Ustrategy

WSJ Report: Why Startups Fail to Innovate and Business Plan Mistakes

The Wall Street Journal published their Business Insight Report yesterday (a quarterly release in collaboration with the MIT/Sloan Management Review).

I like these reports--they tend to be richer and deeper in content and, unlike many other online and offline publications, provide a valuable perspective.

Two articles stand out in this report. I the first, titled Why Business Plans Don't Deliver, John W. Mullins talks about key flaws in business plans Startups submit for review.  If you've ever worked with startups, you can't read this without smiling. There's the "Here I am, never mind the problem" business plan, the "Coke for every kid in China" business plan, and the all time favorite "Our team walks on water" plan. Mullins highlights key areas investors look for before they kick a CEO out the door (such as for the phrase "we have no competition"). A fun and informative read for any CEO of a startup as well as for consultants who want to be more selective about which startups they work with.

The second article, In Search of Innovation, is about a topic very close to my heart: the process of innovation in the startup world. Or better yet, the lack thereof one. Unlike large corporations, startups often think that because they have a "cool technology" that they really want to use, they're already innovative. Wrong. Even cool features and capabilities run their course and the cooler they are the faster others will imitate them--and often be much better at it because they can only improve on what is already out there. While corporations invest in partnerships with ideation agencies like IDEO and SmartDesign, startups invest more in circling around the same idea in different ways. They are also much more attached to their original idea because often that's what they got funded to do. But to truly remain on the edge, deliver innovative products and solutions, and keep users and customers delighted by the experience, startups must look outside their comfort zone in new and unfamiliar ways.

This is exactly why our clients at Ustrategy hire us...and it's exactly why every project feels a little bit like a battle. Startups tend to want innovation but are afraid to open that can or warms. "What if we go someplace we won't know how to come back from?"

The Wall Street Journal article provides a very helpful structured perspective and some high level process ideas (warning: do not attempt at home: professional driver on closed course).

Great read for everyone interested in entrepreneurship, ideation, innovation, and startups.

Thank you to Ken Friedman for the pointer!

For Enterprieses: 5 Building Blocks of Social Media

Last week, a piece I wrote about social media and enterprises was published on ReadWriteWeb. Here's the reposting. We've had some discussion in the comments on RWW (I love RWW readers--always very thoughtful comments). If you'd like to join the conversation, please go here and add your thoughts.

Enterprises and Social Media: 5 Must-Haves

Corporations know that their relationships with customers are drastically changing as a result of the new capabilities made possible by Web 2.0 and social media. Customers increasingly expect to engage with brands instantaneously and satisfactorily. They no longer tolerate long delays in response, live operators buried down the 1-800-line call tree, or the ever-mounting irrelevant spam.

Gradually, but extremely well, customers are learning to sound their voices for everyone to hear. Gone are the days when a customer needed to write a letter to an anonymous clerk at a random PO box address, leaving response to chance and corrective action to a Hanukkah miracle. Customers today can sound their likes and dislikes at anytime across multiple media, uncensored: no smart nephew, neighbor with a printer, or attorney needed.

Corporations are recognizing this shift as well. To survive, brands know they must interact with their customers in new ways across all channels: from outbound marketing to product feedback to sales to support. They also know that as undefined as the space is at the moment, they must take a highly creative and strategic approach to connecting with their customers online and offline. There is no corporate manual yet, no large consultancy slideshow to refer to. Customers themselves are setting the rules, which is a challenging model for most large corporations.

But some enterprises are starting to figure it out. They try different approaches, push the boundaries of experimentation, and continually test themselves, asking their customers to play judge. BurgerKing's WhopperSacrifice campaign is one example. When else has a large corporation asked people to sacrifice 10 of their friends? The campaign resulted in a whopping 233,906 people interacting with the brand in a new way (and to great controversy, always a good sign). Starbucks tried a safer approach after customer backlash against the automated coffee brewers it introduced in its stores. The MyStarbucksIdea campaign brought back some customers and put baristas back behind the coffee machines.

So what makes some brands more successful than others when interacting with customers online? What sets them apart? Here are five fundamental requirements for brands that want to form relationships with their customers in a Web 2.0 world:

1. Be a Panther, Not a Dinosaur

Size, complexity, and distance from the end customer play a substantial part in any enterprise's ability to effectively connect with customers. The closer a company's employees are to end customers and the more direct contact C-level executives have with customers, the faster the company will be able to adapt to new means of customer interaction, to allocate budget, and to get everyone on board with an actionable plan.

Zappos' CEO, Tony Hsieh, grew his company into a $1 billion a year retailer with his unmitigated commitment to customers. Hsieh applied a dynamic method early on, changing Zappos' offerings constantly and agilely (free shipping, new product lines, 360-day return policy) until they fit customers just right. Corporations today must learn agility, be able to adapt and change quickly, and commit to making all decisions based on customer benefit. The corporate dinosaur will not survive for long.

2. Evolve Your Organizational Culture and Structure

While some brands, like Disney and Zappos, have always put the customer at the center of their organizational culture, others, like Wal-Mart and Panda Express, are just now figuring out the importance of aligning their internal culture with their customers' culture. This evolution is easier for brands that are already structured around their customers, but for others it will be trial and error.

No matter how it gets there, every enterprise -- whether B2C or B2B -- will have to evolve its culture in the coming three to five years to survive. This evolution means re-examining traditional approaches to inbound and outbound customer outreach and being willing to shift ownership and re-structure so that each and every employee is responsible for the customer experience. Organizations will likely become flatter and return to cultivating leaders from within who can move the organizational culture forward.

3. Understand that Loyalty Is Key to Revenue

For most people, the mere thought of switching online banking providers and having to re-enter all of their information in a new system is dreadful enough that they just don't do it. Cell phone carriers in the US have contract termination fees that are higher than the cost of most phones. These companies rely less on loyalty than on "customer hijacking."

Other companies, including software and hardware manufacturers such as Dell, HP, and Lenovo, cannot constrict customer choice. These companies compete for mostly similar markets -- offering similar products, services, and prices -- and are after customer loyalty most of all. Ask any of these three corporations what it would like to be when it grows up, and it will point to Apple. Apple is the gold standard for generating customer loyalty -- no ransom required.

As Web 2.0 breaks down the walls among customers and between customers and brands, the tie between loyalty and revenue will grow even stronger, and brands that hold customers hostage will be deserted for those that provide real value. A corporation's ability to demonstrate value and secure loyalty will now be measured by their presence and customer relationships online.

4. Bring in the Right People

Traditional consultancies like McKinsey and Bain were once valuable to corporations because of their subject matter expertise. They provided top-down know-how that was adopted by executives and pushed down the chain of command. This approach is completely useless for expanding a corporation's connection to customers online. The right people today possess two key qualities. The first, which is the more easily found of the two, is "in the trenches" experience. People with this quality regularly interact with others online, use various social media conversation tools, are passionate about communities, and can mobilize others with a 140-character line.

The second, much more difficult to find, is the ability to articulate and translate this in-the-trenches knowledge in a way that makes sense to corporations. The right people for an enterprise's interactions with customers have to be able to connect the new psychology of customers with the traditional way in which corporations work. They must know how to help corporations create new strategies, foster change management, and create action plans that lead to clear and measurable results. Corporations will have a tough time finding people with just the right combination of qualities and capabilities; but once found, these emissaries will deliver crucial and uncompromising value to the customer-oriented corporation in the Web 2.0 world.

5. Have a Strategy!

Brands today that have an effective online presence didn't just stumble on the right formula. Getting things right takes work, commitment, experimentation, and genuine care. Whether they realize it or not, brands that are successful in social media have always acted on strategies. They have always set clear goals, developed a plan to reach those goals, and put budgets and people behind them.

Before Web 2.0, Southwest Airlines was the poster child of great customer service. Today, Zappos does for online retail what Southwest did for the discount airline industry. Wal-Mart may not pay its merchants to blog, but the merchants' time is paid for with their salaries. Corporations today, more than ever, need to reassess their strategies and ensure that those strategies are an expression of their desire to move forward rather than fear of losing momentum or control.

Having a Twitter or Facebook page is not a strategy. Nor is it very effective to hire community managers and charge them with reducing marketing dollars. The corporation today must first figure out its goals in the Web 2.0 world, set relevant metrics, invest in understanding customer needs, and map out an actionable plan it can implement. Only then will its full potential in the online social world be realized.

With 68% of online adults using one or more social media tools and 42% of online adults reporting an interest in at least one type of social application from brands they like, enterprises cannot ignore the changing landscape of customer relationships. In the coming years, corporations will not survive on product lines and competitive pricing alone. For corporations to remain competitive, they will need to become more flexible, put people at the center of their culture, and remain dynamically attentive to human needs. It is time again to realize that change should be embraced, not feared, and to put in place the right structures, strategies, and people to support this change.

The Social Media Ecosystem--Presentation

A few weeks back I was invited to speak at the Social Media Club of San Francisco and Silicon Valley. We had a crowd of about 40 people, a fun sochu tasting from Haamonii, and a great conversation about social media and how to think of it in the context of the enterprise world.

After presenting how the corporate ecosystem is changing and discussing elements of Social Media strategy for enterprises, we then put things to the test and broke into small groups--each tasked with developing a Social Media strategy for a company in the retail, tech, of financial industry. It is not always easy to shift from thinking of Social Media in traditional terms of campaigns and demographics and speaking in "Twitter" and "Facebook" terms but most groups came back with real strategies, not just tactics (although we had fun ones too--like putting executives in high heels with Dr. Scholl inserts. Okay. Maybe you had to be there).

One thing I'd like to emphasize is that Social Media isn't a "fix" or a "thing" organizations now must do. It is a manifestation of new capabilities we have in a Web2.0-3.0 world. As a result, the ecosystem itself is changing in large corporations: what used to be a closed system between corporations, their partners, and their customers, is increasingly open and fluid; partnerships, once limited to large and established vendors or consultants is now expanding to include startups and their solutions--which means startups need to learn how to communicate the value proposition in their products in new ways; A traditional corporate-controlled push/pull model for customer feedback and marketing is now dynamic: customers can tell corporations what they need and want whether corporations ask for it or not--this also means that corporations can count on their customers to speak about those things they're excited about and spread the word at a fraction of the cost.  Just yesterday, Sandy Carter, VP IBM Software Channels and Social Media Evangelist demonstrated how IBM was able to save $100,000 on maketing campaigns using Social Media tools to mobilize customers (more about this later this week).

Here's the presentation I shared. Also check out David Libby's thoughts on the topic.

The Corporate Social Media Ecosystem

View more Microsoft Word documents from Ravit Lichtenberg.

You can also download it from Slideshare.

Dell Says ROI on Twitter is $3Mil

In today's New York Times' bits blog, Claire Cain Miller writes about Dell's stated revenue from its use of Twitter.

"Dell said Thursday night that the company had earned $3 million in revenue directly through Twitter since 2007, when it started posting coupons and word of new products on the microblogging site. In the last six months, Dell Outlet earned $1 million in sales from customers who came to the site from Twitter, after taking 18 months to earn its first $1 million. Dell has also earned another $1 million from people who click from Twitter to Dell Outlet to Dell.com and make a purchase there."

The full blog post is here.

Loic le Meur and Chris Shipley Give Advice to French Startups

UbirFrance's TechTour09 kicked off with a CEO showcase presentation and best startup competition. At the reception that followed, Loic le Meur, the highly respected French entrepreneur now living in the Silicon Valley and founder of Seesmic (and co-founder of LeWeb Paris with his wife Geraldine le Meur),  and Chris Shipley, executive producer of DEMO and a founding partner of the GuidWire group, provided advice to the 16 visiting startups.

Loic, in his casual and often humorous self-deprecating style ("I promise to suck less this year"), spoke sans power point about what he learned from his two years in the valley. First, Loic wanted to make sure everyone knew he loves France. Yet his experience in the Valley is such that he currently has no plans to return.

• The Valley is blessed with variety of people...here, it's not a bad thing to have an accent. Don't lose it.
• Being here allows entrepreneurs opportunities they would never get abroad, such as launching your product at Facebook's headquarters.
• There are a lot of smart and incredibly powerful people in the Silicon Valley--and most very accessible. Something not easily seen in France.
• On the downside, even a run or a dinner end up as a networking event. So be prepared. Hopefully you like business networking.
• There are great resources here but they are very expensive. Think carefully where you want to invest. Loic keeps a development team in France (although, I would warn (and I think Loic would agree) having local marketing and business development have no substitute).
• For French companies, hiring is much more flexible in the Valley--unlike labor regulation in France, in the US employment regulations are much more fluid and companies (and workers) can terminate agreements in a day and move on.
• Trust is a big difference. In France it takes long to develop trust but it lasts for years. In the US it's easier to develop trust instantaneously but it may be shorter-term or contextual.
• "If you don't know Techmeme--you should."
• People are very generous in the Valley. You can schedule a meeting with almost anyone but be goal oriented. State what you want to achieve, how much time you're asking for, and get right to it. No need to open a conversation with weekend and kids report. People in the Valley will need a reason to meet up with people who ask for their time.

Chris Shipley, in her unique delivery and with a tight power point, uses Columbus' discovery of the Americas as a metaphor for global startups' best practices. Columbus, says Shipley, was an early entrepreneur. He set to sail West instead of East in his quest for spices, thinking it would get him to his destination faster. He was wrong--but he had a plan and when he discovered America on his way, he took advantage of this new opportunity. Global startups can consider their quest in similar ways and learn from Columbus' journey:

• You need the right vehicle--what kind of a "boat" do YOU need?
• You need the right crew to navigate the vehicle through the changing climate.
• Seek wise counsel
• Be prepared for the unexpected: know when you are off track.
• Fail fast and embrace what you discover in the process. Change. Turn failure into success.
• Embrace the native environment "When in America be an American."
• Be prepared to change course
• Use the experience to build new relationships.
• Be patient: very few companies have been overnight success
• Don't give up: Queen Isabelle rejected Columbus 3 times before finally supporting his quest to head West.

And then it was time for wine and cheese on the terrace...

French Startups Make a Splash at the UbiFrance US TechTour

Sixteen French startups presented today at the French Trade Office--UbiFrance--TechTour showcase, and I was on the judges panel along with investors, journalists, and other expert consultants to startups.

Let's start with the good: Surprising was the high quality of startups at this TechTour compared to other techtours and startup presentations (and I've seen a LOT of startup presentations this year); UbiFrance did a great job at selecting companies who brought a fresh perspective and who stepped out of the crowded Web2.0 space we're so used to in the Valley.

Most companies had a solid, proprietary technology in their building blocks; for many, the presenting CEO is also the inventor behind the patented technologies that enable the solutions. Some spent over 5 years in the lab before launching; others are new on the scene. But no matter how long they've been out of private beta mode, many of the companies already have large paying clients--some companies are already showing significant revenue in France. Not your typical US startup situation.

Like in most cases however, company information, website, and presentations were rarely good enough to get the judges excited without further follow ups (I wrote about how to present European startups in the US a while ago here). In 6 minutes, a company should be able to not only justify its existence but rather, impress anyone who hears its pitch and trigger a desire to hear more. This is at the crux of any good pitch.

From lacking information (such as a sound business model and revenue) to the lengthy academic sequence explaining 'how we got here'--information completely immaterial for the first 6 minutes of a pitch...or even 15!--the presentations were disappointing at best especially given the great technologies some of these companies had.

The way a CEO speaks of his or her company is crucial to the traction of the company with investors and potential partners--and especially for those companies who come here on a short visit and get only one chance to make their pitch before heading back home. 

And so, after four hours of presentations and discussions, we were tasked with selecting the top 3 startups for their potential and demonstrated business case. It was not an easy task but after a number of voting rounds, we narrowed down the list of companies to three winners--all turned out to focus on non-web2.0 media technologies.

In third place, 3DTV Solutions: A unique solution integrating 3D camera technology, software and hardware that enables clients to create "FullDepth 3D images" that can be shown on a flat screen- no glasses needed (think ads, object collaboration, visual production, gaming, and simulation).  The demo was quite breathtaking and I foresee a great future for this startup. 

In the second place, CodaSystems: A proprietary technology that enables image authentication and validation for those needing to verify original copies straight from their mobile cameras. Think legal situation where one might want to ensure an image hadn't been tinkered with, visual evidence, documents, etc., or as Codasystems' tagline says: "evidence of who did what when and where."

And in the first place, A-Volute. A-volute made a strong impression with a tight presentation and a stellar audio demonstration. A-Volute essentially makes 3D sound come out of your typical 2 speakers or headset. We watched as the two simple speakers in front of us generated audio that one could have sworn came from behind, from the sides, from above---anywhere but from those speakers. But A-Volute doesn't want to simply create a new audio experience, it wants to develop the next generation 3D audio standards. A-Volute already has major clients in government, military, and soon in gaming and audio hardware manufacturers. It will be selling its USB 3D audio headsets to consumers in the coming months.

For a complete list of the startups, visit UbiFrance's TechTour website.