The Intelligent Entrepreneur

Bill Murphy does an excellent job of telling each story in relation to the 10 rules of successful entrepreneurship.  While I would highly recommend this book to anyone interested in entrepreneurship, I realize some are more interested in a cliff notes version…  here are the ten rules:

1. Make the commitment.

As anyone who has tried to launch a company knows, becoming a successful entrepreneur is hard.  Without a firm commitment to the company and idea, the success of your new venture is doomed to fail.  Making a commitment is not just about standing behind your idea, it’s an analysis of your life situation as well:

• What other obligations will compete for your time and resources?
• What kind of support systems do you have?
• What is the opportunity cost?
• What is your record of achievement, creation and reinvention?
• What is your tolerance for risk?

2. Find a problem, then solve it.

There is a great quote in the book from a top partner at a venture capital firm: “Pain businesses are those that solve a significant problem, and people will rarely hesitate to pay money to solve that problem. Pleasure businesses solve less urgent problems.  They can sometimes be great, but the success rate is much lower.”

What problems do you have?  Is it a pain problem or a pleasure problem?  How can you solve it?  Will anyone care?

3. Think big, think new, think again.

Thinking big means pursuing ideas that have enough potential to be worth your time.  Ideas with scale, scope and the potential for huge financial returns.  “We only get one life” as Murphy puts it, “and the successful entrepreneurs I interviewed were determined to spend their limited time on this earth wisely by pursuing plans that would make it possible for them to have as much impact as possible.”

Thinking new means bringing a new perspective to an industry that has always done something a certain way.

Thinking again is about recognizing that your first problem and solution are probably not the best.  The best entrepreneurs are serial innovators.

4. You can’t do it alone.

Successful entrepreneurs have what academics and Murphy call “social capital.”  These are networks that have been developed to help identify and pursue opportunity. Secondly, entrepreneurs recognized their own strengths and weaknesses and put together teams that would help them complement their talents and experience.

Supporting the idea of not being able to do it alone is the first item on Paul Graham’s list: The 18 Mistakes that Kill Startups.

So how do you find people to help with your entrepreneurial adventure?

• Use your existing networks – alumni organization? family or friends to lean on?  church groups?
• Decide where you want to work – go do whatever interests you and if you can’t do it, get as close as possible to it as you can.
• Use technology – obviously social networks can help, but keep in mind, it’s about quality not quantity
• Don’t waste time building useless networks – networking is not an end in and of itself.  Make 10 quality connections instead of a 150 useless ones.

5. You must do it alone.

While a partner (or partners) in your entrepreneurial adventure is important, it’s also all about you.  It’s your idea, the team you have recruited, you are the one they look to for guidance and in the end, you’re the one who will likely reap the most substantial rewards.  So, do you believe in yourself enough to pursue your goal?

Developing a healthy dose of confidence is important. Confidence in yourself and confidence in your venture.    Murphy gives a couple of suggestions for developing a healthy sense of confidence:

• Get to know other entrepreneurs – their successes and their failures will prove invaluable.
• Inventory your own successes – develop a reservoir of confidence, never sell yourself short
• Read about the great entrepreneurs and their successes – Ben Franklin, Michael Dell, Ray Kroc and The Intelligent Entrepreneur.

6. Manage risk.

How risky is entrepreneurship?  Is it as riskier than everything else you will do in your life? It depends.  A well planned company with a solid business plan might be a lot less riskier than other things in life.

It will be rare to find a risk free business to start.  But it’s not necessarily about finding a risk free venture.  It’s about finding ways to manage the risks.  It’s a delicate balance between managing risk and exercising too much caution – which leads to inaction.  Nothing ventured, nothing gained.

Some tips from Murphy on this topic:

• Understand finance and accounting (or find someone who does)
• Incorporate
• Have a plan B
• Liquidity is your friend

7. Learn to lead.

Leadership of a startup will come down to how well you can communicate your vision and motivate your partners and employees to adopt that vision as well.  Without a successful leader, your venture is doomed to failure.  So how do you learn to lead?

• Learn to communicate well – can you get your point across clearly?  are you a good listener?
• Clarify your vision – what is the end goal?  How clear is it and how easy is it to describe to the people you are working with?
• Put your ego aside – learn to delegate when necessary.  Find ways to empower other people
• What do you want to do in the company?  – do you want to start or run the company?  Be rich or be king?

8. Learn to sell.

As soon as you become and entrepreneur, you become a salesperson.  You’re constantly selling, even before you figure out which problem you are going to solve.  “Sell today, sell tomorrow, sell all the damn time.  First and last, you’re an entrepreneur.  But in between, you’re all about selling.”

Two things can help you sell your new business: passion and credibility.  Be passionate about the product you are offering and how it can help solve your customers problems, but balance your passion with credibility.  Selling anything to anybody, isn’t the objective.  Don’t compromise your credibility (pushing the truth) to make a sale.

9. Persist, persevere, prevail.

The three stories of Marc, Marla and Chris in Bill Murphy’s book illustrate the importance of persistence.  At some point during each story, the entrepreneurs are faced what seem to be huge obstacles.  A combination of skill, knowledge and sheer persistence help them push through these difficult times.

You, like Marc, Marla and Chris will also encounter challenges during your entrepreneurial adventure.  Stick with it.  You will be much better off persisting and hopefully prevailing.  Whatever you do, learn as much as you can from your successes and failures and carry that knowledge on to future projects.

10. Play the game for life.

As I learned from reading this book, the entrepreneurial venture isn’t entirely about cashing in on a great idea for a substantial sum of money.  It’s about finding fulfillment in life.  It’s about answering the question: “Why am I here?”

As Murphy states: “What matters most is finding a true measure of fulfillment – one that leaves you feeling that you have used all your talents to accomplish something worthwhile, make a difference in people’s lives and leave a legacy for those who follow.

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If you’ve heard those stories before, you can probably recall them; maybe not all of the details, but the general concept, theme and/or idea.

Chip and Dan Heath explore why these stories stand out better than many in their book Made to Stick.  Released in 2007, this book breaks down what makes stories or speeches memorable into six principles: Simple, Unexpected, Concrete, Credible, Emotional and Stories; or SUCCESs.

Simple

The book offers a variety of case studies that show the importance of keeping the core simple.  One of my favorite examples was with Southwest Airlines.  Known as the low-cost carrier that excels in customer service and employee retention, Southwest Airlines internal motto and core idea is “THE low-fare airline.”  Employees are encouraged to reference this during the decision making process.  The example presented in the book was with Chicken Caesar Salad.  Customers like Chicken Caesar Salad – so should they offer this snack on particular flights.  The response from one of the company leaders: Would offering Chicken Caesar Salad on this flight make Southwest “The low-fare airline?”  No. That is the single most important thing.  I haven’t been offered a Chicken Caesar Salad on Southwest flight, have you?

Or, how about the 1992 Clinton campaign motto: “It’s the economy, stupid”?  Simple and succinct.

Unexpected

There are two approaches to generating unexpectedness.  The first is getting attention by breaking a pattern or creating a surprise.  A great example of breaking the pattern comes again from the airline industry.  In this instance, a flight attendant revised the monotonous, repetitive safety announcements we hear whenever we fly a plane.  What did she do?  She broke up the announcement into interesting pieces: “If you haven’t been in an automobile since 1965, the proper way to fasten a seatbelt is…”

While surprise gets our attention, interest keeps out attention.  One approach described is the “gap theory of curiosity.”  It’s like the often heard news teasers: “Which local restaurant received a D on a recent inspection scores? Are you eating there?”

Concrete

Tangible ideas and concepts are easier to understand than abstract ones.  What does justice or loyalty look like?  That is a lot harder to grasp than say a bicycle or avocado.  The more hooks used in the story, the better.  One approach to teaching prejudice in elementary school was described as brown eyes vs. blue eyes.  One day the blue eyes were better, the next day the brown eyes.

A second example described was setting common goals in tangible terms:  Boeing’s 727 was developed with the goal of: seat 131 passengers, fly from Miami to New York nonstop and land on runway 4-22 at LaGuardia (a runway too short for existing passenger planes).

Credible

Credible helps people believe the story or statement.  Search snopes.com for spoof emails about medicine and you will often see references to the Food and Drug Administration (FDA) or the Center for Disease Control (CDC).  References to these groups add credibility to those statements, even in the case when the statements are untrue.

The Heath’s outline two types of credibility:  External Credibility and Internal Credibility.  The above example is using external credibility.  Internal credibility is found when convincing details are used or statistics are made accessible (more visual or easier to grasp).  One test of credibility is called the Sinatra test, from the song New York, New York.  The lyrics: “if you can make it there, you can make it anywhere.”  If you safe guard the results of the Oscars, then you can probably safeguard or company documents.

Emotional

The Mother Teresa principle is a very interesting study.  Participants at University of Pennsylvania were given five $1 bills to take a survey about technology (completely unrelated to the purpose of the study).  Along with the $5, participants received:

1. A letter detailing the statistics of starving children in Africa
2. A letter detailing the specifics about a starving child in Africa, Rokia.
3. Both of the above to letters.

Mother Teresa once said, “If I look at the mass, I will never act.  If I look at one, I will.”  Participants that received the first letter donated $1.14, participants that received the second letter donated on average $2.38 and participants who received both letters donated, surprisingly, $1.43.  The second letter pulls more on our emotions than the first.

Another approach is to appeal to a person’s identity.  Texas addressed their litter problem by implementing a “Don’t mess with Texas” campaign.

Stories

The last principle in Made to Stick deals with stories.  Stories work as simulation – talking shop with co-workers so they know what to expect or “look out for” – or as inspiration, see Chicken Soup for the Soul.  The right story can help convey the message and a great story is often retold multiple times.

SUCCESs

Those are the six principles in Made to Stick.  The outline of these principles is very high level.  If you found these concepts and ideas interesting, I suggest reading the book and related case studies for each principle I didn’t mention.  It’s quite obvious that using these principles in your communications, formal and informal, will help the listeners retain your message.

If you give speeches, talks or presentations for fun or for work, I would strongly suggest reading this book and implementing a few of the SUCCESs principles.  Your speech doesn’t need every principle in it, but I would think at least three of the six.

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