All posts in “Next Big Thing”

Have HP, Dell, Apple, Microsoft and Others Forgotten How To Innovate?
How Can Startups Benefit?

Technology-InnovationsNot too many years ago I would buy a new computer every two or three years. My phone would be ready for replacement every two years right on my old phone’s two year birthday. I have a drawer filled with old phones.

But hardware and software upgrades and replacements don’t seem as urgent these days. I’m not feeling the same excitement about getting the next hot computer or smart phone. A cleaner shinier case is just not a good enough reason to spend the cash.

How about you? Have you been spending money on technology like you did years ago? Probably not.

Why do you think that might be?

techinnovIt comes down to one thing… Innovation.

For computing technology that means faster, smaller, easier to use, and relatively lower priced. For some reason companies like Dell, Apple, Microsoft, and Hewlett-Packard have forgotten how to innovate.

You don’t think so?…

Then why has HP’s stock been battered over the last year? It has gone from the $16 a share neighborhood to the $10 neighborhood for a one year 35% drop in value! Today’s HP earnings report was accompanied by management comments whining about slow PC an Printer sales.  I wonder why?

964736-hp-reports-big-loss-on-writedownsAnd what about Apple? This formerly innovative company’s stock price has gone from around $111 to $96 over the last year? That’s over a 13% drop! This should be a growth stock, right? Apple’s stock price held up better during the 2008 stock market melt-down.

The fact is that people are holding onto their old iPhones, iPads, and Macs longer since there are few compelling reasons to pay for something Apple calls “New”. The last iPhone upgrade was a great example of this lack of innovation. What was really new in that last upgrade?

Tech stock weakness has set in because these big tech companies have forgotten how to innovate. Maybe an army of accountants have taken over and pushed out the engineers, designers, and dreamers.

In the past, a new PC or laptop would at least double the speed of your older computer. Every two years there would be countless new cell phone features and it would be blazingly faster. New versions of Microsoft Office would be packed with useful new features and maybe even a little faster and easier to use.

We all had to upgrade! And we felt we received our money’s worth.

Nissan-Garage-560x223I have heard some people say that Apple has stopped innovating because Steve Jobs is gone. Then what’s the excuse for the lack of innovation at Dell Computer? Michael Dell is running the company and since he took the company private he doesn’t have Wall Street task masters to answer to. Mr. Dell can do what he wants. But he can’t seem to make a faster, cheaper, cooler computer for me?

This lack of real innovation is putting the entire tech sector into a terrible fog. It has been difficult for these tech companies to increase revenues so the only way to improve their bottom line is with cost cutting. Which means they are spending more time counting beans and less time on real innovation.

Has HP forgotten their own rules?

Has HP forgotten their own rules?

These companies may have painted their selves into a dangerous corner…. A corner that may give and unfair advantage to passionate risk-takers and fearless dreamers.

Could that be you?

What does this mean for the real innovators? Those scrappy engineers and designers who lust for new, fast, sleek, simple, and the most elegant may see their day in the sun.

If old line tech companies don’t start innovating and providing exciting products eventually someone else will fill the gap.

Right now people are sitting on a huge installed base of old Windows XP and Windows 7 computers. These users seem to be happy right now even though Microsoft has virtually abandoned Windows XP, their most solid operating system ever. They are temporarily happy because nothing on the market has shown them a good reason to upgrade.

I’ve tried Windows 10 and it feels solid but complicated. Windows 7 is doing a fine job for me right now. But as soon as Dell puts out a computer twice as fast as the one I am using I will upgrade. I’m itching to spend the money.

We’ve seen this innovation drought before and it doesn’t end well for the companies who do not innovate. Remember Research In Motion? And back in the 1990s there were several PC manufacturers that disappeared when they stopped innovating. Without significant technology improvements they were forced to compete by lowering prices. Those companies are all gone now.

This is where it began... The the innovators arrived!

This is where it began… The the innovators arrived!

What’s the message here for startups? When the big guys stop innovating… This is what real opportunity looks like.

Maybe it’s time to start a company than CAN innovate. One that is not afraid of taking risks, making mistakes, and stumbling onto what could be the next big thing…

I like to think that right now in some basement, garage, or windowless backroom a dedicated team of innovators is exploring something to delight us in all new ways.

If that’s you then you are probably in the right place at the right time.

I’m ready to buy your new product and millions of other people will be right behind me.

A Six-Point Company Idea Checklist To Help You Spot The Next NetFlix, Uber or Pinterest.

NetflixBuilding4There are basically three types of ideas when it comes to Startups. Small Ideas, Big Ideas, and DOA (Dead On Arrival) Ideas. Unfortunately most of the ideas I see fall into the first and last categories. Far too few even come close to The Next Big Idea.

A Small Idea is not really a bad thing. The problem is that there is a low probability that a Small Idea will develop into something that can support the large organization required for execution and an outside investment level to make the company grow at an acceptable pace. There is nothing wrong with a small idea. I have seen many small ideas that can support a tight staff of five to ten people where everyone goes home at the end of the month with a nice paycheck and benefits package. Nothing wrong with that. The problem occurs when a startup team mistakes a Small Idea for a Big Idea. They try to build the Small Idea company along with all its related expenses with the illusion that it is a Big Idea company. Pretty quickly expenses balloon with staff, advertising, programming, office space, travel, etc… while revenues can’t keep pace. Then the bills mount up and things collapse. If you are working on a Small Idea company don’t grow and run it like a Big Idea company until you are absolutely sure the company can support your intended expense ramp up.

UBER RUBIOAnd… I will say it one more time… There is nothing wrong with a Small Idea company just be sure to keep your expenses in line with actual revenues.

DOA (Dead On Arrival) Idea companies are a whole different animal. Sometimes these have the hype, excitement, logos, t-shirts, PowerPoint Presentations, Sharp Teams, plus the overall energy and “feel” of the Next big Idea… But… Once you get past the fog and manufactured excitement of all the company accouterments, the product/service just does not work for a significant number of users, has already been done, or does not have the possibility of attracting more than a few curious early adopter types who probably would not pay anything for the product/service.

A Big Idea company needs to be something that could reasonably create a profitable company with at least $100 million in annual sales. More is good but the $100 million mark is the ideal.

There are many great Big Idea company examples from the past so lets think in general about a few of the past “Big Ideas” and try to categorize them. Things like online Travel booking (Travelocity, Orbitz), online auctions (eBay), service sharing (Uber, AirBnB) and online Classified ads (CraigsList). When you consider these four categories you will have to agree that each probably fit the checklist shown below when they were created. But the key will be to identify new categories going Pinterest-HQforward. More on those potential new categories in a future article.

When I review startup companies I use a six-point Next Big Idea checklist like the one below before I even begin digging in for a deeper look at the team, marketing plan, P/L projections, etc…

The Six-Point Next Big Idea Checklist 

1) The Product/Service is Unique, Special, and Relevant – Are there any products/services that do this now? If so, why your product/service now? What is the target user “pain point” that the product/service will address? Who are the current competitors? How do the target users perform the task now? Does the product/service look like it would have been a great product/service to introduce last year or next year?

The Product or Service may already exist but for some reason your implementation will solve a big problem or in some significant way make things easier, faster, or more efficient. Or just more fun!

2) The Future Looks Good For The Product/Service – Is there is some known significant “game changing” event or trend on the horizon that will make your product/service especially relevant almost overnight?

An example of this would be that your product/service takes advantage of (exploits) some new feature in the next iPad, iPhone, Mac, or version of Windows. Or maybe some new law will require people do something and your product/service makes that much easier for people.

IBM PC In 1984

IBM PC In 1984

3) The Market Size Is Significant And Provable – The potential market is substantial and the target users will pay for the product/service.

The bottom line is that you will need to make money. It’s a fact of business and it will be better for you if your market is significant. Estimate the number of potential users and how much they each would pay. And show your proof on why you think those numbers are correct. The best ideas in the world (even from huge companies with big marketing budgets) will not endure if the market is too small. Examples are Microsoft webtv PLUS, Apple Newton, Sony BetaMAx, and smokeless cigarettes. If you are interested CLICK HERE for a list of the entire top 25 Biggest Product Flops of All Time.

4) The User Experience Delights People – Can the benefits/features be clearly defined and experienced by the target user? Is it confusing or clear? Is there an “aha, I need this!” moment for the target user? Is there a moment of delight and surprise for the target user? How forgettable is the product/service? Is it something people will want to talk about and share?

The Next Big Idea will be something that can be quickly communicated either in words or by demonstration. And when people see it they will immediately

The First Macintosh Computer 1984

The First Macintosh Computer 1984

understand it. They will line up to buy the product/service.

I remember the first time I saw the Apple Macintosh. (Yes, to entice my company to make software for the Mac, Apple sent me a Mac Computer many months before they were released in stores.) As soon as that first screen popped up I knew the new apple computer would be a success. Especially because it was sitting on my desk next to an IBM PC with a DOS operating system that had green glowing characters on a black screen. The Macintosh looked easier and was a delight to use. It still is.

5) A Prototype Can Be Tested Right Now – How fast can a prototype be created for testing and how much will a prototype cost?

0524_chipotle_new_630x420The faster you can get a minimally functioning prototype in front of users the better. You need to see how people really respond to the product/service in a real life setting.

6) There Is A Significant Moat – What is the moat? What will keep others out of your product/service space long enough to build a user base? Can you patent some technology? Is there some type of exclusive arrangement? Is the market too expensive for others to enter? Is there some unique distribution channel? Is there some unique aspect of the product/service that cannot be easily duplicated? Is there some unique customer relationship required to make a sale?… The bigger the moat the better.
There will always be great ideas that will not make it through my Big Idea checklist but still go on to succeed. ushg_shackshake_940_09Companies like Chipotle and Shakshack come to mind. Why would we ever need another place that makes burritos when we have Taco Bell? Why another burger place to compete with 5 Guys and all the rest? But these two companies are on a roll.

If your dream is to start a Big Idea Company the key is to run your potential company ideas through the six-points above or…. just work harder on your burrito and burger recipes.

 

Four New Year’s Resolutions That Can Make a Big Difference For Startups in 2015

2014-2015As I look at startup companies all over the world one sad fact seems to be evident. I’m sorry to say that most fail in the first year.

The sad part is because startup company founders work their tails off and make many personal sacrifices for their dream. Countless hours are spent and opportunities missed while they pursue what they think will be the Next Big Thing.

But… Unfortunately after around a year most founders find themselves sitting around a table trying to decide if they want to continue slogging along without paychecks while they are racking up more debt.

And… There is always that potential investor just on the edge of solving all their problems with a big check. In most cases more money won’t necessarily solve any real problems. The money is just a temporary Band-Aid.

So what kind of New year’s resolutions could startup founders commit to that might raise the probability that their startup will be a success?

Here are four potential New Year’s resolutions for startup founders:

1. Resolve to only create products and/or services that will be compelling for potential customers next year not last year.

So many starup ideas I see would have been great back in 2012 and completely successful back in 2010. Unfortunately the concept is a little stale right now. If an idea is already out there and gaining any type of traction starups can probably save a lot of future grief if they keep looking for another idea they can dedicate their lives to for the next few years.

Look for ideas that will get people excited in 2016. Why so far out? Because it will take you at least that long to get wheels under your idea.

How do you know if an idea will be great in 2016?

For now I will leave the full explanation of this to a future article. But… You will know a great idea when you see it and when you show it to others and you see genuine excitement.

2. Resolve to make sure your idea can make money.

This may seem like a no brainer but most startup teams get so wrapped up in the bits and bytes of their idea that they do not focus on the actual potential profitability of the product/service.

How much of the product/service do you need to sell to cover the cost of operations?

When the answer to this question is such a high number that you would need to have the entire working population of China as customers then you need to rethink your business model.

When the answer to this question involves a $20 million launch marketing budget just to get to break even you will probably have a hard time scraping up that money unless you have a very rich uncle.

If you think you will make up for a lack of traditional revenues by selling advertising, think again. Just to get your product/service in front of enough eyeballs to generate enough advertising dollars to significantly move the needle will take a large marketing budget and a very compelling offering.

Can your product/service make money?

You will need to intimately understand your customers wants, needs, pain points and what they will spend for your product/service. You will need to either make them money, save them money, or be lots of fun to compel them to spend their hard-earned cash.

Run the numbers before you start on your journey. Be sure you can sell a reasonable amount of your product/service. If the numbers don’t work out, so what… Move on to another idea.

3. Resolve to spend investor’s money like it is your own.

When I would go shopping with my kids they would frequently point out something they wanted. It could be candy, a toy, or some sugar heavy breakfast cereal. They really needed it and now. So I would tell them okay they could get it but the money would come out of their allowance.

All of a sudden my kids didn’t need it anymore. Its amazing how people spend differently when it is their own money.

When you finally get the seed or follow on capital needed to launch your startup remember to always spend that money like it is your own cash. Yes, I mean every single penny should be spent like it is your own.

Only spend money that will make a significant difference in your company’s future (or present) profitability right now. Demand the most bang for your buck.

It may seem harsh but cut out the cappuccino bars, sushi dinners, swanky furniture, Uber Rides, and high priced office space. Save those expenses for after you are raking in cash and have shown your investors a profit.

4. Resolve to decide what you want from your startup company before you begin.

Before you begin your startup journey take a few minutes to think about what you actually want from the experience. Talk to a few friends about it. Write it down. Tape it on your bathroom mirror so you see it every morning and night when you brush your teeth.

It could be independence, being your own boss, working with your best friends, changing the world, or just the adventure of running a company. Whatever it is you want be sure you are laser focused on those goals. Everything you do should be put through this important filter because a year or years from now if you are not true to what you want no amount of financial success will really matter. On the other hand if your company does a crash and burn but you got what you wanted you will be a real success.

An example of how I see startup founders get tripped up on this one is when they want to be their own bosses but they end of giving away controlling interest in their companies after several rounds of raising capital. If you own less than 51% of the company you are not your own boss.
And most of all… Do what you love because that may be all you get out of the venture.
Too many startup founders charge into their companies without taking a few hours, days or even weeks to at least map out the basics. These four New Year’s resolutions should prove very valuable when starting the essential thought processes, conversations and research needed to raise the probability of your startup’s success.