Wednesday, January 7, 2009

The Difference Between Entrepreneur and Executive




There is an unwritten rule in business that once a company goes public, the original founders must be ousted. The myth: entrepreneurs are great for getting a company started, but not so great when Wall Street is looking over their shoulder. Part of this thinking is that founders of companies are mavericks, passionate doers with a vision, nontraditional in their approach to management and outspoken - the kind of rabble rousing that makes investors uneasy. (What is rabble rousing anyway?)

Passionate in their approach, some are seen as little more than televangelists who work their corporate gospel for all it's worth, but when confronted with real management challenges, their methodologies are revealed to be a house of cards.

To put it mildly, this is a gross generalization and highly inaccurate.

Case in point, Steve Jobs was an entrepreneur with a vision - created the greatest user-friendly computer in the world and took a byte (pun intended) out of IBM's market dominance. Passionate and visionary, Jobs had in his corner Steve Wozniak to handle the structure of Apple. Before these guys, working on a computer required extensive knowledge of code just to do a simple task. Many a computer science major looked down at those who couldn't understand the basics of a computer. Then Apple came along and changed all that posturing by inventing a user-friendly computer that required no code, no programming knowledge, just plug and play. With their visually intuitive interface, Apple redefined what working on a computer meant. They changed the computer business forever by creating computers for the rest of us.

So, it wasn't a mystery why Mac became the computer of choice for graphic designers - with it's focus on the graphical user interface and out of the box ease of operation, an Apple computer could be used by anyone. Before the Macintosh, all typesetting at ad agencies and design firms had to be sent out to a type house to be set into those neat rows you see in magazines and newspapers. You never knew what the type would look like until it came back. One wrong calculation could ruin a piece. Calculating typefaces was a science only doled out to designers with a propensity for math. With applications like Pagemaker and WYSIWYG (what you see is what you get) interfacing, Apple ruined independent typesetting companies overnight. Now all typesetting could be done in house from your desktop and changes could be made instantaneously. Apple was the David that slew Goliath and Apple buyers began to take on a cult-like obsession.

But all was not well at Apple. Jobs' direction for the company seemed at odds with CEO John Sculley. A power struggle ensued and the board of directors sided with Sculley - Jobs was forced out, and the press had a field day. To an outsider it made no sense. To a seasoned businessperson, it wasn't soon enough. The founder whose ideology was what brought the company to its current stage of profitability and notoriety was seen as a hindrance to the next phase of success. The myth of the entrepreneur, unable to take the company forward, prevailed.

At first, the executive team took Apple down a road where it had never been before, and profits were the proof that all was working. Time would tell, however, that a new CEO, several years of lack luster sales, and a low stock price are enough to make even the most seasoned board of directors realize they may have made a mistake. The Macintosh started to look like an IBM clone. Just another computer.

For obvious reasons, Jobs was asked back in 97 and the Apple brand began to make a comeback. The entrepreneurial spirit returned and Apple stopped making products that looked like grey boxes and started putting the ergonomic designs back into their industrial design. Lessons learned from Jobs' NEXT computer system were integrated into the new PowerMac lines, and the iMac brought the Apple brand back to profitability. This was an entrepreneur with executive and strategic execution.

Jobs brought the passion back to Apple. The myth of the entrepreneur had been broken. And let's not forget Jobs' investment in Pixar Studios before it was acquired by Disney. So much for the myth of the entrepreneur not understanding real business.

Conversely, executives who arose through the ranks of Wharton, Yale or Harvard learned the ropes of hard work and numbers crunching, eventually landing a key leadership position after quite a bit of seasoning, are just as valid. Many a business needs this style of management to operate and with over 50 million businesses in the United States, I'd say the majority of them operate under this management structure.

Just look at the number of law, accounting and engineering firms that must have serious systems in place to operate. This isn't just a happy accident, it's tried and true business 101. Many times executives are brought in to clean up the huge mess created by a founder who didn't know any better.

One of my favorite case studies of exemplary reorganizing is Harley Davidson. AMF drove the Harley name into the ground back in the 70s by firing employees and streamlining production to such a degree that Harley Davidson became the laughing stock of the motorcycle industry. In an effort to push for greater and greater profits, AMF forgot to make a superior product. It didn't take long for Japanese imports of better quality to flood the American market.

In 1981, AMF sold Harley to a group of investors led by Vaughn Beals and Willie G. Davidson (yes, grandson of co-founder William A. Davidson) for $80 million. In order to get back their market share and keep Japanese imports at bay, Harley Davidson worked closely with The US International Trade Commission, requesting they impose a 45% tariff on imported bikes over 700cc's. This was a temporary measure specifically designed to protect Harley and raise the price of Japanese imports. It was the helping hand that kept the competition at bay.

Next step was for quality to increase while keeping costs low. In Japan after WWII, W. Edwards Deming created a productivity model using a simple method of only ordering inventory when needed. Before his methods, companies usually kept large amounts of product in warehouses. It was costly to store, heat and/or cool and costly to insure. And if inventory prices fell, you were stuck with overpriced goods. Assembly could be at such a loss that a company could go out of business.

Deming was the father of Just In Time manufacturing and for good reason - he single handedly helped Japan rebuild after WWII. JIT focused on ordering inventory only when needed but, more importantly, gave workers on the assembly plant floor control over product quality, even the authority to shut down the line if a part or finished product didn't meet their standards. Quality over quantity.

Harley's executive management deliberately returned to what made their company famous - the macho "retro" appeal of the machines, building motorcycles that deliberately adopted the look and feel of their earlier cycles with customer-requested customizations. Components like brakes, front forks, shocks, carburetors, electrical parts and wheels were outsourced from foreign manufacturers and quality increased, technical improvements were made, and buyers slowly returned.

With JIT methodologies and a return to quality, Harley Davidson's reputation began to grow into the premium brand it is today. They even went so far as to get The US International Trade Commission to lift the previously levied tariffs. Because people were still buying Japanese imported cycles at a premium, once the tariffs were lifted, the price stayed the same, and allowed Harley to charge an even higher premium.

Today's Harley brands encompass the traditional bikes such as the Fat Boy, and female biker focused brands like the Sportster, and the Cafe Racer inspired V-Rod with it's retro look. Solid management brought Harley Davidson back from the edge of oblivian.

But what can we learn from both styles of management? First, let's define the two positions. The dictionary defines the entrepreneur as "one who organizes a business undertaking, assuming the risk for the sake of the profit." This individual many times takes on all the roles within a company until profits and/or investors allow for staffing.

And an executive is defined as "one who administers or manages matters of business of a corporation." In other words, the executive oversees the structure and the day-to-day operations for the board, the owners, or investors. Compensation may be in the form of perks, stock options, or bonuses.

Either way it appears as if the entrepreneur is working for him or herself and the executive is working for the investors.

So what can entrepreneurs learn from executives and what can executives learn from entrepreneurs?
Entrepreneurs must understand that their business(es) should run without them. Systems and structure must be executed by management and each member of an enterprise should know his/her role. When venture capitalists and bankers invest in a new start-up, it is the first thing they look for - business structure. The passionate nature of the founder may get them to the table, but it is true day-to-day business management they look for. Look at Ray Kroc, founder of McDonalds. He created tight methods for creating every product on the menu. In a business where profit margins are very tight, Kroc showed investors that his structure assured profits, whether he was there or not.


Executives, on the other hand, should take a page from the entrepreneur by looking beyond the numbers and going with their gut. When Mazda introduced the Miata, all the marketing data out there said nothing about a little convertible sports car. It was the last thing on the American consumers' mind. But Mazda did the unthinkable - they put passion back into driving with a fun and affordable roadster that brought back the days of British MG Midgets and weekends in the country.

The Miata made them look like geniuses. Had they anticipated some sort of market trend? The fact is they did nothing of the kind. Mazda took a chance that paid off big time. They put excitement back into driving. Period. Consumers buy because there is a an emotional reason to buy. Numbers crunching doesn't reveal passion.

The balance between the entrepreneur vs. executive methodologies is a simple paradigm - it is right-brained thinking versus left-brain thinking. To truly take over the business world, one must integrate both. Look at the leaders you admire best. If you look closely, you will see that they operate from both a sense of passion for what they do while balancing systems, as well as integrate a structure that operates during their absence.

Jack Welch is a prime example of someone who balances the two sides of entrepreneur and executive. He was the very outspoken CEO of General Electric for over 40 years. Passionate and strict, he became a mini-celebrity appearing on The Tonight Show with Jay Leno many times. He kept the bread and butter parts of GE (large turbines, electrical engines, stuff the consumers never see) robust, while balancing the consumer products (televisions, refrigerators, washing machines, etc.) with their financial services divisions. He truly played both roles.

Now that he has retired he is a well sought out speaker for obvious reasons - he knows how to run a business from both sides.

Look at Lee Iacocca, former President Bill Clinton, John Johnson, Mary Kay-Ash, Donald Trump, Malcolm Forbes, Warren Buffet, Tony Robbins, Hilary Clinton, HP's former CEO Carly Fiorina, etc. All are reflections of balance between an entrepreneur's spirit and a corporate executive's strategy. The balance between passion and discipline is what drives all of them.

As Wolfgang Amadeus Mozart once said, "Neither a lofty degree of intelligence nor imagination nor both together go to the making of genius. Love, love, love, that is the soul of genius."

The funny part is one of Mozart's sons, Franz Xaver Wolfgang, was rumored to be a better, more disciplined musician than his father, but Xaver shyness only allowed him to focus on conducting - his back to the audience. Having to work in the shadow of his famous father was too hard and despite touring extensively, he faded into history. And there it is again - the passion of an entrepreneur and the logic of the executive.

The balance between the two seems to be the road less traveled, but it has the greatest rewards. In closing, my expertise in this field is extensive, so all I can recommend is that if you are an entrepreneur, learn to build structure and if you are an executive, find what is passionate about your company and reveal it. The results will astound.

Thank you for reading,

Brad

Brad Szollose is the author of Liquid Leadership: From Woodstock to Wikipedia – Multigenerational Management Ideas That Are Changing The Way We Run Things

BTW: When Mac users talk about their computers, iPods and iPhones they usually use words like "I love my Mac." Strong words for an inanimate object, but that is Apple's target audience. They have an emotional attachment for Apple products. Most entrepreneurs dream of creating that kind of customer loyalty. How do you turn loyal advocates into cult-like zealots? Ask Steve Jobs and Guy Kawasaki. They, in my book, are the masters. Know your audience and you'll know their passions.

Also, Apple breaks the mold as a business. They are one of the few consumer products manufacturers who also provide content. That's like a television manufacturer providing the shows as well. But unlike SONY, who does just that, Apple's profit margin percentages as a ratio of sales to manufacturing are much more lucrative. One of the best verticle models I've seen.

This article and my blogs, articles and designs etc...are created on a MacBook Pro, with a 17-inch screen and YES, I love my Mac.

Also, I am not a fan of over analyses especially when it comes to basic human nature. Entrepreneurs shoot from the hip and executives strategize. One builds start-ups, the latter maintains and builds equity. What is there to analyze?

Here's some "lite" reading on the subject:

Tuesday, January 6, 2009

E-Branding — 7 Mistakes to Avoid



I am always astounded when companies treat the Internet like one big TV commercial. Banner ad click-throughs are almost non-existent, yet ad-buying continues onward and upward, ignoring the cold hard facts, (click-through rates are so low that time spent on a site is now considered a unit of measurement).

Social networking, e-shopping, viral videos and mobile phone content are in, banner ads out. The Internet is a golden opportunity for marketers to create a 1:1 relationship, but all too often, getting that close to a customer is too scary for most. Time to think out of the box with your Web initiative. Here are just a few clues to get you to stop treating Web 2.0 like a television commercial and kick your Search Engine Optimization strategy into high gear. The following are mistakes to avoid:

Mistake 1: You're treating your online brand like a brick and mortar brand.
According to The Cluetrain Manifesto, markets are conversations and the Internet is one of the biggest, most fragmented conversations ever created. It's a broadcast arena, a storefront, a publisher, a support group, a social network and something else we've yet to discover. It's about physical borders disappearing in favor of common networks - people gathering together to talk and it is anything but passive.

If people are hanging out on the Internet doing their thing, how do you think marketing is viewed? Marketing to this giant conversation is viewed as a mechanical intrusion to be completely ignored. Doc Searls, in his preface to The Cluetrain Manifesto, points out that, "Markets are conversations; and conversation is fire. Therefore, Marketing is arson."

What marketers assume is that consumers can't see this fake conversation, and that is where the big disconnect is taking place. Consumers have formed a story about your brand that has nothing to do with the official corporate message. Time to wake up.

Brands that have been created exclusively for the Internet, get this. They know that the Web is about creating trust not banner ads. They have formed a relationship with an Internet-savvy customer that respects their individuality. People are not "consumers" in cyberspace - they are people.

Commerce in the Internet Marketplace is secondary to the Internet's main purpose: conversation. Today a brand must romance the digital native and give them what they want, when they want it and how they want it. It may take you months to develop a relationship before getting a sale.

Brands that started in the Brick and Mortar World are seen as the outsider - a buzz- kill attending the biggest party in the world. You just won't be accepted as a Web brand no matter how hard you try.

This is why Amazon is the leader on the Internet while Barnes & Noble is number 2. What if Amazon tried to build a store in every mall in America? They'd fail. An Internet brand can't compete against a real world brand anymore than a real world brand can compete with an Internet brand. The overhead alone would drive the Cyber company out of business.

Want to reach your online audience? Try hiring an Internet-savvy marketer. That's the first step to winning some credibility. Don't just look at the resume, ask her what was the most unusual way she reached her target and met her goals. The cyber- savvy is the one you hire.

Mistake 2: You have nothing more than an online brochure.
I was recently consulting with one of the largest consumer brands in the U.S. when their VP of Interactive Development asked me why their site wasn't getting any return visitors. I told them point blank that, although they had flash all over their site and it was well designed and had SEM software and support staff, they had nothing more than a very expensive brochure.

Look, Web 2.0 is about figuring out from your customers what they like, then give it to them, even if it doesn't appear to affect the bottom line. Figure out how to create that one-to-one relationship with them and your brand will be golden. Stay on your toes - today social networks and viral videos are hot, tomorrow, who knows?

But, here's the scary part of all this: You have to get rid of the wall between your brand and your customer - it's no longer a closed system. It's not about a bevy of corporate lawyers giving you a list of stuff to say on your FAQ section. It's about one human being forming a relationship with another group of human beings that just happen to be working for your brand. It's a chance to be a part of the online conversation and join in on what is being said about you. Scary yes, but rewarding.

When your people talk with customers, remove the shackles of corporate speak you have locked around their necks. Train them instead to be themselves. Remember, people can sense a lack of authenticity. If you aren't part of their online conversation, the real conversation, you are dead.

Mistake 3: Your content is old.
This one needs very little explanation. If you haven't updated your site's content, there is no reason for people to revisit. Do you think that might be the reason no one is coming back to that web site you built a year ago?

Take a page from your favorite Blogger. Some Web Log Authors give us new and fresh musings everyday, while others only once a month. Either way, be consistent, personal and in-depth. Give your audience something to sink their teeth into, otherwise forget it.

Try twittering. It allows you to send out mini content to a list of cell phone surfers and online supporters. Keep it short though, twitter is about one or two sentences. Steve Jobs twittered that he was nervous before a keynote address. The audience picked it up on their iphones and were more receptive when he came on stage. It also allows for a human connection to a very popular executive.

I wish more CEOs twittered. It would go a long way to building their company's brand and engender trust by their shareholders. The Information Age is about staying in touch.

Mistake 4: Your strategy is not bold enough.
Recently Burger King decided to take the Whopper off the menu. They did it half-heartedly by doing it at a few of their restaurants, and then filmed people's response. It did nothing to affect the bottom line. We yawn and life goes on.

But Starbucks, on the other hand, closed down all their stores all across the United States for an entire evening. Bold and decisive, Howard Schultz took a stand against mediocrity, closed every store and retrained every Starbucks employee on what coffee meant. The next day Starbucks opened to fanfare and a return to great customer service. People noticed and wrote about it in The New York Times.

Bold moves like that can only get bold results, and I predict Starbucks will have a 15% increase in revenue this quarter as a result of such action. It creates a buzz on the street. Try it sometime.

Mistake 5: You're not facing the truth about your Brand.
Dunkin' Donuts recently started to provide lattes on their menu. They've had flavored coffee for years, but the lattes were an attempt to compete with Starbucks, and with that one action, I could see just how much of a disconnect Dunkin' Donuts has with their customers.

You see, Dunkin' Donuts is an all-American brand that served a working nation for over half a century with delicious donuts. Coffee is necessary for their brand because coffee and donuts go together like hamburgers and French fries. But coffee is their secondary market, (sales may seem like coffee is their primary market, but tell that to the customer). Dunkin' Donuts may try, but they have very little in common with a high-end coffee chain that provides coffees from around the world.

Remember, your brand has a position in the customers' mind, and that position represents one thing and one thing only. Starbucks represents coffee. Dunkin' Donuts represents donuts. One is a white-collar brand and the other is a blue-collar brand. The customer for Starbucks wants to pay top dollar to feel as if they are getting the Italian coffee shop experience, while the Dunkin' Donuts customer is looking for value and speed. The consumer will NEVER see them as equals, because consumers NEVER change their minds about a brand. For Dunkin' Donuts to think they can compete with Starbucks is a lesson in futility. But try telling that to the board of directors.

Don't be afraid to listen to the online conversation about your brand. David Felton was so frustrated with his local Dunkin' Donuts that he built an online message board to complain about his local franchise. Complaints about other franchises started showing up on the site - so much so that 5,000 franchise owners were forced to respond and correct the mistakes...sometimes within hours. It made Dunkin' Donuts a better, stronger and customer-focused company. But somewhere in the executive suite, they didn't get it. Felton's Website was shut down after much harassment from Dunkin' Donuts. They paid Felton an undisclosed sum, but DD never seemed to understand what was happening. The market was telling them they weren't perfect. Instead of being the first company to listen to complaints and adjust accordingly, they chose to silence their customer - the lifeblood of their brand. They didn't like the message they were hearing and instead of listening, they ended the conversation.

Take a lesson for your own brand. Yes, it may not be what you want to hear, but at least it will be honest. After that, work on meeting and exceeding customers' needs.

Mistake 6: Are you focused too much on the Internet, traditional marketing or both?
Years ago, many a business needed nothing more than an online brochure. Today, the online store is so easy to build and maintain that not having a web presence is seen as a major red flag to a company's stability.

Many a mega-brand has an online store because it is a duel channel for sales. Best Buy is a good example of this. I love to browse their brick and mortar stores and grab some bargains. But their online brand is very important as well when I have no time to physically shop.

Maintaining a 1-800 number and a Web store at the same time can be hard. But if you want to do it right, then I suggest that you take a look at QVC, HSN, the above- mentioned Best Buy, B&H Photo and others too numerous to mention. Take a good look at how they promote one store against the other - some use a blend of catalogs and email promotions, while others rely on TV and Internet only. QVC and HSN promote their sites from their popular television shows. They drive traffic through a live broadcast, but it doesn't end with the program. The site continues to run the promotion for a limited time. Updated content and limited time offers will drive traffic and if the offering is a good one, it will create conversion, (browsers who buy).

On the other hand, maybe you are a restaurant and need to have a web presence. Try offering take-out orders through your website with an automatic discount for orders over $25. I've seen restaurants do 70% of their evening business through take-out. Some even have to shut down the restaurant so the kitchen can handle the online orders.

Try it. You may find a nice blend between your Web presence and your brick and mortar stores.

Mistake 7: You're too literal in your message.
Many years ago I attended the annual stockholders meeting for a company in which I was heavily invested. The executive team took several actions that irked me. These changes made me realize they would be going out of business. The first mistake they made was a name change. Someone believed that adding the word Digital to their brand would change the markets' perception of what they did, (They were an interactive design agency).

The second thing that irked me was they changed the company's tag line to "A Full-Service Interactive Agency that Forges 1:1 Relationships through Channel Marketing Partnerships with Strategic Players in the Online World." I felt like I was reading an article for a science magazine instead of a company whose job was to bring powerful experiences to the web-savvy visitor.

I dumped my stock as quickly as possible.

If your primary marketing message is attempting to convince shareholders how great you are in dry corporate-speak, you have a problem. Your message should be simple, on target to your consumer audience and, most importantly, stir the emotions.

When your marketing message sounds like a bank poster, time to rethink your marketing...quickly.
What will help most is that you begin to understand that the Web is not a passive media. People go online to do research for every product they buy. The research they get is not from a corporation telling them how great the product is, they are getting their insight from regular people who are using the product now. They're asking questions about how well your products work, and what isn't so great about your brand.

Try listening to your consumer by creating advocacy sites and real dialogue through social networking. Listen to the conversation and follow through with the changes. Or you can continue as usual - ignore the marketplace, market around the problem and hope the next version will fix itself. If your product stinks, no amount of marketing can fix it on the Web. Word gets around fast these days and the one thing Netizens are really into is telling the truth.

Listen to the conversation and change with it. By focusing on getting it right, your SEO strategy will become easier and more profitable. Jumping on a band wagon because everybody else is will teach you a lesson on how to waste money. Being strategic and listening to the market will help build a better relationship with your customers. Let me know how it works.

Thanks again for reading,

Brad Szollose

Brad Szollose is the author of Liquid Leadership: From Woodstock to Wikipedia – Multigenerational Management Ideas That Are Changing The Way We Run Things
For more info, go to http://bradszollose.com

May I recommend?:
Check out Umbro. http://www.umbro.com on the ultimate soccer experience alongside great content and a mega store. They are always updating the site with complete makeovers, flash, videos, and driving rock music. Well done.

SEO: Search Engine Optimization Bible by Jerri L. Ledford
http://www.amazon.com/SEO-Search-Engine-Optimization-Bible/dp/0470175001/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1207770716&sr=8-1