All posts in “Next Big Thing”

What Essential Lesson Can Today’s Tech Titans Learn From The Xerox Collapse? And… Where’s The Opportunity For Your Next Startup?

I know the stock market is going crazy these days and churning up a lot of stomach acid, but It’s a fact of life that stock prices will always go up and down. The only sure thing is to keep your eye on the actual company performance and invest in the real winners.

This recent New York Time story that talks about the “absorption” of Xerox by Fujifilm Holdings of Japan is significant. The news is not exactly earth shaking since we have all seen the business use of paper documents collapse over the last 20 years.  Xerox was a paper moving business that could nit leave the paper world behind and really innovate.

The introduction of reasonably prices fax machines in the 1980s and the subsequent integration of electronic fax modems into desktop computers back in the early 1990s should have been a strong warning to Xerox that paper documents could be on the way to extinction.

But the introduction and wide use of Business eMail and electronic documents with the help of software like Adobe Acrobat, first released on June 15, 1993 should have really sent a message to Xerox.  Now you can even sign and return legal documents without printing them. The days of multi-acre office spaces stacked with files cabinets full of paper documents, and the need for multiple copies, is long gone.

But enough with the ancient history lesson… What does this Xerox collapse mean for technology companies today and for your next startup?

No More File Cabinets Required

It all comes down to one huge problem for large companies…

The bigger they get the harder it is to really innovate. Probably every Fortune 1,000 CEO has this rule on a piece of paper tucked into his (or her) wallet.

How could this big company innovation roadblock rule actually be true?

The fact of the matter is these big companies are designed to deliver product (maybe even a service) for the lowest possible cost. There is a specific skill set involved to design, control, and execute low cost/high reliability product delivery systems.  It is very different from the skill set needed for relentless pursuit of the next big (or even small) thing and the open minded discovery that leads to company transforming innovation.

The main problem is that the end-to-end innovation process has three guaranteed components:

  1. It will be extremely risky – Like new business startups there are so many unknowns and uncontrollable variables that these type of projects within big companies are at the extreme high end of the risk curve. No one in a big company wants to spend a few years dealing with hundreds of unknowns. It can be bad for their annual bonus.
  2. There is a high probability of failure – Most innovation projects will fail. And failure is no way to advance in a big company. And… It’s can be bad for your annual bonus.
  3. It will take time to build an innovation into a real business – These kind of innovative products (or services) may not see their first dollar of revenue for over a year. And because of bloated big company organization structures, procedures, and approval processes profitability may be several business cycles away in a world of quarter-to-quarter profit reports. Definitely not good for your annual bonus.

The Xerox Computer That Inspired The Macintosh

Are you seeing a theme here?

Hint: How can a big companies innovate if no one in the organization structure is ready to put their bonus or even actual job on the line?

The simple answer is that they can’t really innovate. It does happen form time-to-time but it definitely is not that often.

So in a world where companies are faced with the innovate or die choice every year what can they do?

They usually wait for some smart startup to take all the risk then buy the startup.

A great example is a recent story that talks about how Walmart’s Store No 8 Incubator is acquiring Spatialand, a company that builds Virtual Reality (VR) products for retail stores and websites.  Sounds like a whole new way to shop and a possible Amazon killer.  Any edge against Amazon is a must-have for WalMart.

Why should Walmart take the immense risk, and put some executives bonu’s in jeopardy so they can develop cutting edge advanced shopping technology when they can wait for some smart startup team to take all the risk and deliver something they can just pick off a shelf and call their own.

The Guy Who Took The Risk And Turned That Xerox Technology Into Apple Computer

Walmart is a company that is really good at sourcing packaged goods and other consumer products in mass quantities from independent manufacturers all over the world and putting it on their multitude of store shelves then keeping the product restocked.  This does not resemble in any way the skills needed to design, develop, manage, and deploy a high-tech VR shopping experience. If Walmart tried this they would fail. And spend a lot of money and time doing it.

Now all we need is a way for risk averse process-capable big companies to work with risk hungry technically-proficient startup companies to a keep steady stream of innovations flowing to the big companies.

I have some ideas on how this could actually work and benefit both large companies and startups, but I will save it for a future article.

Xerox will not be the last titan to fall… Who will be next?

Can Disruptors Be Built Instead Of Discovered?

Facebook, Google, Netflix, and Amazon are all going strong right now but one thing is for sure… No disruptor has lasted forever. Just as these leaders crushed their predecessors, new innovative companies will come along and crush them at some point. Maybe sooner than you think…

Why not you?

When you look at the crop of companies that keep jumping into current startup accelerators you might think all the great ideas have been tried already.

It’s just seems like the same old ideas are being recycled over and over again. And when something fresh pops up it usually addresses a market that is too small to actually create a significant business. A billion-dollar business.  And… That’s one key trait of a true disrupter.

First let’s agree that a successful startup, a real disrupter, as a minimum needs three things beside the elusive great idea…

  1. A dedicated team – The founders need to be extremely competent, fearless, and ready to give 110%.
  2. A clear “Distribution” plan – How the product or service will attract paying customers and deliver the product or service.
  3. A defendable moat – Once competitors (known and unknown) see what you are doing what will keep them from going after the same market the same way and putting you out of business?

Without any one of these three essential components a startup is only relying on luck to succeed. And luck is not a solid business strategy.

Could empty seats be the real problem?

The thing I have seen with current business accelerators is they have a certain number of seats to fill. There may be twenty, fifty, or a hundred. And no matter how good the current crop of startup teams might be they will fill all those seats.

Maybe this is the reason why Accelerators seem to be faltering when it comes to creating the next round of truly disruptive companies. An emphasis on the number of startups and filling seats could be distracting accelerator managers from focusing in on the few companies that can really rise above the others.

This numbers game worked well five or ten years ago when disruption was easier but today there is so much background noise in the acceleration game that good teams and ideas may be getting lost.

Is a new Accelerator model needed?

In the world of innovation, it’s a safe bet that if you are doing business today the same way you did business last year then you are probably falling behind.  Accelerators are caught in this trap. If the innovator gate keepers don’t innovate who will?

Instead of moving big numbers of startups through the acceleration process and hoping a few will get to the next round of funding and see some growth, why not focus on just a few startups?

This is probably a scary concept for accelerator operators because it puts the responsibility on them to pick winners. It’s a lot more difficult to select the five best accelerator candidates than to select fifty. But the key to this strategy is that ten times the resources, cash, time, and expertise can be dedicated to fewer companies. Vastly raising the probability of success.

Yes, this will leave many startup companies without a seat in an accelerator but I will talk a little more about how this could be mitigated later in this article.

So, if accelerators of the future only work with a limited number of companies how can they raise the probability that those fewer bets will result in wins?

If the following criterion is used companies that do get into accelerators should have a higher success rate:

  1. Customer Centric – Products/services that actually address a real market pain point or passion point.
  2. Distribution Focused – The company has a clear way to attract customers, deliver their product/service, and make a profit.
  3. Clear Objective – What does a win look like for the startup? Is a win about securing the next round of financing and foisting the startup onto another treadmill or about helping the company actually delivering a product/service that can be profitable?

All three of these selection criteria must be met to get into the accelerator of the future. If a company comes close it’s just not good enough and the founders should work to build up the weak areas or move on to another idea.

So… What would the future of accelerators be like if operators had five companies instead of fifty?

This more focused accelerator model would be interesting to see in action. But it won’t happen until accelerator managers and funders figure it out that enough is enough. The failure rate is just too high.

What about the forty-five companies that don’t make it into the accelerator of the future?

A better way to pre-accelerate startups should help that forty-five companies bridge the gap to get into the accelerator’s next round or move on to a better idea.  This is the way baseball’s farm teams work to develop talent for the major leagues.  This could be a way to get to the next disruptors even faster…

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.