When you are running a small business, it is really easy to get distracted. Firstly, your own CEO job most likely has a lot of different tasks, from chief strategist to chief bottle washer. Secondly, your team often has many demands on your time, to help point them in the right direction on their projects. And, thirdly, it’s just too easy to get sucked into the random inbound contacts that come into your email box or through social media. All I can say to you entrepreneurs who are “floating in the wind” of poor time management is: unless you are doing at least one material thing each day to move your business forward, towards new revenue or profit heights, you are never going to grow your business as quickly as you could be. Allow me to explain.
WHAT IS A MATERIAL ACTION?
To me, a material action is something that has meaningful revenue or profit implications from its output. On the revenue side, it could be things like launching a new marketing campaign, or making a new sales call, or ideating a new product line, or expanding into a new target-customer or geographic market, or hiring a new salesperson, or negotiating business merger opportunities, etc. Anything that will drive new revenues. On the profit side, it could be things like cutting your cost structure, or improving your business efficiency, or improving your company morale and productivity, to name a few. Anything that will drive higher margins for your business.
WHAT IS NOT A MATERIAL ACTION?
On the flipside, there are a lot of demands on your time that you think may be important, but just are not a material action, as defined above. This could be things like producing your monthly financial statements, or posting to your social media accounts, or writing a new monthly email newsletter, or managing your ad agency, or doing one-on-one meetings with your direct reports, or running payroll checks, or upgrading your systems, or relocating your home office, etc. Yes, these are important tasks that need to get done. But, they are not going to propel your business to the next level.
BUDGET MORE TIME FOR MORE MATERIAL ACTIONS
I bet if you did a critical assessment of how you are spending each of your working hours, most of you are spending the vast majority of your time, if not all of your time, on “less material” actions. To me, if you are not spending at least 20% of each day on “material actions” you will not have a reasonable chance to grow your revenues and propel your business to the next level. So, it is important that you actually carve out “material action” time into your daily schedules. For example, maybe you block out 8am-10am each day for you to think and act strategically and materially about your business. Note that I intentionally did not suggest 3pm-5pm each day, when you are most likely tired and not doing your best thinking.
CASE STUDY—PART 1 (THE GOOD)
We recently acquired a business in February 2018. At the time, they were doing around $2.5MM in annual revenues. Within four months of acquiring the business, our annualized revenue run rate had doubled to over $5MM. How did we do that? We focused on material actions to drive the business forward. We quadrupled our marketing budget, hired a new ad agency, we launched an SEO effort, opened new sales and marketing channels, expanded our sales team, grew our margins, etc. Our focus was on driving revenues as quickly as we could, and our time was firmly focused on making those material actions happen.
CASE STUDY—PART 2 (THE BAD)
In continuing the above story, with an increase in revenues came an increase in time that was needed on “less material” projects in the months that followed. We learned our CRM could not handle the extra volume, and we needed to upgrade to a different CRM, which needed to be researched. We learned our product information on the website was out of date, and needed to be updated. Our product offering needed to be fine-tuned, to make the business more scalable. Our ad agency suggested we make some technology changes, which resulted in some unexpected hiccups and fixing time required. In doubling our staff size, came the review of hundreds of resumes and dozens of interviews. Sometimes those hires worked out, and other times they did not, spinning our wheels right back to where we started. Quickly, the time I had to focus on “material” projects, started to get consumed by “less material” projects. And, guess what happened: sales growth started to slow down!!
HAND OFF LESS MATERIAL WORK TO OTHERS
I get it, small businesses are typically under-capitalized and don’t necessarily have the luxury of large teams of staff to help leverage your workload. But, even in small businesses, you need to figure out how to keep yourself moving the business forward with “material” projects. Where you can, hand off the “less material” work. Let your bookkeeper produce monthly financial statements. Let your head of marketing manage your ad agency. Let your head of technology review various systems needed. And, take yourself out of that process, at least until the busy work is done and you can review the final output of that work. Don’t let the “less material” work get in the way of you having the time required to drive the business forward by completing "material" work.
Executives in small businesses are typically very busy people, wearing many different hats at the same time. The real challenge you will have is making sure that 100% of your time is not consumed by “less material” projects. You need the discipline of: (i) knowing what projects have the highest odds of moving your revenue or profit growth to the next level (which is an art of its own); and (ii) making sure that slotted time to work on “material” projects is actually getting reserved to make sure that work gets done. Remember the scene in the Pixar movie “Up”, where the dog kept getting distracted by the squirrels running by? The “less material” work you doing are “the squirrels”, distracting you from where your focus needs to be.
We talked about determining whether or not you had a good business idea for your startup. I just assumed everyone reading already had a startup idea in mind. But, what if you don't? What if you know you want to startup a business, but aren't really clear on what business to start. Then, this lesson on startup ideation is for you.
To me, startup ideation is centered around solving real life problems, with a solution you are passionate about. Notice I intentionally did not lead with: can you make a lot of money with this idea. Although that is an equally important concept, that analysis will come later. But unless you are passionate about what you are building, your startup will most likely not survive all the potential pitfalls that come along the way. It is much easier to get frustrated and walk away from a business you are not passionate about. It is much harder to walk away from a startup that hits you in your softspot. And, it is that drive that every good entrepreneur needs, to get through the good times and the bad times.
Launching iExplore was like that for me. I was passionate about adventure travel, as a traveler who had been to 50 countries looking for an easier way to plan trips to remote destinations, based on the pain points I had identified in the process of booking my own trips. And, that passion fueled the business through both the good times (e.g., the dot com boom) and the bad times (e.g., after the impacts of 9/11/01). When you are passionate about something, you want it to succeed that much more, regardless what hurdles get thrown your way.
So, what is the best way to identify real world problems that need solving? Simply living your day-to-day life will identify plenty of opportunities. Every time you get frustrated about an inconvenience you experience, write it down in a notebook. Before you know it, you will have pages of inconveniences, that most-likely, millions of other people are frustrated by the same things. Then, prioritize that list of inconveniences around the products or services that are most meaningful to you. Perhaps these are your hobbies, or certain interests that really get you excited. And, worth mentioning, the more first hand experience you have around a topic, the better you will be in building a business around that topic.
So, an an example, in my life, I am passionate about many things. I love movies, music, collecting books, traveling, college football, history and spending time with my family, to name few. We already learned iExplore was born out of my love of travel. So, what other pain points exist across these topics, that a startup may solve real world problems? As one example, I hate movie reviews from professional film critics, as I usually never agree with them. I would rather rely on the movie critiques of friends and family that I trust, who best understand my interests and would recommend movies that I would most likely enjoy. Voila! There is a startup idea of turning my Facebook friends into movie reviewers, in an industry I am passionate about, and with a solution that will improve my life. Whether or not it is good idea, or a investor backable idea, would be the next question to solve.
So, keep your notebooks handy and you will find startup ideas will be aplenty!!
Imagine yourself as the CEO of a Dow component company in 1919. You are fully aware of the technological forces that would shape much of the 20th century, electricity and internal combustion. You may have even be an early adopter of these technologies. Still, everything seems like business as usual.
What you don’t see, however, is that these inventions are merely the start. Secondary technologies, such as home appliances, radio, highways and shopping malls, would reshape the economy in ways that no one could have predicted. Your company has a roughly 50% chance of remaining on the Dow a decade later.
We are at a similar point today. New inventions, such as quantum computing, neuromorphic chips, synthetic biology and advancements in materials science already exist. It is not those inventions, however, but the ecosystems they spawn that will shape the decades to come. We’re all going to have to learn how to compete in a new era of innovation.
A 50-Year Boom In Productivity
By 1919, electricity was already a 40-year old technology. In 1882, just three years after he had almost literally shocked the world with his revolutionary electric light bulb, Thomas Edison opened his Pearl Street Station, the first commercial electrical distribution plant in the United States. By 1884 it was already servicing over 500 homes.
Yet although electricity and electric lighting were already widespread in 1919, they didn’t have a measurable effect on productivity and a paper by the economist Paul David helps explain why. It took time for manufacturers to adapt their factories to electricity and learn to design workflow to leverage the flexibility that the new technology offered. It was the improved workflow, more than the technology itself, that drove productivity forward.
Automobiles saw a similar evolution. It took time for infrastructure, such as roads and gas stations, to be built. Improved logistics reshaped supply chains and factories moved from cities in the north — close to customers — to small towns in the south, where labor and land were cheaper. That improved the economics of manufacturing further.
Yet all of that was just prelude to the massive changes that would come. Electricity spawned secondary innovations, such as household appliances and radios. Improved logistics reshaped the retail industry, shifting it from corner stores to supermarkets and shopping malls. As Robert Gordon explains in The Rise and Fall of American Growth, these changes resulted in a 50-year boom in productivity between 1920 and 1970.
The Digital Revolution
In 1984, Steve Jobs and Apple launched the Macintosh, which heralded a new era of computing. Based on technology developed for the Xerox Alto in the early 1970s, with a bitmapped screen, a graphical user interface and a mouse, it made computing far more accessible to regular consumers.
Before long, personal computers were everywhere. Kids would use them to write term papers and play video games. Lotus 1-2-3 spreadsheet software became a staple for small businesses and entrepreneurs. Desktop publishing helped democratize the flow of information. The computer age had begun in earnest.
Yet much like electricity and internal combustion earlier in the century, the effect on productivity was negligible, causing the Nobel Prize winning economist Robert Solow to quip, “You can see the computer age everywhere but in the productivity statistics.” In fact, it wouldn’t be till the late 90s that we saw a measurable impact from computers.
Once again, it wasn’t any particular invention that made the difference, but an ecosystem that built up over years. The Internet paved the way for open-source software. Hordes of application developers created industry specific tools to automate almost every imaginable business process. Computers converged with phones to create the mobile era.
The 30 Years Rule
Look back at the two major eras of technology in the 20th century and a consistent theme begins to emerge. An initial discovery of a new phenomenon, such as electricity and internal combustion, is eventually used to create a new invention, like the light bulb or the automobile. This creates some excitement, and builds the fortunes of a few entrepreneurs, but has little impact on society as a whole.
Yet slowly, an ecosystem begins to emerge. Roads and gas stations are built. Household appliances and personal computers are invented. Secondary inventions, such as shopping malls, home appliances, the Internet and application software help create new business models. Those business models create new value and drive productivity.
The truth is that innovation is never a single event, but a process of discovery, engineering and transformation. As a general rule of thumb, it takes about 30 years for all of this to take place, because thousands, if not millions of people need to change their behavior, coordinate their activity and start new businesses.
That’s why the future will always surprise us. It is not any one great event that tips the scales, but some hardly noticeable connection that completes the network. Network scientists call this type of thing an instantaneous phase transition and there’s really no way to predict exactly when it will happen, but if you learn to look for telltale signs, you can see one coming.
A New Era Of Innovation
Today, we appear to be in a very similar situation to what those executives faced in 1919. We have decoded the human genome. Artificial intelligence has become a reality that everyone, for the most part, accepts. New computing architectures, such as quantum computers and neuromorphic chips, are in late stages of development by a variety of companies.
Yet once again, the impact has been negligible and it’s not hard to see why. While these inventions, in some cases at least, are relatively mature, they have yet to create the ecosystems that can drive a true transformation. Today, however, we can clearly see those ecosystems being created.
In fact, in artificial intelligence we can already see a fairly well developed ecosystem emerging already. In synthetic biology and genomics we can begin to see one as well, although it is still nascent. IBM has created a Q Network of major companies, research labs and startups to support quantum computing.
Here’s what’s important to know: We can’t predict exactly when the system will tip, but it’s a good bet it will happen in the next decade. It is also likely that the impact will be equal to or greater than the 50 year boom that began in the 1920s. Finally, it won’t be driven by any particular invention, but by ecosystems. You need to start figuring out how you will connect.
An earlier version of this article first appeared on Inc.com
We've put together this short list of organizations that provide valuable tools and education for building a business and researching your marketplace, competition, and industry.
Regardless of the type of business you have, certain basics apply. Whether you go it alone, or whether you hire professionals to help you with incorporating, filing patents and trademarks, or navigating federal, state, and local business regulations - you can be more prepared, and steer clear of regulatory and financial potholes, by educating yourself.
"USPTO" stands for United States Patent & Trademark Office. The USPTO is a government entity. This government office is the national repository for patents, trademarks, and applications for these certifications. Before applying for a patent or trademark, you may wish to consult with an attorney whose practice focuses on patent and trademark filings. To look up an existing patent or trademark, visit USPTO.gov.
Founded by engineer and entrepreneur Ewing Marion Kauffman of Kansas City, MO, the Kauffman Foundation focuses on education, entrepreneurship, and research. Information about aspects of entrepreneurship is available on their main site, Kauffman.org, and entrepreneurial resources are offered at Entrepreneurship.org.
U. S. Small Business Administration
The U.S. Small Business Administration, or SBA, focuses on helping individuals start and grow a business via loans, grants, education, and local assistance. You can find out about the programs and assistance offered by visiting SBA.gov.
USA.GOV Small Business
The U.S. government's official site for starting and operating a business in the United States, USA.gov offers information on the steps to start a small business, how to get financing help from the government, importing and exporting, nonprofits, business taxes, federal government contracting, programs for veterans and minorities, plus resources state by state. You can find out more by visiting USA.gov/business or calling 1-844-USA-GOV1.
The Americans With Disabilities Act, or ADA, was signed into law July 26, 1990 by President George H. W. Bush. This law prohibits discrimination and guarantees that people with disabilities have the same opportunities as everyone else to participate in mainstream American life - employment, purchasing goods and serices, and participation in government programs and services.
As a business or employer, it is important to understand and comply with ADA guidelines. You can find out about the law and ADA standards by visiting ADA.gov.
Startup investors tell me they invest in a new venture with a higher caliber of people, rather than the product or service, and I agree. In my role as a business advisor, I see successful businesses most often emerging from great teams rather than great products. Yet I find the people building teams are usually product experts, often with no experience in team building.
Of course, it’s no surprise that most entrepreneurs don’t have a background in hiring teams, and don’t have a budget for training or human resource consultants. But these days with all the resources on the Internet and elsewhere, there is no excuse for not keeping up on the latest insights, best practices, and technology in the area of hiring, motivating, and training.
For example, I just remembered a classic book, “The Best Team Wins: Build Your Business Through Predictive Hiring,” by Adam Robinson, CEO and cofounder of Hireology, which details the how and why of hiring your most valuable assets today. He comments that in spite of the digital revolution, the hiring process hasn’t changed from its low priority, last minute, subjective roots.
In fact, his analysis of current statistics and many case studies leads both of us to recommend a focus on a set of key hiring principles that shouldn’t come as a surprise, but don’t seem to get followed very often these days by new companies, or even the more mature ones:
- Look for a cultural fit before a skill match. In the past, very little consideration has been given to finding people who share your purpose and values for the business. But today, in this era of relationships, people who fit your culture have proven to be much more engaged and productive than others who are more skilled, but feel like outsiders.
Some of the companies with the best team cultures, including Zappos, even go so far as to offer new employees $2,000 to quit after the first week on the job if they don’t feel a fit with the team assigned. It’s a small cost to prevent a long-term loss.
- Give priority to attitude over experience. New businesses need people who have a passion for getting things done with limited resources, enjoy problem solving, and relish constant change. Often times, candidates with more years of experience are frustrated and unproductive in these environments, and are looking for structure and consistency.
At Twitter, for example, even though everyone gets great perks, including meals, yoga classes, and unlimited vacations for some, employees can’t stop talking about how they love working with other motivated people, where no one leaves until the work gets done.
- Be patient when filling open positions. Not planning ahead, and only hiring people in the crisis of an open position is a recipe for creating dysfunctional teams. Having no one is better than someone who needs constant attention, or is working against you. Define a disciplined process, take the time to find multiple candidates, and do proper reviews.
- Get interactive in candidate interviews. Some entrepreneurs approach hiring as a test of their selling ability, while others wait for the candidate to sell them. The best approach is to ask open-ended questions, really listen to the answers, and then follow-up for depth. Have multiple team members do their own two-way interviews, and compare notes.
- Avoid surprises through proactive homework. Team managers in a hurry to hire often skip references, assuming they won’t get the real story anyway. In truth, much can be inferred from what is not said, and the tone of former managers. Doing multiple calls will reinforce your qualms or eliminate them. Recovery from a surprise bad hire is expensive. Another type of surprise is the perfect candidate who walks away at the last minute. This can be avoided by asking about extenuating circumstances before you extend them an offer, such as spousal objections or other pending job offers. Asking will give you the chance to address these considerations, and avoid disappointment and drama.
- Do your onboarding with conviction. Integration of a new employee into their team is the right time to communicate the culture and direction of the business, and let them know what is expected of them. The proper training and support right up front is key to retention, the right attitude, and their ability to be influential in driving your business.
Building and managing a great team doesn’t stop when your last position is filled. Keeping the team motivated and happy over time is just as hard. Even happy people expect to be promoted, and do move on to other opportunities, so you have to plan for replacements as well as new business. Is your business able to grow and adapt as fast as the market changes these days?
Author: Martin Zwilling, CEO & Founder of Startup Professionals, Inc.
Image via Max Pixel
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