Monday, May 21, 2012

Review of The Lean Startup

While reading The Lean Startup by Eric Ries, I found I underlined many sentences and wrote many notes in the margins. Before I tell you the most valuable nuggets I learned, first let me give my review: it is an outstanding book! If you want to or already have started a business, you need to read it. If you agree that the definition of business model is the most scale-able and repeatable way to get customers to pay you for your product or service, then you'll want to read this book more than once.

Now, on to some of my key take-aways.

Entrepreneurship is a form of management, one that focuses on doing the boring stuff over and over again, following a system, or process, that follows the steps of building, measuring, learning, tweaking, and then repeating this process as quickly and diligently as possible.

The traditional balance sheet and profit and loss is almost useless in the startup phase. The balance sheet and its various ratios are meaningless, and the profit and loss (or really the loss statement since most startups lose money at first) reveals no new, timely information to the entrepreneur. Lean startups call for more frequent and timely numbers that measure progress in the context of experimentation, learning, and key drivers of success.

Evaluating what we learn from our experiments leads us to one of two conclusions: pivot or preserve. Either it didn't work and needs to be changed or it did work and we need to keep doing more of the same.

Running one test, or experiment, at a time is no longer acceptable. It breeds a culture of politicians and salespeople lobbying for the success or failure of the experiment. Running hundreds of tests at a time (how Ries describes Intuit) allows for everything to move at the speed of the experimentation system with "shift-on-the-fly" results.

The goal of every startup should be to test every one of the assumptions they have made as quickly possible.

The "go and see for yourself" principle challenges all entrepreneurs to get to know their customers intimately and understand the core reasons they want to buy.

A Minimum Viable Product (MVP) does not have to be a working prototype. It can be something as simple as a basic survey or landing page with basic information and calls to action. It might even be a video of the concept. The key is to experiment on and test your assumptions as quickly and inexpensively as possible.

I love the concept Ries calls "Wizard of Oz testing". Rather than build out a product that is perfectly automated at the beginning, you can make it appear that your website is automated but actually is being run by humans. This allows for quick and inexpensive experimentation to take place long before investing in something that you'll likely need to scrap later.

"New customers come from the actions of past customers."

Those are some of the more important points I learned or re-learned from Eric's book and perspective. The book is well worth the read, and every business that has any desire to innovate can add value to their innovation process by implementing The Lean Startup principles.

Wednesday, May 16, 2012

To MBA or Not

Based on some recent chatter on the subject, I am going to chime in on why pursuing and earning an MBA degree was one of the best decisions I ever made for my career. I realize there are lots of opinions, theories, and even some studies on this subject, and its clear that an MBA is not for everyone. One of my favorite articles about this topic, along with the debate of pursuing college education vs. entrepreneurial opportunities, was written by @_AlexLawrence and it is worth your consideration: Should I stay or should I go.

I will write this post similarly slanted toward entrepreneurial career paths. I do not intend this post to be any more than my anecdotal experience and opinion. The MBA degree was right for me, and here's why.

You Get What You Put in
The amount of value extracted from the MBA education is directly proportional to how much each individual student puts into it. The best part of my education was when I allowed it to push me the furthest from my comfort zone and inspire me to change and grow.

I attended the University of Georgia, well-known for its entrepreneurship program. I signed up for as many entrepreneurship classes as possible, and I was not disappointed. Within the first three weeks we had to form into teams and come up with a business idea to pitch to real-world investors and entrepreneurs. Every three weeks thereafter, on a Friday, we had to pitch to a new set of investors and entrepreneurs, and our professor expected significant improvement between each 3-week period.

After the second of these presentations, I was feeling pretty good about my team, our business idea, and the plan we were building...until I returned to school the following Monday morning. In my student box was our draft of a business plan with notes covering the margins and every available white space on each page. These notes were not pointing out our amazing skill and insight...rather they constructively ripped our plan and model apart. On top of the plan was an audio cassette tape sporting our team name. When the tape ended 45-minutes after I started listening to it, I felt as if I had been cut to the very core. Our professor pointed out every major and minor flaw and problem with our plan and presentation, and most of it was directed at me. But I only had time to mope for a few moments until the other side of the audio cassette began to play!

I had two choices. I could be angry and coast through the rest of the class, or I could take every piece of constructive criticism, analyze it, and figure out how to make myself, our presentation, and our plan better. Those who know me can likely guess which option I took, which was the latter. I went to work and felt like we made significant progress when we went in front of the next group of "judges" just three weeks later. But the following Monday morning I found a similarly marked plan and audio cassette tape in my box. But this time our professor's voice only filled the tape halfway through the second side. Now that's progress!

After an entire semester of this rigorous improvement process, I was a changed person. But it was only because I made the choice to fully engage. What I got from this class and the rest of my MBA experience was directly proportional to what I put into it. We went on to win several business plan competitions and a slot in the grand-daddy of them all, Moot Corp. My attitude toward my MBA education probably had something to do with why I was voted by my fellow classmates as student of the year. The speech I gave at graduation teaches some of these principles...feel free to read it here: Ken Kaufman Speech at MBA Graduation - Servant Leadership.

MBA Education Without the Degree
I am convinced that you can learn most of the MBA curriculum from books and other programs that boast the ability to teach the MBA material in 90 days, a month, or I think one of them even promises the timeline of 5 days. There are plenty of executive series and lectures that can fill the need to learn. Not to mention that the school of hard knocks has taught a lot of first and second-time entrepreneurs more than most newly minted MBAs can hope to learn from their entire corporate or consulting careers.

MBA Degree is About Opportunity
You see, in my opinion, an advanced degree's greatest value is in the opportunities it creates (notice I said degree and not education). I felt that the MBA degree would open up more opportunities to do the things I wanted to do with my career than if I didn't have one. Anyone considering an MBA needs to weigh that question in their minds, and realize that an MBA from some schools does not create as many opportunities as an MBA from other schools.

If you always plan to own your own business and your customers don't care if you have an advanced education, then the MBA degree itself will likely not add much value to you. But if you invest yourself into the education, I have no doubt you'll gain great value. And that's the key...the education can be gained from many different venues, but the degree cannot.

MBA Degree and Education are Meaningless Unless You Can Perform
Early in my career I was hired by an entrepreneur who started his company twenty years earlier after dropping out of high school. His company had grown to over 500 employees, an amazing success story. On my first day he asked me: "So what do you think you and your advanced education can teach a high-school dropout about running a business?"

That was the moment my MBA education and degree came full circle. I realized right then and there that everything I learned and the fancy degree on the wall helped me get the job but would be worthless if I didn't help this company grow and improve. My reply was simple: "Well, it seems like I have a lot to learn from you and your success." And I did.

Conclusion - Investment in Yourself
Early in my studies and career in finance I heard many people talk about the greatest investment most people make is in their home. I could not disagree more. The greatest investment people can make is into themselves...their education, experience, etc. And I'm not talking about the fancy ROI calculation where you figure out how much more money you can make a year because you earned an MBA. I'm talking about the person the MBA experience helps influence you to become. Is your perspective broader? Are you more able to make a positive difference in your relationships? Are you more empowered to add value wherever you decide to commit your professional time?

That's the real "ROI" of the MBA.

Monday, May 14, 2012

Lessons Learned from 3 Successful Entrepreneurs

I was part of a great event last week that featured 3 entrepreneurs (here's a picture of me hosting the event). Each shared three of their top lessons learned during the process of starting, developing, and growing their enterprises.

Thanks BizVision's Shawn Jones, Rimports' Jeff Palmer, and OrangeSoda's Jay Bean, the content was top notch. Here are some of the highlights from the Twitter feed for the event...all found under the hashtag #uvef.

Tweeted by @BNMadsen
  • Bizvision gets repeat & referral biz from customers; very little other marketing.
  • Bizvision advantages: low price, lean & flexible, low risk upfront.
  • Bizvision lesson learned: #1 = partner model (drive development), experts in their verticals, best "salespeople".
  • Bizvision lesson learned: #2 = customize/scale (started by building a platform not a site), build w/future in mind.
  • Bizvision lesson learned: #3 = stay lean: keep expenses down, outsource before hiring/buying equipment, focus on actions/plans.
  • Rimports financing through Zion's First Natl Bank - great partner.
  • Moms are best customers and marketers for Rimports.
  • Scentsy is biggest Rimports' competitor and biggest evangelist for product at MLM, Rimports sells for less at retail.
  • People are our most important resource; invested from the core - Rimports.
  • Honesty & integrity are core values - vol dealt w/82 out of 155,000 units - cost $1/4M - cemented partnership with Walmart.
  • Rimports mantra: there is a way.
  • Rimports - keep offerings fresh each quarter.
Tweeted by @Kisstixx
  • Honesty and integrity in business will take you far never compromise that.
  • There are no barriers just challenging opportunities! 
  • Choose a strategic investor that has your same vision, passion, and drive @mcuban
Tweeted by @aboytodd:
  • Lesson #3 at #bizvision "stay lean"
  • Shining referral for Zion's bank from rimport's Jeff Palmer.
  • People are best investment. Lesson learned at rimports.
  • Partnerships and alliances are the greatest asset for growth at rimports.
  • "There's always a way." the maxim of Jeff Palmer at rimports.
  • Rimports awarded product of the year by Walmart in 2011
Tweeted by @jpilmer:
  • PRICE is easy to copy. Low risk and flexible are not and better differential advantage.
  • Bizvision says stay lean
  • #Rimports on deck w $120M revenue at #UVEF. They love #ZionsBank as parter. 18-65 year old women target. They know the customer.
  • People are our best investment at Rimports. Give people autonomy. Key motivator.
  • #OrangeSoda on deck at #UVEF. Avg customer only $500. The key seems to be the niche focus and knowing the market.
  • Mobile Search is key to SEO of future per #OrangeSoda at #UVEF . Heads up #entrepreneur.
Tweeted by @thisiscoalition:
  • Innovation is driven by pushing the envelope.
  • Love the recognition that partners drive the business of BizVision.
Tweeted by @BCookson
  • Build platform rather than just site.
Tweeted by @LynnDavid007:
  • Business financial management is a lot like personal money management. Stay Lean--don't spend unnecessary money.
  • "I have two words for funding: Zion's Bank." --Jeff Palmer. A simple statement, but can be crucial advice for a new entrepreneur.
  • Some strategic investors will not have the same vision, passion, or objectives as you.
  • Social networking is going mobile dramatically.
Tweeted by @dagrani
  • Yay for rimports to listen to women to drive sales. Women are responsible for majority of sales.
  • Rimports manages growth through hiring great people. Gives them a task and then walks away. Trust is key.
Tweeted by @kindallpalmer:
  • There are no barriers, only challenging opportunity.
  • Be innovative. Build what you need instead of buying to stay on top.
Tweeted by @bryanbostrom:
  • BizVision does not have clients or customers, but Partners.
  • People are your best investment. -Jeff Palmer, Rimports USA
  • When adversity surfaces, think, "There is always a way."
  • Only spend your time and resources building a product that will make you the best in the biz in your space. Outsource the rest & save.
Tweeted by me...@_KenKaufman:
  • Focus on calling those who pay you partners, not customers or clients.
  • Customer service can always be a point of differentiation.
  • Customize and the platform, not just a website. Build with the future in mind. 
  • Stay Lean. Cyclical business allows them to shift on the fly.
  • Rimports likes having MLM competitors because they evangelize the concept at almost twice the cost.
  • Invest in People.
  • Honesty is integrity.
  • There is always a way. It's up to you to find it and then make it happen.
  • Some strategic investors will not have the same vision, passion, or objectives.
  • Decide what technology to buy vs. build. Stick to your core business.
  • Know your customer and how u can best solve their pain points.
  • Focus all product development efforts on how u can best serve your customers.

Thursday, May 10, 2012

It's Less About Software and More About Using it Correctly

About a month ago a business owner asked me this question: "Is QuickBooks the best for me?"

After asking a few questions, I realized he wanted some reassurance that he wasn't missing anything about his business and how he could improve it. His business is doing less than $500,000/year and QuickBooks is certainly an adequate accounting program for that size of business, but what stuck out to me is that he was asking the wrong question.

Rather than trying to determine if he had the right software, he should have been more concerned about if he was using it adequately. If you drive a manual transmission 5-speed car but you never shift higher than second gear, you're not getting the best performance and results from your vehicle. It's the same with accounting software, or any other software for that matter.

Software does not run itself. The people who interface with the software, who input information and export information and reports, they are the ones who run the software and determine how effective it is for the business. Having appropriate software is certainly required for success, but far more businesses fail to use the software they have correctly, maximizing its ability to help the business be successful!