Apple Again!
Apple is an innovative company; but in a different way. Rather than developing entirely new product categories, it excels at taking existing, half-baked ideas and showing the rest how to do it properly. Macintosh was not the first PC (remember Steve Jobs visit to Xerox PARC?), iPod was not the first MP3 player; neither iPhone was the first smart phone. Same is true for iPad.
But something is also different since iPod. Apple provides a vertical business opportunity for small players; basically everyone can become a big player in this model. Unknown artists can sell their songs without going through big production companies. A kid can create the best application for iPhone and compete with major software development companies. I guess same is going to happen for iPad.
Open source and its community were out there for a while. But big organizations (Nokia, Microsoft, …) were worry to lose their dominance. Nokia open source model was not successful for its smartphones because it did not provide real vertical for geeky developer to create revenue. Still Nokia was a big corporation and could not see someone out of its system makes some money. You need to be a part of the system! Apple on the other hand has its rebellious attitude. Lets provide SDK for free and let the guys create revenue. Use its huge marketing muscle and create an avenue for smaller players. It broke the dominance of mobile phone companies and their dominance in software for smartphones. Probably this is the time for PC software companies to be afraid!
Start-up Culture
Last night I was talking to one of my old friends. He is a serial entrepreneur; starting couple of technology companies and had nice exists. He asked me what comes to my mind when I hear the word start-up; how old, how many employees, etc. And I didn’t have a good answer for his question!
I have seen lots of two years old companies, with millions of dolor raised as a start-up but act as a hundred years old big corporation. CEO is sitting in an office far away from engineering group and the real actions. People are fragmented into different groups. There is no transparency. And the famous “all hands meetings” once in a while!!! When you are working in a company with less than 50 employees every working day should be an all hands meeting. Start-up is a culture, a way that you mange and run a company, a state of mind to be involved in every details and actions. Size and years in operation are really secondary factors.
Start-up Management Tips
A good manager needs to spend more time with her/his team rather than his boss or peers. I have seen many middle managers working long hours behind closed doors to prepare weekly reports for their managers and cut themselves from day to day operations. These folks rely on high level and brief interactions with their directors. They do not spend time themselves to go through issues and picture the reality.
This can be a bigger problem in smaller companies. Because of the size and limited resources, you need to be more involved as a manager in day to day job. In start-ups you do not have the leverage of a highly structural organization. There is no clear vertical isolation between different functions and groups. Confusion is part of the game! But it is natural to solve the problem at the spot rather than pass it to other people. In a small organization you do not have that leverage.
Apple Won Again
It is sad to see Nokia is closing its flagship store on London’s Regent street after suffering slow sales and poor footfall; just after 2 years! While the fortunes of the Apple Store opposite are buoyant, with the Mac-maker frequently touting it as the most profitable store in its arsenal, Nokia’s Regent Street shop failed to generate enough interest. During same time and at same location, it is the product and user experience which dictate success of a company. Nokia should understand it was not Apple store which attract people; products in the store were the main reason customers were going to Apple store.
How to Manage a Company?
Anyone who has passed a management course is familiar with Peter Drucker and his books on this subject. He coined the term “knowledge worker” and later in his life considered knowledge work productivity to be the next frontier of management.
But his most important contribution was promoting decentralization and simplification. Drucker discounted the command and control model and asserted that companies work best when they are decentralized. According to Drucker, corporations tend to produce too many products, hire employees they don’t need, and expand into economic sectors that they should avoid.
He considered companies as human organization rather than just as source of economic data. But he also insisted that all human organizations need clear objectives and hard measurements to keep them efficient. Basically, everyone needs to be accountable! And if you go higher in the chain of commands, you are more accountable; because you have more authority. He was always against “super bosses”. That is why he liked to say that people used the word guru because the word charlatan was so hard to spell!
Bad Signs for a Start-up Company
When your management team is underutilized in a start-up company, office politics will take over the whole 
operations. Like kids; they should be busy with good activities that couldn’t find time to think about bad stuff.
In a small company everyone should be utilized 110%; your VP of engineering is on the road with field engineers and your CEO is moving the furniture in the office and going to Staples to buy stationary to save some money. If your higher management sits in the office and you have directors who communicate with other employees, you have executive assistance for a 50 people company something is wrong. When people are not busy with real operations, they feel vulnerable and start justifies their presence by artificial activities. At this stage, the whole intent is to perceive employees, board and other investors just to drag the operations for couple of more months and receive the paychecks as far as you can. Do you watch Office; they don’t have anything to do!
Nokia; Still Going Down!
Couple of months ago I wrote about why Nokia is loosing the battle in smartphone war! The latest news that iPhone share of smartphon
e market is up to 17 percent is another affirmative sign of gradual decline for Nokia. While global mobile phone handsets were almost the same as for the same quarter in 2008, smartphone sales were up by 13 per cent to 41 million for the three months ending September 30. This means you can not count on out of date, old fashion voice centric phones forever to generate revenue. Also, you can not wait for Apple or other companies to come out with a concept (iPhone, iTune, etc) and just copy that! You should have some innovation yourself to be successful!
VCs, the End?
During last couple of weeks, I received emails from my VC friends if I am aware of any job opportunity for them!!! Initially I thought it is joke or something; but no, they were serious. Venture capitalists are a breed in decline! Just 17 venture capital firms raised new funds in the third quarter of 2009, the smallest number of firms in any quarter since the third quarter of 1994, according to new data released by Thomson Reuters and the National Venture Capital Association (NVCA). While venture capital firms typically raise money every three or four years, and so a single quarter represents only a snapshot, the very small number of firms raising money (historically speaking) shows just how much of a crunch the industry is in right now.
Too Much Money and Ego; If you want to kill a Start-up!
In his article, Paul Graham
mentioned 18 mistakes that kill start-ups. Among them, two caught my attention. Number one, Single Founder! How many times you have seen a founder who can not convinced any other to join her/him or ego does not let her/him to share the glory with others. “Single founder syndrome” marginalizes start-up culture by reducing true power of founder! It is a one man show, she/he against others (VCs and other board members).
Raising too much money and spending a lot is another recipe for disaster! Once you raise several million dollars of money, the clock is ticking. If VCs fund you, they’re not going to let you just put the money in the bank and keep operating as two guys living on ramen. They want that money to go to work. At the very least you’ll move into proper office space and hire more people. That will change the atmosphere, and not entirely for the better. Now most of your people will be employees rather than founders. They won’t be as committed; they’ll need to be told what to do; they’ll start to engage in office politics and you know the rest!
Kleiner’s Laws
Eugene Kleiner was always my favorite VC! My fascination started when I was doing my MBA and read his famous ten laws:
- Make sure the dog wants to eat the dog food. No matter how ground-breaking a new technology, how large a potential market, make certain customers actually want it.
- Build one business at a time. Most business plans are overly ambitious. Concentrate on being successful in one endeavor first.
- The time to take the tarts is when they’re being passed. If an environment is right for funding, go for it. Eugene, more than anyone, knew that venture capital goes in cycles.
- The problem with most companies is they don’t know what business they’re in.
- Even turkeys can fly in a high wind. In times of strong economies, even bad companies can look good.
- It’s easier to get a piece of an existing market than to create a new one.
- It’s difficult to see the picture when you’re inside the frame.
- After learning some of the tricks of the trade, some people think they know the trade. This reflected some of Eugene’s own humility; he recognized that many venture capitalists thought they were experts when they had just a bit of knowledge.
- Venture capitalists will stop at nothing to copy success.
- Invest in people, not just products. Eugene always respected founding entrepreneurs. He wanted to build companies with them not just with their ideas.
After being around startups for more than ten years and dealing with couple of them I know how true they are! “Build one business at a time. Most business plans are overly ambitious. Concentrate on being successful in one endeavor first”. Let focus and be successful in one technology/product and then jump to the new one. For the first four to five years, your product is your technology and your technology is your product. Your CTO is your VP of engineering and your VP of engineering is your CTO! When you have not delivered your first product, there is no need for future technologies and products. Even if you have the best portfolio of patents, without a solid product and revenue they are worthless! Do not believe me, ask Irvine Jacobs from Qualcomm.
“Even turkeys can fly in a high wind. In times of strong economies, even bad companies can look good”. This is the story for early 2000 and 2007! When companies were out to raise money and no one vet them based on “their” value and what they have and not based on what is the hype out there. Companies with positive cash flow can go through the present storm and come out more solid and successful. Companies need cash and looking for investors to come out of this storm; will come out diluted and weak!
“It’s easier to get a piece of an existing market than to create a new one”. If market does not exist and you plan for a “potential” product for a “potential” market; good luck!
And my favorite; “Invest in people, not just products. Eugene always respected founding entrepreneurs. He wanted to build companies with them not just with their ideas”. Guys, if you think the founders are not right people to run the company for first five to six years, you do not have a company! DOS was not successful; it was the combination of Bill Gates and DOS which was a success. Apple Computer was not successful; it was combination of Steve Jobs and Apple Computer which was successful. Intel RAMs/Processors were not successful; it was combination of Noyce/Moore/Grove and their RAMs/Processors which was successful.
