I go and track their physical communities I note that they have 363 and the vast majority of them are congregated in urban areas and their largest community has 137 members.  

Well, some real quick math makes it obvious that they actually are a community of 22,000 (363 communities with an average of 60 members) rather than 1.5 million.

Of course they want to expand their 1.5 million by going international, and they should, but they need to also step back and realize that their long term success will be based upon increasing their 363 geographical communities, or their physical communities, rather than globalizing their petri dish.  Communities are just as much about vertical growth, or the depth of penetration, as they are horizontal, or overall size.

Sunday, July 17, 2011

Creating A Tech Team In A Non Tech Environment

This is a hypothetical post, to fill a knowledge void.

If you found yourself half way between the two coasts, with a company that had a very successful product and a very able management team, and a vision of a very cutting edge, internet based, consumer centric retail and social media platform that was niche market rather than mass market focused exactly how would you begin defining the talent needed and the scope of work necessary to build this vision?

One could contract out to a company such as Hitcents or Rockfish Interactive  but at sometime, after the initial build, staff would have to be hired to maintain, upgrade, support, the various planned projects and then you also have the issue of  continual marketing/advertising and promotions, along with management of communities and databases.  On top of this the projects must integrate with the existing apparel management software, and the projects fall into those that are consumer based and those that are retailer based.

One could also hire their own people and build from within; but the key to success is the realization that within an old economy/old tech company a new economy/new tech company would emerge.

How would you begin?  Where would you begin?  Who would be the most critical component to making this a success and what would be their skill set?

Fads, Trends, and Human Nature

Lately I have seen a tremendous amount of noise about "social hiring," "collaboration," "communities," and what I refer to as "new economy" thinking, and no one cheers all this new thinking on as much as I do, but I cannot help but realize that sometimes the best ideas end up failing because they run into the brick wall of human nature.

Regardless of how far and or how hard one attempts to innovate the reality is that human nature will kick in at some point.  But exactly how do you make a point without sounding too critical?  How does one go about getting people to think, keeping the ball rolling, without lecturing?  Then I came across this article and this story:
Start with a cage containing five monkeys.


Inside the cage, hang a banana on a string and place a set of stairs under it.


Before long, a monkey will go to the stairs and start to climb towards the banana.


As soon as he touches the stairs, spray all of the monkeys with cold water.


After a while, another monkey makes an attempt with the same result – all the monkeys are sprayed with cold water.


Pretty soon, when another monkey tries to climb the stairs, the other monkeys will try to prevent it.


Now, turn off the cold water.


Remove one monkey from the cage and replace it with a new one.


The new monkey sees the banana and wants to climb the stairs.


To his surprise and horror, all of the other monkeys attack him.


After another attempt and attack, he knows that if he tries to climb the stairs, he will be assaulted.


Next, remove another of the original five monkeys and replace it with a new one.


The newcomer goes to the stairs and is attacked.


The previous newcomer takes part in the punishment with enthusiasm.


Again, replace a third original monkey with a new one.


The new one makes it to the stairs and is attacked as well.


Two of the four monkeys that beat him have no idea why they were not permitted to climb the stairs, or why they are participating in the beating of the newest monkey.


After replacing the fourth and fifth original monkeys, all the monkeys that have been sprayed with cold water have been replaced.


Nevertheless, no monkey ever again approaches the stairs.


Why not?


Because as far as they know that’s the way it’s always been around here.


And that’s how company policy begins …
The invisible barriers of human nature.  We can criticize the limitations of hierarchical organizations but teams, groups, and lateral organizational structures can also be as limiting due to the age old concept of peer pressure.    

I have met with a few successful Web 2.0 companies and I marveled at how conformist they were!  Oh, yes, they had replaced a formal dress code with an informal one; if everyone in your operation is wearing t shirts, jeans, and sports nose rings, and tattoos, then you really have not changed anything!

The more things change, the more they stay the same.

On line communities are great, but all communities create their own hierarchy, all communities eventually devise a way to de mark those who can participate and those who cannot; they all internalize a structure for the "paying of dues" as it is known.


We all admire the "change" that the internet has wrought in our lives and then human nature ends up trumping change; we do not explore for example, how Google + can change "me" but rather we attempt to figure out how to conform Google + to "me."  


Retailers view social media and email marketing as just another advertising channel and then complain about dismal results.


There have always been fads and there have always been trends, the difference is one builds upon human nature and the other does not.

Friday, July 15, 2011

Modeling The Masters

Dee Hock is the founder and former CEO of VISA and I came across his story and the term "Modeling The Masters" in the article,  How to Hire, Be a Leader, and Empty Your Mind Like Dee Hock.

Dee Hock walked away from three separate jobs at respected financial companies because he thought they were too hierarchical and controlling which limited his creativity.  Hock went looking for an opportunity to build a different type of organization, one that valued the creativity and enthusiasm of its employees.


Now, most of us will never have an opportunity to create an organization the size or scope of VISA, nor will we ever have the vision that Dee Hock had, but we can learn from his example, we can practice "modeling the masters" in our own companies, organizations, and personal lives, by taking the following action:


Action Item #1: Hire People Different From You


If you believe that you have a great company, organization, and or if you truly believe that you are a great manager or leader then why would hiring people who are different than you, people who are over qualified be so threatening?  If your company is growing then wouldn't you want the most over qualified candidate you could find:  Why hire someone who is 'qualified' today when they will must likely be unqualified in a year or two.  If you are very good at what you do then how could someone who is also good, or different, threaten you?  Wouldn't they challenge you to be even better?  

When you look at a job description you see tasks, machines do tasks and tasks are teachable.  When building a team remember that bringing in someone who is a perfect fit does nothing to improve the overall ability of the team; seek out the candidate who is over qualified, seek out the candidate that brings a different experience and or perspective to you and your organization. 

Most small businesses fail because hiring decisions are made the wrong way and or for the wrong reasons. 


Action Item #2: Be A Leader


Have you ever looked at an organizational chart and realized that authority flows from the bottom up?  Or to quote Dee Hock,
"If you don't understand that you work for your mislabelled 'subordinates,' then you know nothing of leadership. You know only tyranny."

  I realized over my career I spent over 75% of my time managing myself and my superiors and the balance was spent managing those who reported to me. Leadership is not a position but rather a perspective; the  perspective of those who report to you, or as Dee Hock said,
"As soon as you start building a team they're going to start looking to you as their leader. They'll not only look at what decisions you make but also the process you go through to make those decisions. They're going to want to see someone who they respect and can learn from."
As frightening as it may seem, if your team cannot accomplish its purpose without you, then you are not a leader; you are nothing more than a cog, a cog in the wheel, an employee.  You cannot lead if you find yourself always focused on what those behind you are doing and or wether they are following.  

Action Item #3: Empty Your Mind


If you find yourself overloaded, unable to focus, doing too much, then you have obviously hired people just like yourself and you are not a leader.  If you are busy fighting fires, or overwhelmed with day to day issues  then you will never have the chance to empty your mind to focus on the big picture and where your business and or organization is going.  Creative ideas can't be forced and if you want more of them then you'll need to free up your mental energy so you can focus.


If you find yourself so tied down with the present then what future are you going to have?  Putting out fires is what leaders do, but if they do so constantly, then they are going to be totally caught by surprise by the train heading directly at them.  To be successful in a company, with a business, or an organization, you should be able to look at someone who works for you and say, "Your the boss, tell me what you need from me...."

Integration: The New With The Old

I have spent a lifetime being told "....what you do not seem to understand..." and then being given a lecture of how a particular industry operates and or why what is current processes and or procedures is the best that can be achieved.  

Now, I am being told that, "...we are changing the world...." as a retort as to why "old" knowledge, "old" technology, or "old" economic processes are no longer relevant.

So, I developed a perpetual smirk on my face and a real sense of humor; because the traditionalists will continue to believe that we have reached a peak while the innovators will believe that we are at a beginning of a revolution:  Neither realizing that they are standing on the same plateau but looking in different directions.

"The realist sees what is and remembers what was; 
The idealist sees what is and dreams of what could be....
The realist struggles through life never achieving
While the idealist struggles through life never satisfied."

I wrote that back in 1979 and it was as true then as it is today.  The traditionalists who fail to innovate die and the innovators who fail to grasp tradition will never grow beyond being a fad.

It dawned on me this morning that I have been presenting my business funding proposal to today's "idealists" and they saw "old economy" and next week I will be presenting the exact same funding proposal to today's "traditionalists" and they will probably see "...a fad."

Where exactly does "integration" of the old and the new occur?  

How does a company of thousands of employees and hundred of millions of dollars in annual revenue incorporate the concepts of consumer centric and or community into a business model with a marketing budget that dwarfs the companies leading the way in the area of consumer centric and or community retail?  When does an innovative company in the consumer centric and or community retail environment realize that they are now a mature brand?

When does tradition realize the revolution won, and when do the revolutionaries realize they are the status quo?  How exactly do you achieve the "tao" of success; the balance of being and becoming on a constant basis?  Especially in a world where the innovators are concentrated in one industry and the traditionalists are in others?  How do you convince others that you represent the best of both worlds when one world scorns tradition and the other fears change?

I do hope that I figure it out this weekend!

Wednesday, July 13, 2011

Why T Shirts?

When I grow up I want to be.......

Never once did I ever consider that I would be involved in the manufacture, embellishment, and marketing of t shirts!  Those are Turner Originals in the picture to the left, they are MY creations and they are very different from your run of the mill t shirt in a variety of ways and that is why they come banded!

I would love to lay claim to some life saving invention, or that somehow something I thought about while in college has now come to fruition and is changing the world.  Oh, it would be so awesome to have folks waiting for my next blog post, or to be able to raffle off a lunch with me that would net some charity millions of dollars.  Never happen, because all I do for a living is make and sell t shirts.

When all you have done is make t shirts, embellish t shirts, and market t shirts all your life you find yourself ashamed to tell people what you do for a living; you hesitate commenting on blogs out of fear that someone may click on your profile and realize that you are in the t shirt trade!

You think the whole world has passed you by, that your knowledge is ancient history, that your craft, your vision, is so antiquated that you keep your excitement and passion to yourself. Then you come across an article where Adam Nash, Vice President of Linkedin, and mentor at 500Start Ups among other things actually took an interest in something that you thought the world had given up on:


Then I come to find out that he has three other articles on Tech and T Shirts and has more in the pipeline!

Finally, techies are talking about something I know and understand!  My purpose in life is no renewed!  Mr. Nash, I assure you in four posts you have only scratched the surface in regards to t shirts!

I have been arguing the how, what, why, and when of t shirts for 25 years!  In the mid 90's I came up with the idea for our gift industry start up to package a screen printed ladies tee with one of their potpourri gift products as a spring gift for gardeners: that was their number one selling product that year!  Notice the t-shirts in truck stops?  Well, I sold that idea to a chain over 13 years ago and ended up having to drive a loaded van all the way to Juliet, Illinois in January, to set up the first test store; had to assemble the shelving, load inventory, test the computer system, develop the auto replenishment inventory procedures and then turnaround and go home driving at about 35 miles per hour.  Wanted to make sure that we "executed" flawlessly!

Now we can talk t-shirts! I guess I can start a "T Shirts on Tuesday" series!  With a hat tip to Fred Wilson of course!

Break The Rules

This is a photo of an ad used by The Body Shop to their campaign of Activate Self Esteem, in Australia.

While this campaign started in Australia in 2002 it is still being shared on Facebook today; a good friend of mine, who is a plus sized young lady, forwarded it to me last week.

I thought about this ad while I was reading an article this morning on Mod Cloth, a rule breaking new start up in women's apparel.  

Mod Cloth breaks the rules as follows:

Broken Rule #1: Always organize merchandise in a way that makes sense.


Mod Cloth launches 25 to 50 new products a day randomly, and they thus create a reason for the consumer to visit their website more than once a day!  One third of their customers return more than once a day and 5% of them visit more than five times a day!  They basically threw out the age old tradition of a "catalog" by randomly adding new product regularly, and intermingling their products, thus increasing their impulse shopping potential and ensuring that they draw the consumer to products that the consumer might not necessarily consider in a traditional structured catalog format. 

Broken Rule #2: Let the designer or buyer drive fashion trends.


Mod Cloth is riding the new concept of consumer centric retail, particularly with their Be The Buyer program.  The key to their success is how they use Social Media to tap into the desire of consumers for individual style:  They do not see Social Media as a marketing channel but rather as a channel to invite consumer participation; the message is "collaborate with us" not "buy from us" and for more on this concept you can read this Q&A with the CMO of Mod Cloth.  

Broken Rule #3: Only measure success through conversion.


I have long argued that Social Media, from an apparel and or retail perspective, has totally changed the rules of advertising, marketing, and branding.  If you view Social Media from the traditional advertising/marketing perspective you are going to be disappointed with the results.  

Social Media is about engaging ones customer; this is a whole new way of thinking and one has to play hunches, develop new models, and test the results.  You also have to realize that what works for one company and or industry might not be what works with your particular niche customer.  Free shipping and discounts are traditional methods to generate sales but that is not a method to engage customers.

The reality is that B2C retail is now a new frontier:  Where once there was one method to success now there are a variety of methods.  Mod Cloth, like Threadless, another company I follow religiously, have been very successful in a very short time. 

The reality is that they will have to continue to break the rules, as their current consumer base ages they will have to adapt to the tastes of an aging consumer while at the same time continuing to remain true to their initial concept and reinvent the concept for a younger consumer; if they do not then they will no longer represent a trend but rather be nothing more than a fad.  Thus, the concept of a brand is not fixed but rather is always in a flux between being and becoming.


Tuesday, July 12, 2011

Risk

Risk, what exactly is it?  We talk about it all the time, especially in regards to business and money.  Currently, there is a big fad in regards to the term 'entrepreneur' and we marvel at these individuals because they are "...accountable for the inherent risks and the outcome of a product."

If we look at risk as a mathematical formula we would basically have:

Risk = (Probability of failure) X 
(Expected loss in case of failure)

Is it the 'probability of failure' variable or the 'expected loss' variable that makes someone an entrepreneur?  If you are young, unmarried, and either in college or of college age then the reality is you most likely have little to nothing to lose, regardless of the probability of failure in whatever is attempted.  So, does that qualify one to claim to be an entrepreneur?


As one matures, it is logical to assume that while the variable 'expected loss' will increase the probability of failure in turn decreases due to the fact that one has gained more knowledge and thus it could be assumed that one would make decisions that while no less risky are much better thought out.


But honestly, when attempting a new endeavor, how many people actually calculate risk of failure?  

The reality is that most individuals are risk adverse, which realistically means that they not only avoid and or fear risk but they will most likely avoid attempting any calculations of risk and loss altogether.  Entrepreneurs are no more or less risk adverse than others but where they differ is in  their decision making; risk adverse individuals have no calculations for "regret."  


Regret is a variable for the cost of not taking advantage of an opportunity.  Risk adverse individuals prefer the status quo not only due to the fact that they prefer the status quo to any situation that could lead to a worse off position than the status quo, but because they have no concept of "regret" or that one is worse off by not pursuing an opportunity; regret is the belief that one is in fact worse off by doing nothing.


In my experience with a variety of start ups and turnarounds the most likely causes for failure were lack of execution, lack of capital (which has always been due to sales outpacing inventory), and the inability of the founder/owner to entrust others, a belief that they had to do it all, and or the inability to acknowledge employees who were in fact, stakeholders.


In my post on Entrepreneurship I make mention of "opportunity driven" entrepreneurs and "necessity driven" entrepreneurs and I commented that:
"The world of internet based start ups is an example of opportunity driven entrepreneurs, while the rest of our economy fosters entrepreneurship as necessity driven, or people striking out on their own due to financial necessity."
In an environment where one is forced and or compelled to strike out on their own, of course the risk of failure will dramatically increase; there is no calculation of risk because there is no choice, there is no sense of regret, because their is no choice.  If one strikes out on their own out of financial necessity and if a major cause of failure is a lack of capital then logically the statistics for failure will create a sense that entrepreneurs are risk takers; but the reality is that if less than 1% of all start ups get funding, and well over 50% of small businesses are struggling because they have no access to capital the reality is that even the most talented, even the most obvious of ideas will not be successful because they will only be attempted out of necessity; and thus doomed to fail.


The reason we see more young people being innovative and striking out on their own, is because they are opportunity driven rather than necessity driven.  While the young focus on the internet as entrepreneurs the reality is that we no longer lead the world in innovation because outside of internet/technology, we are devoid of any opportunity to innovate; every week we hear of mega million dollar financing deals for another innovative tech start up, from time to time we hear of some tech start up that reaches greatness and creates billions of dollars for the founders and investors in the start up.  We celebrate this as "proof" of the greatness of our society and or our economy, we use this as an example of what the rest of the economy should do,  we even have politicians now jumping on the bandwagon of the start up model as a way to create jobs, and a great debate is occurring within our colleges about the need to teach entrepreneurship. 


The reality is all we have to do is return to a basic calculation of risk and create an environment where risk is calculated in an opportunity driven environment rather than a necessity driven environment.  We need to accept the fact that the success of the tech/internet start up world is as much of a desire to create wealth, in the sense of wealth within a bubble, as it is to "change the world."  Start ups such as Jewelmint and Beachmint, and the mega million dollars of funding they receive do not represent innovation nor will they change the world, but rather they are the equivelant of flipping homes in 2006.


We need to return the calculation of risk to an environment of risk vs. reward rather than the current environment of necessity.  We need to base our concept of risk on a more rational sense of 'value' or to a scale of base hits rather than home runs.  We do not need more risk takers, nor do we need more education in regards to entrepreneurship, and there is absolutely nothing the government can do, but rather we need more investors who value a return on an investment rather than scoring on an all or nothing gamble.


The reality is that risk is irrelevant in an environment that is necessity driven; no calculations of value are relevant in a world where opportunity has been replaced by necessity.  To calculate a formula assumes rationality and the calculation of risk without a corresponding calculation of reward is irrational.  


  


  






  

Sunday, July 10, 2011

Hiring: Do You Really Know What You Are Looking For?

I have been doing a lot of research in regards to jobs and hiring methods.  I notice that there is a big focus on keywords and applicant tracking software such as Jobvite, Jobscore, to name a just a few.  These are awesome tools, but in regards to the concept of "social hiring" and or whatever promises made in regards to isolating the ideal candidate for a position, that is absurd; that is where our faith in technology can blind us.

The best manager of customer service I ever had the honor of working with was a lady whom I originally interviewed for the position of Daycare Director.  She had never worked in an office, had never worked in a manufacturing environment, and had little to no computer skills whatsoever.  But, she had supervised people and obviously had worked with the public, and I cannot imagine a more demanding public than parents who are entrusting you with their child/children.

I would never have found her focusing on just keywords, nor would she have been even remotely considered if I had focused on direct experience; if you just focus on the 'tasks' of a job rather than the 'skills' inherent in the tasks, or the job titles of the "previous experience" section of a resume you are going to miss the potential that great people represent because you are focusing on experience rather than potential.

I guess this would be called a career change but the reality was while the job description did change the skills necessary for success did not.

Once I interviewed an accountant for a position that she was very overqualified for, and I told her that she was overqualified but that I would save her resume and contact her when we had an opening better suited for her qualifications:  Yes, I actually did save her resume!  In fact less than six months later I did call her and offer her a job.  She brought a degree of professionalism to part of our administration that was in need of it.  The only issue was that she had always worked in small offices where she was in charge and now she found herself in a position where she was in charge of a department that was one of many departments; and she always had issues working with other people as a team; and I told her on her first day on the job that would be her "Achilles heel....".

I once hired a young college student to work part time, on 2nd shift, in our payroll department; after a short interview I realized that he had the perfect thought process to be in IT.  He was majoring in Philosophy of all things, but every single question I asked he broke it down and responded with answers that were like bullet points.  Within a year he was our tech support and with Microsoft and IBM training he basically took over the IT department and replaced the existing staff of two.  To this day I still have not found anyone, even among the local companies that provide IT services as a business that could match the ability of this young man.

The best production clerk I ever saw I met in a truck stop where she was a waitress!  It was a hectic fast paced environment where you had to think on your feet and watching her coordinate the efforts of the kitchen with the demands of the customers was quite a sight!  Twenty-five years later she is still putting out fires and coordinating activities that change constantly.

How exactly do you match skill sets and personalities to jobs?  Some people have built careers, that look impressive on a resume, but what if that career was built not on a conscious decision of what they enjoy and or are good at but rather because it was the first job they could find?

The whole concept of "keywords" just really gives you insight into what a person has done, not what they are good at, and it definitely tells you nothing about how good of a fit the candidate will be for the position that you are trying to fill.

I love the term, "overqualified"  I mean think about it, why wouldn't you want to get the most for your money?  Is it that a candidate is overqualified or are you just over awed?  Now, if you believe that the individual would be bored or not challenged by a job then you might want to review your job description and figure out what made that position attractive to someone who you deem "overqualified" you might have dramatically overstated the position.

In regards to the concept of "social hiring" or the idea that everyone within an organization has input in the hiring decision for a position.  I always looked to hire people who challenged me, you forced me to be better, but I cannot see a group having the same desire, because they are looking for someone that "fits in;" group decision making is more apt to create mental inbreeding, and conformity, rather than diversity and growth.

When companies define their work environment as "competitive and challenging" and then leave hiring to a popularity contest via social hiring, then you have a contradiction; group decisions are always protective and no one in a group is going to say, "...lets hire this person because they are going to really challenge us and make us achieve more...."

I cannot help but realize that what we attempt to do when hiring a person for a position is to really avoid a hard decision!  We do not want to hire anyone over 50 because......well, because that puts a limit on the applicant pool.  We do not want to consider anyone who is unemployed because....well, because that puts a limit on the applicant pool.  We use keywords today, for no other reason than it allows a software to scan through resumes.....well, just to cut down on the applicant pool.  Only look for those applicants with industry experience, or who have prior job titles that match.  Or, lord forbid, didn't major in the right subject matter in college, or forgot to seek some particular certification so to have the right "codes" after their name.

If we could devise a software that would pick that one resume, that one applicant out of hundreds, and then flash "THIS ONE" across our computer screen, then we could escape from having to make a decision in regards to people and hide forever from the fact that maybe we really don't have a clue what the "ideal" candidate for a job actually is because job descriptions define a static relationship, or the engineering of an organization, and the interaction of people is dynamic which in turns changes anything static.

Hint, for those of you who are developing this applicant tracking software, why not include a simple personality test, or have some questions drawn up that would give the applicant a chance to give answers to questions that would give readers a glimpse of the social aspect of the applicant.  It would assist companies to relate to applicants and you could add an additional fee for these additional screening tools!

I also think that College2Startup is a great concept and I think every college should create a website for their seniors and recent graduates that would allow employers to surf this pool of talent; lots of jobs are "created" this way and with the unemployment rate being what it is, we are going to be in a "buyers" market for talent for quite sometime. 

Entrepreneurship

The word 'entrepreneur' is being batted around quite a bit nowadays, in fact it is being used in so many situations and to describe so many people that I actually had to look the definition up to get my bearings.

Entrepreneurs, like the self employed and or business owner share some very important traits, they are all people who have possession of a new enterprise, venture, or idea, and are accountable for the inherent risks and the outcome of a product.  That does not mean that every entrepreneur is necessarily a business owner or self employed, nor does it mean that every owner is an entrepreneur.

Entrepreneurs are leaders and team builders, but that does not mean that they will be "a founder," "CEO/President," or "owner" of a company or organization.  An entrepreneur characteristically innovates, introduces new technologies, increases efficiency, productivity, or generates new products or services. An entrepreneur acts as a catalyst for economic change and are highly creative individuals who imagine new solutions by generating opportunities for profit or reward.

True entrepreneurs put passion before profits; the vision, the dream, is what they live for not the money.  A true creative passion to change, to improve, to see things others do not see, can actually be hindered by greed, by a desire to get rich.  

Can entrepreneurship be taught?  No, not really.  Environments can be created where entrepreneurship can flourish, and I would argue that the key issue with our economy right now is that we, as a nation, have killed entrepreneurship and it is probably the number one reason we find ourselves in the situation we are in.  Now, I realize that numerous readers will react negatively to what I just said, but outside of technology, outside of the internet, we have absolutely no environment for entrepreneurship.

If we want to foster entrepreneurship then we need to return to the concept of "critical thinking" or:
"...knowing how to sift fact from opinion, make a clear written argument or objectively review conflicting reports of a situation or event..."
In a recently published study,  Academically Adrift: Limited Learning on College Campuses, Richard Arum notes that:
Forty-five percent of students made no significant improvement in their critical thinking, reasoning or writing skills during the first two years of college, according to the study. After four years, 36 percent showed no significant gains in these so-called “higher order” thinking skills.Students who majored in the traditional liberal arts — including the social sciences, humanities, natural sciences and mathematics — showed significantly greater gains over time than other students in critical thinking, complex reasoning and writing skills.  Students majoring in business, education, social work and communications showed the least gains in learning. However, the authors note that their findings don’t preclude the possibility that such students “are developing subject-specific or occupationally relevant skills.”
Entrepreneurship is not an occupation but rather a way of thinking and seeing the world.  It is more a Weltanschauung than a 'subject' of study.  


I think we also need to realize that there is "opportunity driven" entrepreneurs and "necessity driven" entrepreneurs;  The world of internet based start ups is an example of opportunity driven entrepreneurs, while the rest of our economy fosters entrepreneurship as necessity driven, or people striking out on their own due to financial necessity.  There is an emerging body of work that shows that entrepreneurial behavior is dependent on social and economic factors:  For examplecountries which have healthy and diversified labor markets or stronger safety nets show a more favorable ratio of opportunity-driven rather than necessity-driven entrepreneurs.


Necessity-driven entrepreneurs work out of their home, become insurance salesmen, or open up cupcake shops, while opportunity-driven entrepreneurs create new products, new ways of doing things, and eventually jobs for others.

Saturday, July 9, 2011

From Competition To Collaboration

The basic premise of competition is that the world has finite limits; whether that be the size of a market, the number of customers, or the number of opportunities that one can compete in or for.  If there is finite limits then of course it is understandable to see competition as a win-lose proposition.  If demand is infinite then viewing everything as win-lose is actually detrimental to success.  

If consumers spend only a finite amount of money a year and there are only a finite number of consumers available to you then obviously, Walmart will be viewed as a threat, as a competitor.  If there is a law that states that individuals can only join one social network then of course Google + can be seen as a threat to Facebook, just as one could claim that the success of Facebook caused the demise of Myspace;  but the reality was that the demise of Myspace was due to their inability to judge consumer demand and Facebook benefited; execution led to the demise of Myspace not competition.

I have yet to see, after 25 years, a company and or a product that was run out of business due to the external threat of competition; every single example I have, and there are numerous examples, are all of companies that ceased operations due to internal shortcomings.

One of the hardest things I have had to accomplish over the course of the last 6 months was a business plan.  I know that we will collaborate with other product manufacturers to offer their product in our market.  I realize that there are barriers to entry in my market and that we can provide a "bridge" over the "moat" to our market; six months ago I had no idea what the products were, but I have identified three now.  I also realize that at some point in the future we will have stores; but will they be actual brick and mortar stores, pop up shops, or stores within stores, I have no idea.  As far as when this occurs, again, it will occur when a compelling opportunity presents its self.  I do have a list of cities where we would initially begin thinking about establishing retail outlets, but that could change too!  I do realize, based upon internet sales, that we will most likely have a store in Moscow, Warsaw, and Amsterdam.

Being competitive, creates an "us against everyone else" mentality which becomes tunnel vision.  Tunnel vision is the one sure way to extinction.  Terms such as "consumer centric" and or "customization" are nothing more than new ways of saying that one collaborates with their consumers.  That collaboration can then be the basis of a whole new model for a retail product; retailers know what their consumers have bought but that should not be confused with what they are willing and or wanting to purchase.  I see this constantly when I review what retailers purchased in a particular geographic area and what consumers, in the same geographic area,  have purchased from our website.

The only real competition that exists, is that within ones self and or ones organization; the need to constantly improve and adapt is the key to success.  The only competition that matters is that between being and becoming; and in this competition smaller companies, companies that collaborate and reach out, companies that can be proactive rather than reactive will succeed; and thus the threat of competition is internal not external.

Friday, July 8, 2011

B2C And "The Shopping Experience"

"(T)here are known knowns; there are things we know we know.  We also know there are known unknowns; that is to say we know there are some things we do not know.  But there are also unknown unknowns – the ones we don't know we don't know. ”
—Former US Secretary of Defense Donald Rumsfeld

As quirky as that quote is I cannot help but relate to it from time to time;  whenever I begin to layout my expectations for our new shopping cart software I cannot help but get tangled up in the 'knowns' and the 'unknowns.'

Most ecommerce sites look at the shopping cart as something to get a consumer through as quickly as possible; its like the self service, 15 items or less lane, at the super market.  All the effort is put toward the website, like merchandising a store window, all the effort is put to enticing you to purchase, but once you have decided to purchase you are "dropped off " or transferred to a cold and uninviting shopping cart.  We have done everything we can do to assure you of our superior customer service, we have added 24/7 customer service via chat, and we have all sorts of links, and "Frequently Asked Questions" sections, but the moment you click "add to cart" we disappear during the check out process, and do not re emerge until the sale is complete.

If you think about it, the innovation of communities, social media, and branding, to name a few, have existed from time immemorial in the timeline of the development of social man; thus, all the only innovation that the internet represents is just the re-creation of a past, "known known."

Now, we see ecommerce talking about "the shopping experience."

For most of us who are over 40 we can remember what a true shopping experience was;  it involved a small specialty store where a sales person would not just wait on you, but would also flatter and suggest.  You knew, upon leaving a store, that you had had a great shopping experience if you actually ended up walking out of the store with a lot more than you went into the store to buy initially.  You may have cursed yourself for overspending but the reality was that you enjoyed every minute of it.

I cheer on the internet because it is in fact breathing life back into the concept of a specialty store; the opportunity to find exactly what we want, or the options to find things you never knew you needed, without being limited by how far you are willing to drive is just awesome.  But, to call it a "shopping experience" is really a long way from the truth.


The "ideal" ecommerce shopping experience involves a loyalty program that actually begins the shopping cart experience by knowing the consumer by name; a very good sales clerk in a specialty store would have known your name by the time you reached the cash register.  As part of the concept of a loyalty program an empowered ecommerce program should know whether you purchased before and what you purchased before.  It should be able to "compliment" a consumer for their purchases and at some point "suggest" something to compliment the items purchased.  I know from experience that if a consumer calls in an order it is very easy to recommend a new color of a garment or another garment and before you know it you have increased the value of their order by 20%;  now a Swedish company is coming up with new technology in this area but realistically we are talking about taking a database and creating a command matrix that would trigger events during the check out process.


We have the technology to create little talking characters that pop up on a website and entice you to visit the website via a prerecorded voice message (excuse me if I don't use the "techy" terms) but why can't we have a little prerecorded sales clerk that would assist with the shopping cart check out process?  If a consumer wants to breeze through the process then they could click an end to the "floating" video clerk and zip through the process.  But the reality is, for a greater number of consumers, I think that creating a true shopping experience from within the shopping cart program would be enjoyable and dramatically increase sales for the website.


Little pictures or blocks of item, with such text as, "People who purchases this also looked at this..." just doesn't cut it!  But the ability to suggest that something they didn't buy would really work with something they did buy would take ecommerce to the level of a "shopping experience."


We are watching as venture capitalists pour millions of dollars into online retailers such as Trunk Club  who's whole premise is based upon,
"We start with an assortment of the best brands in men’s fashion, and then personally hand select a “trunk” of clothes for you based on your preferences."
Oh, and also the club like concepts Jewelmint and Beachmint, both of which are based upon the premise of individualized style preselected for you.


Nothing different than back in the good ol' days when we experienced sales clerks that knew how to read a customer!  No reason that cannot be built into a shopping cart to recreate a true shopping experience!  I guess this is an example of a "Known Unknown!"