Sample text for A good hard kick in the ass : basic training for entrepreneurs / Rob Adams.
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Good Ideas Are a Dime a Dozen
Nothing beats an ice-cold beer on a blazing hot day in Austin, Texas. And nothing leads entrepreneurs down more ratholes than the myth that good ideas are scarce. Both these facts were driven home to me one late summer evening, as I shared a round of draughts with Mike Turner and Mark McClain in the air-conditioned bar of Louie's 106, a local deal-making hot spot around the corner from our offices.
This was shortly after AV Labs got underway. Mike and Mark had started with us to pioneer the role of Venture Fellow, a position allowing experienced executives to mentor infant businesses while exploring their own startup ideas. Both ex-VPs at Tivoli Systems, they'd been hard at work trying to pinpoint an idea they could make fly in the marketplace. Together with Kevin Cunningham and Bill Kennedy, ex-Tivoli directors who'd agreed to be part of a new company, they'd been talking to people, researching the Internet, and reviewing industry analyst reports. So far, they hadn't found the right concept--but judging from the positive attitudes that flowed along with the cold beer that afternoon in Louie's, they were having a great time.
"We've coined a new term, Rob," said Mark, his gray eyes thoughtful behind wire-rimmed glasses. "Web-roaching."
"What's that?" I asked.
"We've been using the Internet to research different concepts. We've found out that the minute you hit on an idea you think is unique, four or five roaches scurry out from underneath a rock."
At that point Mike jumped in. "We thought we were really out there when we hit upon application firewalls. We figured, hey, what if you could fire up a Web-based application and partition it, then let different outsiders access only certain parts? We thought this was a really unique notion--until Kevin and I found five companies that were already doing it."
Now pretty fired up themselves, they told me they'd decided to pursue their one and only idea that seemed to be one-of-a-kind: the next great sensory input to the Internet. I must have looked confused (perhaps because I was). "Smell, Rob, smell," Mark explained. "Face it--we have sight, and we have sound. Now, the Internet needs smell. Our company will make it possible to point to something on the Internet and get an odor."
"Cool, huh?" said Mike, grinning as he watched the reaction on my face. Then they both started laughing. I was relieved to know these guys weren't serious about pursuing such an outlandish idea. Unique, undoubtedly, but totally off-the-wall. Of course nobody was doing this--and no wonder!
I knew Mike and Mark would soon find a way to put their talents to the entrepreneurial test. In the meantime, as we finished our beers, I promised to pass on any ideas that crossed my mind, and to watch for any interesting trends suggested by the press or analysts. You can imagine how we all laughed when, not long after, I plopped a Money magazine on the conference table at a meeting. In that issue, Money ran a story about a startup on the West Coast. That company's mission--you guessed it--was to provide olfactory input and output over the Internet.
Think your idea has to be unique? You're deluded.
If Mike and Mark's experience tells you anything, it should tell you this: There really is nothing new under the sun. You wouldn't believe how many would-be entrepreneurs believe otherwise. They come into our office and swear they've got some new, radically cool, killer idea. They expect us to be impressed. They're surprised, even offended, when we're not.
Even intelligent, aware, knowledgeable people--people like Mark and Mike--believe a good idea is like the Hope Diamond. A good idea, they think, is rare in its brilliance and perfection. It is utterly unique in the universe. To be successful, entrepreneurs are supposed to have an idea like that, aren't they?
No! The idea does not have to be unique. The idea itself is really not that big a deal.
It wasn't long before Mike and Mark perceived this for themselves. At Louie's that day, they'd already gotten a whiff (if you will) of the truth. I knew it was only a matter of time before they figured it out. I was right. "We spent a month," Mark now says, "trying to come up with an idea no one had thought of, something you couldn't find commercially. I have to say that honestly, it's hard to find, if not impossible. Ultimately, what we learned was, there is no new idea."
Mike, Mark, Kevin, and Bill went on to form Waveset Technologies, one of Austin's most promising startups. And--surprise, surprise--the idea they finally zeroed in on was similar to the firewall concept they'd discarded early on, when four or five "Web roaches" scurried out from underneath the rock. Using the Waveset solution, companies can give outside partners and customers Internet access to internal data and applications, while managing this access in a secure manner.
Unique? Not by a long shot. In fact, the Waveset team got wind of several competitors early on. (Those dang roaches, all over the place.) What distinguishes Waveset is not the idea. Something else entirely will propel this company beyond the competition. What's that? The team's execution intelligence. In this chapter, I will explore what I mean by "execution intelligence." You will learn an important lesson:
Good ideas are not scarce; what's rare is a team that can execute.
But before we dive in to that discussion, let's debunk the notion that good ideas are scarce, once and for all.
In love with your idea? Get over it. Ideas are commodities.
If you come see us at AV Labs, we'll be able to tell if you're wrapped around the axle on your idea. First, you'll ask us to sign a nondisclosure agreement. Then you'll claim you're going to be "first to market." Then you'll tell us you have "no competition." We'll probably continue to listen politely. But your credibility will be zero.
Let's talk a little bit about each of these entrepreneurial delusions--all sub-myths of the Big Lie that "a unique idea is the key to my success."
Want me to sign a nondisclosure? Instead, say: "I'm clueless."
If I had a nickel for every entrepreneur who's walked into my office and asked me to sign a nondisclosure agreement, I could chuck it all and move to Tahiti. Every time this happens, I see a huge red flag pop out of the top of their head: Warning! Careful! Don't go there!
Why is "Please sign a nondisclosure" such a turn-off to an investor? Because it screams out, "I'm stuck on my idea." We all have a finite amount of energy for anything. If you want a nondisclosure, that means you've spent way too much of your energy obsessing about the idea. It suggests you probably haven't thought enough about the team, which is what an investor is really interested in. It implies you haven't given much thought to your customers, or to the market. You've got stuck here: Nobody in the whole world has ever had a notion like mine. Which, plain and simple, tells me you probably haven't done your homework.
I'll say something like this: "Listen, if you think this is so unique, consider my 1:8:20 rule: For every entrepreneur with an idea in Austin, there are eight in Boston with the same idea, and twenty in the garages of Palo Alto (let alone the rest of Silicon Valley)."
My point is, ideas are far from scarce. They're a dime a dozen. They're mere commodities.
Nine times out of ten, even a cursory perusal of the Internet will prove this is so. Think you have a unique idea? C'mon, get off your rear end and do a simple Internet search, and just see what happens. Like the Waveset team during their own "Web-roaching" sessions, you'll probably find several companies that have already taken a given idea to market. Which suggests, by default, that many others are working on it. As Mike Turner himself says, "The Internet itself quickly debunks the myth that ideas are scarce. Ten years ago, you'd be sitting here in Austin with an idea, and there would be ten people thinking the same thought, but without an interconnected network there was no way you'd know it. You'd think you were just off doing your own unique thing.
"Now, with the Internet, all you have to do is a search on a concept--such as 'database firewall,' 'application firewall,' 'sensory input,' or whatever--and poof! Ten companies are doing it. Before, it would take five years to find this out. Today it's almost instantaneous."
Once entrepreneurs are disabused of the "great unique idea" notion, most of them are actually relieved. Here they've spent all this time believing the uniqueness of their idea was the most important prerequisite to success. Now, they're free. Free to go out and pursue an idea they'd be really, really great at. Free to tackle a concept they'd abandoned, believing it was not sufficiently "unique." What's more, once you get it that your idea does not have to be unique, you no longer have to keep it a secret.
Getting to market first? Big deal.
If you imagine you have a one-of-a-kind idea, it only follows that you're convinced you'll get the solution to market before anyone else. I see this all the time. People tout their "first mover" status as a huge competitive advantage. All I can say is, anyone who's gone to business school and makes this claim deserves a tuition refund.
Getting to market first doesn't mean anything. Don't get me wrong--time to market is critical, especially in the fast-paced high-tech markets. But "time to market" is not synonymous with "first to market." If first-to-market is your only real advantage, this book just paid for itself; I've saved you several years of time you might have wasted pursuing an idea that's probably not all that great. First-to-market is an unsustainable advantage. Remember when Netscape's browser was out long before Microsoft Explorer? What browser are you using right now? In addition, many an entrepreneur has woken up, only to discover he's built an unsustainable expense structure in service to the "first mover" advantage. I could go on. The point is, the examples are legion that "creating a new category" does not necessarily spell success.
As a matter of fact, there aren't many companies I can think of that did succeed after creating such a category. I can, though, think of plenty of businesses that entered an existing category and proceeded to stomp all those roaches to smithereens. How? By executing to dominate, not define, a market space.
Think there's no competition? You're naive.
The third myth pertaining to the "good ideas are scarce" fallacy is the one labeled "I have no competition." This is another claim I hear from many a hopeful entrepreneur. As my colleague John Doggett, a fellow professor at the University of Texas business school, says in his characteristically blunt fashion, "This is complete and utter BS. Every product has competition, even if it's just 'I want to keep my money.' "
John is right. Even if you haven't been able to locate competing companies and products, I assure you: Competition exists. Like John says, you have intense competition from people wanting to hang on to their money. In fact, this is probably the biggest competition out there. You also have competition in the form of plain old inertia. People's resistance to change is deep in their bones; this is a universal human trait.
Another form of competition? The do-it-yourself movement--a proclivity that's rife within today's big companies. People think (wrongly, most of the time) that they can save big bucks building their own software solutions rather than buying them. For example, when the Waveset team thoroughly surveyed their proposed customer base (during market validation, the topic of our second kick in the ass), they discovered that the greatest competition came from "people using manual labor and development tools to patch together a solution," recalls Kevin Cunningham. "There were a few software vendors in the space, but they hadn't made huge inroads that we could see."
Still, the team experienced some paranoia about those competing software vendors. To some extent, I told them, their paranoia was a good, healthy thing. But I encouraged them not to obsess about it too much. Why? Because the existence of competition suggests that the idea itself is competitive. Competition functions as its own form of market validation.
Where did all the confusion come from with respect to competition? Mostly, I have to admit, from the venture community itself. Venture investors are completely schizoid on this issue. On the one hand, they want to see some competition--because, again, that helps validate the market. At the same time, they don't want to see too much. We don't want you taking on Microsoft, for example, with some wonderful new PC operating system (an extreme example, but you get the picture). With venture investors as bipolar as they are, no wonder entrepreneurs themselves have gotten a little off-base with respect to competition. The main thing to remember is this: When you're tempted to say "I have no competition," find some.
Because competition, rather than being a bad thing, serves in whatever form as an important corollary--an existing solution to the problem you've identified. And, as you're about to find out, a corollary is one of the prime characteristics of a compelling business proposition.
"Okay, so what is a solid business concept?"
I knew you'd be asking that. Let's look at what we've seen so far. We've seen that focusing on the idea per se leads you, as an entrepreneur, into a number of traps. You start thinking your idea has to be unique. You believe it has to have first-to-market potential. You start to delude yourself that there's no competition.
A much more productive approach is to think of your business in terms of the overall value proposition: Are the elements in place to proceed with a new venture? Is there a reasonable likelihood of success? Typically, five things characterize a viable business, each of which we'll explore in the sections to follow:
* It represents a new approach to existing business processes, ideally by applying technology in a new way.
* Real, existing corollaries exist in the marketplace, today.
* Today's market for the solution is large, representing revenues of at least $1 billion a year.
* Equally large ancillary markets, either vertically or horizontally aligned to the space, also exist.
* Most important of all, the startup team possesses good execution skills in the chosen space.
Library of Congress subject headings for this publication: Entrepreneurship