Category Archives: Business Mistakes

5 Business Fundamentals I Learned the Hard Way

Business Mistakes, Reflections, ,

Two days ago I had the pleasure of being interviewed by John Caddell, founder of the Mistake Bank, for a podcast focusing on mistakes. That made me think about some of the things I learned that came from the business mistakes I’ve made. This is over the more than 27 years since I was last an employee, and 22 years of running my (well, our) own business. And despite a fancy business degree.

1. Your employees can’t also be your friends.

Most business owners want to treat employees like friends. We hire people we think we like, we work with them, we share values, so it’s only natural. But I’ve found, I’m afraid, that it doesn’t work.

Sometimes friends become employees, and sometimes former employees become friends, but don’t kid yourself. People you pay aren’t really friends. And business requires management, which means goals and tracking and accountability and feedback, which, ultimately, means you aren’t equal. You can’t be both equal and effective.

As a test, ask yourself: when those people you thought were friends leave the company, are they still friends?

This was really hard on me because I brought my anti-establishment quasi-hippie former ’60s persona with me into my business. I’m not naturally comfortable with hierarchy. But in a real business, it has to be there. I learned this the hard way.

2. Profits aren’t cash.

Profits are just an accounting concept. You get them by adding up the sales you make over a specified time and subtracting the costs and expenses. But having the sale doesn’t mean you have the money; and the cost associated with that sale might be something you paid months earlier. And furthermore, the money you spend to repay debt or buy assets is completely ignored by profits.

So it’s not hard to go broke while still being profitable. I learned that in business school first but then had to relearn it 15 years later when my company suddenly doubled sales and profits, but it nearly killed us. We were selling through channels, so money from sales came five months later, but we were building inventory and spending on marketing months in advance. So we were spending in October for sales made the following March that generated deposits into the bank in the next July. We nearly went under during our first big growth spurt. So I learned about cash flow the hard way.

3. Good liars are rare but dangerous.

Most liars are obvious and easy to spot, but last week I was chatting with an investor whose firm got into trouble for not catching a problem before they invested. He felt bad. It looked like their “due diligence” process failed. But he said:

“If you think about it, we rarely run across a person who can look you straight in the eye and lie through their teeth without showing it. We’re not equipped for that. When people answer straight direct questions with straight direct lies, they can get away with it.”

That made me think. Lots of people tell lies at odd moments, make excuses, try to squeeze out of things; but with normal people, that kind of behavior trips them up on a regular basis. But the power of the person who lies very well is something else altogether. That’s another one I learned the hard way.

4. You have to live with mistakes.

If you can’t stand mistakes, don’t make them, and don’t tolerate them, then you’re not cut out to have your own business. You are going to make mistakes, you can count on it. You have to be quick and flexible about recognizing mistakes, acknowledging them, and taking whatever steps need to follow them.

In Robert Sutton’s 12 Things Good Bosses Believe, posted last Friday at the Harvard Business Review, he says:

One of the best tests of my leadership — and my organization — is “what happens after people make a mistake?”

I agree. I had to learn that the hard way.

5. You can’t do everything, so at least try do the right things.

I call it displacement: everything you do rules out something else that you can’t do. Every entrepreneur wants to build every possible product to please every possible customer. I do an you do too. But we don’t realize, or at least I certainly didn’t for a long time, that trying to do everything doesn’t work. You end up not doing the really important things as well as you should, getting things only half done.

You try to focus. Take a step back out of the chaos, clear your head, and revisit priorities. What really matters? No matter what brilliant ideas you may or may not call your strategy, your real strategy is how you spend your time and your money. I learned that the hard way.

5 Ways to Tell You’re Too Corporate for Entrepreneurship

Business Mistakes, Leadership, Management, , , , ,

I was reading Should We Worry About Older Entrepreneurs? from Small Business Trends the other day when I stumbled upon this intriguing quote:

Field also worries that entrepreneurship might not be right for older Americans because these folks have spent too much time in the corporate world.

corporate towersHmmm … a bit of a generalization, no?

In honor of that thought, with a tip of the hat to comedian Jeff Foxworthy’s “you might be a redneck” routine, here’s my list of ways (none of them age related) you can tell that you just might be too corporate:

  1. If, when you see $850 or $1,450 in the budget, you assume that means $850,000 and $1.45 million (you ask: the numbers are in thousands, right?), then you might be too corporate for entrepreneurship.
  2. If every time you encounter something that has to be done, you look immediately for staff people to assign it to, then you might be too corporate for entrepreneurship.
  3. If you measure yourself and everybody else by office or cubicle size and layout, then you might be too corporate for entrepreneurship.
  4. If problems are to be ducked, and monkeys to be passed on to somebody else, then you might be too corporate for entrepreneurship.
  5. If having a reason why not is the same as getting something done, then you might be too corporate for entrepreneurship.

But just age? Age might make a person too old, but not too corporate.

(Image: Fisherss/Shutterstock)

The Curious Paradox of Copying and Creativity

Business Mistakes, Business Strategy, Creativity, , , , , , , , , , , , ,

A couple of months ago I picked up this post on TechCrunch, which sort of accuses Apple of copying its iBooks application for the new iPad.

clonesI hate business copycats. Drives me crazy. As Palo Alto Software’s Business Plan Pro grew up, others copied our tag lines, our packaging, and the software. I hated that.

In the retail business you have some companies who live on copying packaging. They put imitation products inside imitation packages to fool people, so they get the wrong thing. I hate that. How do they live with themselves?

But it’s not illegal.

And it’s also the history of innovation. From VisiCalc to SuperCalc to Lotus 1-2-3 to Quattro Pro to Microsoft Excel, copying makes things better. From CP/M to DOS to Windows, copying makes things better. The original Macintosh operating system borrowed from an earlier mouse and window system developed by Xerox. The iPod was not the first MP3 player, nor is the iPad the first tablet computer. These were not new ideas, but they were improvements.

And all the cool new phones now are copying the iPhone.

Do we hate the people who copy ideas? We all do it. Kids learn their moves in sports by copying other kids. We learn to write better by copying writing we like. We learn to get along with people by copying people.

The entire history of human creativity is built on copying. What, if not copying, is the cause of those identifiable periods in music and art and writing, like the Baroque or Renaissance? What except copying makes Gothic cathedrals? Try to name a good movie that didn’t borrow from some earlier movie. Even Shakespeare was often redoing older classical themes.

And yet, when I look at all the stuff in the market that’s copying something else, it makes me mad. Do your own thing. Be original. Make it better. Don’t just copy my thing. Even if it’s barely legal, it’s still sleazy.

A lot of great art starts with copying, borrowing themes, ideas, and so on. But business, starting with one idea and adding to it, making it better, creating new things based on old things, that’s progress. Business copying, looking like somebody else just to steal some respect, is just bad business.

I’m glad cool new innovations based on existing stuff succeed. I hope all sleazy business copies fail.

(Images: galtiero boffi, Konstantin L/Shutterstock)

Where Do You Fit in This Marketing Fable?

Business Mistakes, Marketing, ,

Once upon a time,  there was a (hypothetical) Mary who built a business around her love of gardening. She used to be a gardening columnist in newspapers and magazines. StoryShe had written a couple of books on gardening. She developed a couple of software applications related to seeds and the care of plants. She has a website where she shares her knowledge and sells her books and software along with gardening tools, books, seeds, and related items.

Are you the one who sends her emails suggesting that she sell your books instead of hers? That she adds your content to her website to compete with her content? That her readers and customers would be better served by your stuff rather than her stuff?

Don’t be that one. I’m amazed at how much marketing time and effort is wasted like this. If you’re not in Mary’s situation, you wouldn’t believe how much of this happens.

Think about it first. Why in the world would Mary put your stuff into her marketing mix? She owns hers. She doesn’t have to ask, attribute, or share.

Here’s the point: If what you do is different and complementary to what she does, so that she can offer her customers a broader range or more products, and make a margin on it, then offer it to her. Don’t take her time, or insult her intelligence, suggesting that she use competing content, from competing sites, instead of her own.

On this one I can’t help sharing a past moment standing on the side of a soccer field, watching one of my kids play. I was standing next to a friend who also had a kid on the field. A guy neither of us knew walked up to us and talked for a while about how great his kids was. We listened. Finally the guy walked away. My friend said, quietly, to me only: “Yeah, but I still like my kid better.”

As the classic blues song says: ”God bless the child that’s got its own.”

Moral of the story: don’t be that marketer. Be smarter.

(Image: feng yu/Shutterstock)

Why Are Some Salespeople Proud of Making Bad Deals?

Business Mistakes, ,

I was in an airport recently, not wanting to eavesdrop, just sitting near the gate waiting to board. I was trying to concentrate on my own work on my own laptop in fact, but these people were loud and completely unconcerned about bothering anybody else. So I heard their conversation.

clownThey were salespeople bragging about what I consider the opposite of good selling—making bad deals for things people didn’t want, selling to people who didn’t want to buy, getting the order regardless. You know the cliche: selling iceboxes in Alaska, etc.

Doesn’t this almost always end up with an unhappy customer? How is this good for business? Why are they proud of it? And, if this is you, why are you proud of it?

(Image: by _gee via flickr cc)

Business Strategy in Action, or Reaction, Both, or Neither

Business Mistakes, Business Stories, Business Strategy, , , , , , , , , ,

Apple vs. Kindle vs. publishers, oh my. Do you know the background? It’s all over the web. And I posted here this week about how Apple and Amazon.com and Macmillan are wrapped up in an ebook battle. And it gets better. As I write this, Wednesday evening, the news is that Amazon gave in and put Macmillan back into the mix, but at higher prices. But I just checked the site and my favorite Macmillan book, Thomas Friedman’s Hot, Flat, and Crowded, is listed there as available through third parties only. So go figure.

I’m fascinated with all of this. Really, business strategy in action. Consider these questions, and ask yourself: if you were Steve Jobs, or Jeff Bezos, what would you do?

  1. Does Apple Computer block the Kindle app on its new iPad? The iPad runs iPhone apps, and the Kindle iPhone app works great. But does that mean iPad users can buy Kindle books for their iPad for $9.95, while Apple’s iPad iBooks cost $14.99?

    2. Apple can block the Kindle app, of course. But what will users say about that? Apple users tend to take Apple as some public resource. They’re incensed when Apple acts in its own business interest instead of the public good. Would cutting off the competition be worth the dark side mask?

  2. Is Amazon.com seriously going to cut off its nose to spite its face? They took all Macmillan books off of Amazon.com because of a pricing and revenue share argument related to the iPad. But doesn’t that hurt the Amazon.com business proposition? Don’t we all go there to find the world’s largest inventory? And now they say they’re giving in, putting Macmillan back, and at the higher prices it demanded. What does that do for the Kindle pricing ceiling at $9.99? What happens to the $5 differential on iPad between a Kindle book and an iPad book?
  3. Do publishers gain by fighting either format, or either channel? Now Macmillan books are playing second fiddle at Amazon.com. It’s hard to tell from here, but it’s been presented as Macmillan squaring off against Amazon.com for a larger share of the revenue. That’s a bold move. Would you do it? How would you feel if you were a Macmillan author?
  4. What about Sony, or Barnes and Noble? These other ebook readers that were seriously planning to compete… are they just blown away? What can they do?
  5. Does this mean ebooks are finally for real? I’ve liked ebooks for more than 10 years now, read them on an early Rocket ebook reader, on a PDA, on a Kindle, and on my iPhone, as well as on a number of laptops. Are they finally going to get to critical mass? That would be nice.
  6. Do smart buyers wait for all of this to sort out? Remember the Sony Betamax format vs. VHS? You don’t want to invest on the losing side here, right? I finally bought Blue-ray HD after HD DVD lost the battle.

I’m enjoying the spectacle. I’ve got the Kindle, I’ve got the iPhone with the Kindle app on it, and I’ll probably buy an Apple iPad for its entertainment value, form factor, and long batterly life. For ebooks the iPhone Kindle app is still my favorite, so I’ll probably use the Kindle app on the iPad too, when I get it — if Apple doesn’t block it, that is. I don’t see how the bells and whistles of the new iBook reader can be worth the extra $5. But, since it’s not shipping for a few months anyhow, I’m going to wait and watch.

And I’m especially watching the strategy play out. Several of these big players can make bold decisions that will cut off competition and annoy the hell out of buyers. Is that the way it’s going to go?

(Image credit: from Mashable’s recent post on the eBook War)

Contradiction and Paradox Are the Spice of Business

Back to Fundamentals, Business Mistakes, , , , ,

Measurement, metrics, and accountability are everything. Except when they aren’t.

Yes, I contradict myself. No, I don’t mind. Contradiction and paradox are reality in business as in life. As soon as you develop a general rule, you find exceptions.

And I have posted here both the magic of metrics, and do we undervalue marketing we can’t measure. Like the old folk song says, both sides now.

So with that in the background I read with relish Management by Imagination on the Harvard Business Review’s The Conversation blog. Here’s the lead:

The perception that good management is closely linked to good measurement runs deep. How often do you hear these old saws repeated: “If you can’t measure it, it doesn’t count”; “If you can’t measure it, you can’t manage it”; “If you can’t measure it, it won’t happen”? We like these sayings because they’re comforting. The act of measurement provides security; if we know enough about something to measure it we almost certainly have some control over it.

But however comforting it can be to stick with what we can measure, we run the risk of expunging something really important. What’s more, we won’t see what we’re missing because we don’t know what it is that we don’t know. By sticking simply to what we can measure, we come to imagine a small and constrained world in which we are prisoners of a “reality” that is in fact an edifice we’ve unknowingly constructed around ourselves.

The Harvard post goes on to question the more extreme exercises of metrics:

if you stick to measuring what you can already measure, you cannot create a future that is different than the past.

On the other hand, there’s no denying that the underlying mathematics of computing, as applied on the Web, are total luxury of measurement in today’s business world, especially when compared to what we all did as recently as the 1980s and early 1990s. Back then we’d spend the marketing money on ads and direct mail and such, and then hope for the best, waiting weeks and months to get at best a distorted view of results. Now we get clicks and conversions and return on investment almost instantly.

When I worked as a wire service journalist in the 1970s, the turn of a headline made a huge difference. So we crossed our fingers and hoped it would work. We’d find out the next day. Today the industry leaders like the Huffington Post test headlines, and adjust them, in real time.

Conclusion: I love the truth of case by case judgment of so much of real business. Know the rules, follow them when it makes sense, and break them when it makes sense. Paradox and contradiction are the spice of life. And good business.

Or, if you prefer, take this, straight from the Harvard blog, as a conclusion:

We need to get away from all those old sayings about measurement and management, and in that spirit I’d like to propose a new wisdom: “If you can’t imagine it, you will never create it.” The future is about imagination, not measurement. To imagine a future, one has to look beyond the measurable variables, beyond what can be proven with past data.

(Image credit: Vlue/Shutterstock)

Bad Research is Worse Than No Research at All

Business Mistakes, Business Research

A couple of weeks ago I posted “bad research is worse than no research at all” on Twitter. Some thoughts, like that one, fit perfectly well in 140 characters. And it seems like a useful one too. And true.

The reasons for that statement seem pretty obvious to me. Better to know what you don’t know than to make business decisions based on false information and false conclusions. If the focus group said red is better than green, nobody dares to argue for green. Even if green is really better, and the focus group was off, distorted by one very articulate and engaging green hater. Red it is.

Seth Godin gave a great example on his blog a few days ago. He called it Learning from bad graphs and weak analysis. He takes some business charts and analysis from the New York Times and shows why it doesn’t actually show what it is supposed to show.

(Image: istockphoto.com)

Proper Care and Feeding of People Who Cry Wolf

Business Mistakes, , ,

Remember the kids’ story, the boy who cried wolf? He did it two times, no wolf, so the townspeople ignored him the third time, gulp?

In August I posted Are You a Good Manager? How Can You Tell on this blog. I think I know one element of good manager: taking care of the people who cry wolf. In fairy tales, crying wolf is a bad thing. In management, dealing with employees in a company, it’s a good thing.

Crying wolf means sounding false alarms. Saying something isn’t working. The messaging is wrong, production is faulty, customers are getting the wrong idea, the parking lot is icy, or whatever. And I’ve learned, in some 30 years managing people, that you should treasure the employees who care enough to sound the alarms. And in business, not fairy tales, a false alarm isn’t such a bad thing because it wakes you up, makes you think, keeps you alert. It takes just an extra touch of reaction to check, find the alarm false, or not. And checking isn’t a bad thing. And people who sound alarms are sticking their necks out, risking the comfort of saying nothing, to suggest something’s wrong.

Consider this: what’s the harm of a false alarm in a business setting? How many false alarms are worth it if just one of them turns out to be real? False alarms are part of a good process in business.

So, do you want to be a good manager? When somebody in your business cries wolf, note it, make sure that person knows you’re glad they did, especially when there’s no wolf. Because you want them to cry wolf, again, the next time. And if you say nothing, they’re going to feel foolish, and not do it again.

And if you want to know you’re a bad manager, consider this: are there people in your organization not telling you when they think something is wrong? Why wouldn’t they tell you? What happened the last time they did?

(image credit: wikipedia. An illustration of a 1919 anthology, by Milo Winter)

Note to MBAs: Drop the comma MBA, Please!

Business Education, Business Mistakes, MBA, Rants

imageI just got another email from somebody whose email signature is “So-and-so, MBA.” Which reminds me of the business cards, and letters, and promotional material I see where people brandish those three letters after their name.

I don’t think that “MBA” thing behind your name works out for you.

imageHave you heard the joke about how to create a small business? The answer is take a medium business and put an MBA in charge. And the magic MBA investment formula for guaranteed profit? The answer is buy MBAs for what they’re worth and sell them for what they think they’re worth. Do you know how many people blame MBAs in general for the current financial disaster?

It’s not a matter of licensing and regulation, like MD or CPA. It’s just a master’s degree. In this country alone, accredited institutions grant several hundred thousand masters degrees every year. That’s not including the fake degrees.

So that MBA you earned? Put it on your resume, put it on your blog’s “About” page, and put it in the management team section of your business plan when seeking loans or investment. Use it to know what you’re talking about. But leave it off your name.