I gave a fireside talk earlier today for London Innovators at Google Campus in London to a group of vibrant entrepreneurs which was most enjoyable. A few of the questions I got asked are questions I keep getting quite often, so I’d like to share the answers I gave below
How important is it to differentiate yourself when you start off ?
This is obviously a question that preoccupies entrepreneurs quite a lot. Sometimes too much so. I found myself citing an analogy which I often do.
If you were say BMW in the1920s and pitching the idea of creating a car, most likely the response would be “you’re late. Henry Ford and Mercedes Benz have already done that. Go home”
Of course decades later we now have hundreds of car manufacturers serving a market that grew beyond what one could imagine back then. All pitched to different segments of it. And sure enough they all have 4 wheels, a chassis, a steering wheel, an engine etc. The reality is that the car has evolved very little since then. But there’s been room for many players in the market. And the reason is the market has grown so big and the consumer has evolved so much that different market segments have evolved and made room for more players and for each of them to innovate.
So firstly think of the market. If it’s a large growing market, like that of cars in this analogy, there will be plenty of room for new entrants. Don’t fixate on the fact that your car also has 4 wheels. In the tech space most markets are – contrary to what most investors will tell you – still at their infancy. Investors want to invest in the first henry ford. But a shrewd entrepreneur can create a successful business much later.
Secondly, think of differentiation in terms of market segments and how your product and marketing will appeal to that segment often in subtle but substantial ways. You don’t have to create the flying car to be successful. BMW came much later and now is one of the most profitable car manufacturers in the world. Still with four wheels, an engine and a chassis. But appealing to a customer segment with a certain taste and aspiration, and a certain price point
Saying “it’s a better product” or “we will do it better” is not good enough. The question is for whom?
These sort of analogies are often helpful I find to unpeg you from the fixation and hammering from investors asking “how are you different”. Don’t confuse invention with differentiation. And differentiation is not the feature on your app – much like its not the feature in the BMW’s dashboard that sets it apart from a Renault. It’s the whole experience and the customer segment it’s targeting, in a large market.
How did you overcome the first challenges you met?
Most entrepreneurs starting off have the misconception that there is a magic trigger they will find and once hit it they will take off like a rocket. That rarely happens. And in the cases it does it’s almost always less by design and more by chance. That’s not a robust strategy.
In the tech world unfortunately some of the fixation from investors and everyone who sucks up to them (Hint: Techcunch?) on businesses that just take off like a rocket on day 1 create more damage than good. They make entrepreneurs lose sight of the fundamentals
We forget that most of the brands we interact with around us daily are companies that were built over decades of consistent hard work. America is not a collection of Facebooks , Groupons and Zyngas (the latter two being a great case in hand of where it can all go wrong). It’s a collection of Pepsi Cos, Nikes, Starbucks, Fords, Wall Marts, and thousand of names neither you or I have ever heard of. Businesses that were built over decades by sticking to fundamentals. Chipping away one day at a time, thinking about their customers and how they can add more value
Sticking to fundamentals and building value IS a strategy for success. Waiting to hit a hockey stick and go viral isn’t . That’s just playing roulette.
It’s no wonder that the most successful economy today in Europe is Germany. And that’s because the backbone of the German economy are family run businesses whose succession is their kids and grandkids. They don’t plan for a year ahead. They plan for a generation ahead. In silicon valley today tech companies plan for exit before they have even began!
The stupidest question to get in an investor pitch is “what’s your exit”. Ask that to a German 3rd generation business that’s world leader in making screws or pistons or car parts or iron boards for your home. They will laugh. I say to entrepreneurs: if you get asked that by a prospective investor just turn around and look for the exit sign in the room. And say “there it is !” And get the hell out
My advice – and I speak from my own misdoings here – is if you do raise money, get it from people who think long term. And then carry on running the business as if its 100% your own. Plan a generation ahead. Think of succession as being your grandkids. Its no wonder Warren Buffet is the most successful investor in the world: he invests in businesses with that mindset.
Building a business is more akin to running a marathon, not a sprint. In today’s euphoric tech world everyone is sprinting. We live in times of emotional exuberance. Have the discipline to say no and stick to your fundamentals.
3. What does success mean to you?
I though this was an interesting question. And here was my answer.
A good business defines its success in terms of goals, hitting targets and milestones and making money. All of which are important of course. But a great business – and acting like one will increase the chances of becoming one – has a purpose that goes beyond that. It doesn’t measure success just by the money it makes. But rather by how it drives change, in fundamental ways, how it makes a small dent in the universe.
At PeoplePerHour that is what drives us. At least that’s what gets me out of bed in the morning. We help people change their lives fundamentally, we help other entrepreneurs succeed, we help people fulfill their dreams of being financially independent. We drive change in the way people work every day and that’s change that will stay for good.
For me the measure of success can be broken down to certain tangible things and certain intangible things. The tangible being goals and targets you met , revenue, profit margins etc. But the intangibles are the ones that give you the stamina to keep going in that marathon race. For me its the emails I get from users telling me that without PeoplePerHour they would have not lasted the recession; their business would have gone under or they would still be stuck in a job they don’t like.
Over time I get more and more of these emails and testimonials which is an intangible measure of success. But a very real one. We fulfill our purpose. It may not be what directly pays the bills but its what gives us the stamina to keep going and gel together as a team, marching in the same direction. And that’s what delivers the tangible goals in the end.