Editor Profile - Denny K Miu was the Founder and former CEO of two companies, Gigamon Systems and Integrated Micromachines (now Touchdown Technologies). Denny has extensive experience in developing technology, products and business relationships. He has been a Professor, an engineer, an entrepreneur, a team leader as well as an individual contributor.
Denny is currently the Executive Editor of LoveMyTool.com, his third start-up. You can follow him on Google Buzz or subscribe to his RSS feed.
For humility sake, I often like to remind myself of an interview on MTV where the beautiful hostess asked a famous entertainer how he came to decide to rap as his chosen art form, to which he answered, "Had I know how to sing, I would have preferred to be a singer."
Typically would-be entrepreneurs think of entrepreneurship as a rational choice. My own experience is that most of us (if not all of us) chose to be an entrepreneur only because we didn't have a better alternative. If we could hold down a job or if we were able to be happy working for someone else, we would never strike out on our own.
Entrepreneurship is inevitably our last resort.
In trying to understand the still unfolding financial tsunami, I find myself reading lots of articles (often written by someone who has never been an entrepreneur) explaining why now is the best time to start a company and if someone were to be laid off, it might actually be a "blessing-in-disguise."
I disagree ... I think it is a blessing for anyone to have a paying job right now.
As I have written in the past, I have started two companies in the past (LoveMyTool is my third). I started my first company when I was denied tenure as an Assistant Professor at UCLA and I started my second when I was fired by my first. In both cases, the career change couldn't have happened in a worse economic climate but I made the best out of what I had.
However, as bad as the economy was in both cases, it was a lot better than what we are experiencing now. From an entrepreneur's perspective our economy is still in a free fall and it would be irresponsible for anyone to predict a bottom when all we could witness is a slightly decreasing terminal velocity.
On the other hand, a few of us are giving up on job seeking already and are starting to entertain entrepreneurship as a viable option. To those who are determined to make it work, I offer you my emotional support and the following advise on how you might set SAIL (Simplicity, Agility, Intimacy, and Leverage) to maximize your chance of survival.
By the way, while I might hope that things would recover soon, I have also learned painfully that "Hope is not a Strategy." Realistically all struggling entrepreneurs should forget about achieving success in the next few years; it would be quite an achievement already just to survive.
1) Product Simplicity
To survive, you must think simplicity. Do not try to change the World. In a difficult time such as this, entrepreneurship is all about job creation (creating a paying job for yourself).
No need to look too far or too long term. Whatever you do, do not attempt to "fly a new engine with a new air frame."
In other words, if your business idea is a new product, don't try to force a change on consumer habit. And if your idea is a new distribution scheme, don't try to use it to introduce a new service. Do something very modest that requires little investment (in time and in money) but can uniquely leverage your lifetime experience and hard-earned Rolodex.
A good example of a simple business idea is LoveMyTool. I believe we have accidentally discovered a unique business model and in the long term can be exploited to market any tools (e.g., clean tech tools), and not just network monitoring technologies, i.e., we could grow to be a substantial "narrow-cast" media company.
But that grandiose idea would have to wait. Right now it is important that we ensure our survival by building upon a single idea which is to create "an open forum to self-publish 'upside-down' press releases."
Normally, vendors hire expensive marketing professionals to write press releases that start with a description of the company (a world leader), the management team (experienced A-players), the product (paradigm shifting inventions), the functionalities (do more with less), the problems, the targeted customers and finally a testimonial from an industry expert.
The problem is that no one reads press releases anymore. Everyone has learned to tune them out (especially Google).
LoveMyTool was built upon a simple idea, to flip the press release format on its head.
All of our articles start with a testimonial and instead of featuring the product, we first feature the "advocate", someone who truly "loves" their network tools.
We discover that most readers would take time to read an article if it was written by someone whom they consider their peer.
Our experience tells us that this is the optimal way to engage. Once we cross the threshold, we have earned their undivided attention and we could pull them in to read about the problem and the product.
The last thing that customers care about are the world-class management team and the well-funded company, in exactly the opposite order of a normal press release.
So LoveMyTool is a simple idea. It is not even an invention. We didn't invent new contents. We didn't invent new distribution techniques. We just introduce a new genre ("Advocacy Marketing"). And so far it has proven to be enough to sustain a new business (thereby keeping us employed).
2) Operational Agility
To survive, you need to forget about your vision. Instead, you must have "peripheral" vision.
Forget about coming up with the perfect idea that would untap a billion dollar market. You wouldn't be around long enough. Instead, "be crappy" but be real.
You can't afford to waste your dwindling unemployment benefits or expand your limited personal savings in conceptualizing anymore. You must act now. It is time to launch your business and get yourself into an operational mode. Once you start, you will need to learn to take punches (and there will be plenty) but at least you have a platform to keep learning and keep adapting.
It is too easy to think of the current downturn as just another economic cycle and that in time, we will recover, returning us to our glory past. Instead, you need to think of this as the end of a 60-year cycle.
It is no lost of irony that Ford will emerge as a stronger auto company that GM. Sixty plus years ago, by inventing the modern day consumer credit system and allowing post-war consumers to take home a brand new car in exchange for a lien on their future earnings, GM was able to leapfrog Ford (which was still depending on the "living within your means" lay-away self-financing system).
Similarly, exactly sixty years ago, head communist Mao Zedong stood on top of Tien An Man Square and proclaimed that the Chinese people had risen. Well, more than half a century later they have finally lifted themselves by their bootstraps, ironically not by their ideology but by manufacturing low-cost consumer products that the Western World seem to want and by reinvesting their earnings in foreign debts to lower interest rate and to pop up the demands (sort of like the Opium War in reverse).
All of that is coming to an abrupt end.
Like most of us, I am convinced that as a country, the American people will reinvent ourselves and reinvigorate our economy. But I am also convinced that the future would look nothing like the past.
Therefore as an entrepreneur, there is little return on investing on our past but great deal of possible return on investing on our future. And the only way to benefit from the future is to be part of the future and to be part of the solution.
So either you jump in or you don't jump. But if you choose to jump, it is best that you jump in with both feet.
In the case of LoveMyTool, we are in a constant learning mode. Little did we know when we first started, that we could emerge as the meeting place between open source tools and commercial tools. But as soon as that opportunity presented itself, we embraced and we became an enthusiastic supporter of Sharkfest, helping to bridge the divide between the two Worlds.
We also learned the importance of videos and in particular, how to recreate the customer experience typical of a sales meeting, by combining live footage with PowerPoint presentations (LMTV).
We have lots more to learn and we will continue to be agile (both in recovering from our mistakes and in adapting to new opportunities). So must you.
3) Customer Intimacy
To survive, you need to "think inside the box" and your priority should be to keep a few customers extremely happy.
This is counter-intuitive because normally our job would be to keep a large number of customers moderately happy (to grow sales while controlling cost).
My point is that it is OK to aim high, but in a down market such as this, it is best to shot low.
Focus on your current customer base and make sure everyone is happy. And I mean everyone. Do not compromise on quality of customer support and if you must sacrifice on quantity, do so proactively.
The reality is that the cost of acquiring a new customer is extremely high in a down market because customers are not spending (or even disappearing) and your competitors are out there doing exactly what you are doing competing for the same oxygen.
A perfect defense is your only offense given that the cost of losing a recurring customer could be extremely high, possibly a death sentence for your fledging company. In short, ignore your competitors and focus exclusively on your existing customers.
Again, in the case of LoveMyTool, we currently have six or seven paying sponsors, helping us to pay our bills and to compensate our writers. Among our sponsors, it would be fair to say that not all of them appreciate us equally. Some appreciate us more than others and some are providing more exclusive contents to the site than others (e.g., Anue Systems which publishes frequently).
Our path to success is very simple. Keep our friends close and our best friends even closer.
4) Financial Leverage
To survive, you must leverage. Don't spend any money unless it is absolutely necessary. Whatever you do, don't spend your own money paying other people's salaries. At this moment, entrepreneurship is about job creation only if it is to create a paying job for yourself. Now is not the time to be a hero.
I had five partners in my last startup and before settling on the final team, I had recruited another five partners that I had to invite out. In retrospect, the only thing that the remaining partners had in common was that they all had working wives.
One important benefit of starting a company in a down market is that there are lots of people who are also out of work and some of them (e.g., those with working wives) could actually afford to work for free (in exchange for a piece of the action).
So be generous, invite them to be a partner and give them a chance to enjoy potential future upsides in exchange for taking some upfront risks. In other words, give someone else the same opportunity to create a paying job for themselves.
Keep in mind that the most immediate benefit of working for yourself is that you get to make your own mistakes. But it also means that you have no one else to blame but yourself (which in my experience is actually quite liberating).
The above is what I have learned in the last fifteen years as a struggling entrepreneur in minimizing mistakes (Simplicity, Agility, Intimacy and Leverage). I hope it helps.
Happy SAIL'ing and good luck to everyone.
--Denny--
Click here to read other chapters of Denny's 2nd Book ยป
