A friend/mentor at the Tech Coast Angels sent me a one-sentence email today that simply said:
"Person who sees problem--human being; finds solution--visionary; solves problem--entrepreneur."
No commentary was provided and none was needed. The line comes from Naveen Jain and appeared in his article "How Entrepreneurs Become Visionary Leaders." The full quote is:
"An entrepreneur is not a person who starts a company but he is the person who
actually solves a problem. It’s all about execution and it is a state of mind. A
person who sees a problem is a Human Being, person who finds a solution is
visionary and the person who goes out and does something about it is an
entrepreneur."
My favorite part of this paragraph is that entrepreneurship is a state of mind. Starting a company is as easy as spending 30 minutes and $500 on Legalzoom.com. Anyone can do that and it doesn't make them an entrepreneur. Solving a real problem does. And that can happen whether you're the founder or one of 10,000 employees at your company.
Wednesday, May 23, 2012
Wednesday, May 16, 2012
Is First the Worst?
I was taking a Sunday stroll with my family last weekend when, upon leaving our favorite neighborhood coffee shop, my wife asked - "Do you think Starbucks is successful because they were the first or because they make the best coffee?"
Great question.
The concept of first mover advantage is an important one to me as the COO and part-owner of a first mover. And there is no consensus on whether it's actually an "advantage."
Intuitively, being the first seems like a good thing. So much emphasis is placed on the "idea" that it makes sense that the first person with that idea will be the one who's successful. For many years, this is how I viewed the world.
Then I learned that great ideas are in abundance and the keys to success are execution, monetization and timing. It's not nearly as sexy to be #3 but be the best at providing the right solution at the right time with the right business model, but that's usually how you win the game.
My MBA professors almost universally agreed that being the first mover is a disadvantage. The first mover spends tremendous resources creating a market and learning how to service it. Customer acquisition costs are through the roof. Each iteration drains more time and money. And, right when you figure it out (if you're still around at that point), second and third movers with clean balance sheets and nimble teams come in and capitalize on the foundation you've built. First movers put in the labor... second and third movers eat the fruit.
There are many examples of this. Friendster before Facebook. AltaVista before Google. Atari before Nintendo. And so forth.
But I don't believe this is a universal truth. The exception is if the first mover can create significant barriers to entry, and fast.
Starbucks is successful in my opinion for two reasons. First, they had a great concept - create a "third place" for people to comfortably spend time outside of the home/office. Second, they were able to scale quickly, opening a new store every work day, by utilizing debt financing to open company-owned stores as opposed to franchising like most QSR's, thus providing this "third place" for people wherever they may be. Now, whether I'm in NYC or Temecula CA or Lake Geneva WI, I know that I can go to Starbucks to catch up on work and meet with clients/friends because I know exactly what I'm going to get. And that's why people go there - not for the burnt coffee.
There are other barriers you can create as well - exclusive contracts with key suppliers, strategic partnerships with large industry incumbents, IP, customer loyalty, economies of scale, switching costs and others.
At TGA, I'm confident in our first mover advantage because we've created several of the aforementioned barriers. But it hasn't stopped others from trying to compete. And that, to me, is a good thing. It validates the market, grows it and expands awareness of our concept. It also makes us appreciative of being five steps ahead and keeps us obsessively focused on getting to six, seven, eight...
If you've come up with a new idea and no one else is doing it, there may be a reason for that. But if you validate the concept in the marketplace, go for it. Focus on scale and creating barriers to entry quickly.
If you've come up with an iteration on an old idea, that's great too. It's how most businesses are started. I remember hearing a story that Steve Jobs had the idea for the iPad a decade before its release (and versions of the concept can be traced back to the late 60s) but he didn't feel the market was ready for it yet.
People have built great companies both ways. Whichever path you go, remember that execution, monetiziation and timing usually win the game.
Good luck and happy entrepreneuring.
Great question.
The concept of first mover advantage is an important one to me as the COO and part-owner of a first mover. And there is no consensus on whether it's actually an "advantage."
Intuitively, being the first seems like a good thing. So much emphasis is placed on the "idea" that it makes sense that the first person with that idea will be the one who's successful. For many years, this is how I viewed the world.
Then I learned that great ideas are in abundance and the keys to success are execution, monetization and timing. It's not nearly as sexy to be #3 but be the best at providing the right solution at the right time with the right business model, but that's usually how you win the game.
My MBA professors almost universally agreed that being the first mover is a disadvantage. The first mover spends tremendous resources creating a market and learning how to service it. Customer acquisition costs are through the roof. Each iteration drains more time and money. And, right when you figure it out (if you're still around at that point), second and third movers with clean balance sheets and nimble teams come in and capitalize on the foundation you've built. First movers put in the labor... second and third movers eat the fruit.
There are many examples of this. Friendster before Facebook. AltaVista before Google. Atari before Nintendo. And so forth.
But I don't believe this is a universal truth. The exception is if the first mover can create significant barriers to entry, and fast.
Starbucks is successful in my opinion for two reasons. First, they had a great concept - create a "third place" for people to comfortably spend time outside of the home/office. Second, they were able to scale quickly, opening a new store every work day, by utilizing debt financing to open company-owned stores as opposed to franchising like most QSR's, thus providing this "third place" for people wherever they may be. Now, whether I'm in NYC or Temecula CA or Lake Geneva WI, I know that I can go to Starbucks to catch up on work and meet with clients/friends because I know exactly what I'm going to get. And that's why people go there - not for the burnt coffee.
There are other barriers you can create as well - exclusive contracts with key suppliers, strategic partnerships with large industry incumbents, IP, customer loyalty, economies of scale, switching costs and others.
At TGA, I'm confident in our first mover advantage because we've created several of the aforementioned barriers. But it hasn't stopped others from trying to compete. And that, to me, is a good thing. It validates the market, grows it and expands awareness of our concept. It also makes us appreciative of being five steps ahead and keeps us obsessively focused on getting to six, seven, eight...
If you've come up with a new idea and no one else is doing it, there may be a reason for that. But if you validate the concept in the marketplace, go for it. Focus on scale and creating barriers to entry quickly.
If you've come up with an iteration on an old idea, that's great too. It's how most businesses are started. I remember hearing a story that Steve Jobs had the idea for the iPad a decade before its release (and versions of the concept can be traced back to the late 60s) but he didn't feel the market was ready for it yet.
People have built great companies both ways. Whichever path you go, remember that execution, monetiziation and timing usually win the game.
Good luck and happy entrepreneuring.
Thursday, May 10, 2012
Not Feeling the Love? You're Probably on to Something Good
There was an article in the Harvard Business Review last weekend that caught my attention. It was called "If You're Not Pissing Someone Off, You're Probably Not Innovating." I found myself agreeing with much of it and finding it especially relevant to the golf industry.
The premise of the article is that industries are controlled by incumbents who do not look kindly on new ways of doing things. As a result, a "fundamental obstacle to innovation that all would-be disruptors must be prepared to face is the potentially hostile response of incumbents who don't want to see their market advantages threatened."
This is very true in the golf industry where "tradition" is the cornerstone of a powerful culture. "Innovation" to many is seen as a direct threat to the sanctity of the game they love and this causes emotions, both positive and negative, to run especially high.
Additionally, the industry is controlled, like most industries, by an exclusive "inner circle" that is difficult to penetrate.
Fred Wilson talks about this concept in a blog titled "Insurgents vs. Incumbents." In it he says: "The startup world is about insurgents. A person or a few people with an idea. And they drop everything and go for it. They are going up against the incumbents and that doesn't just mean the big companies that occupy the market position they want. That means all the people, institutions, and organizations that are in cahoots with the big companies."
In golf, this would be the PGA of America, PGA Tour, The First Tee, USGA, LPGA and a few others.
If you're a current or aspiring golf entrepreneur, be prepared to feel the opposite of loved by these groups. And that's okay. The golf industry has been contracting for a decade so these folks have reason to be defensive, and the data clearly shows that the current way of doing things is not working. It's also a $76 billion industry in a volatile environment, making it a great time/place for disruption.
Being an "insurgent" is awesome. It's thrilling, purposeful, educational, humbling and an opportunity to do something significant and meaningful. But be prepared to face people every day - every hour, even - who don't share your vision. Who will try to derail you. Who will be dismissive. Who will react negatively to the very premise of your concept.
But if you're getting this type of response from incumbents, know that you're on to something good. Be resilient. Because if what you were doing wasn't a threat to them, they either wouldn't care or would try to help.
We've faced this for years at TGA with success so it's definitely possible to overcome. And now that we've reached a point where our footprint is too large to ignore - two franchise systems, 67 franchisees, >150k students, strong growth and huge opportunities on the horizon for 2012 - the "inner circle" is starting to open up their arms.
I'm okay with having to prove ourselves to the incumbents and you should be too. The goal is to be one of them, soon. We just need to make sure that if/when that happens, we continue to be innovators. It goes back to something I wrote about in the past - it's the pace of innovation that determines the winners, not the original idea.
The premise of the article is that industries are controlled by incumbents who do not look kindly on new ways of doing things. As a result, a "fundamental obstacle to innovation that all would-be disruptors must be prepared to face is the potentially hostile response of incumbents who don't want to see their market advantages threatened."
This is very true in the golf industry where "tradition" is the cornerstone of a powerful culture. "Innovation" to many is seen as a direct threat to the sanctity of the game they love and this causes emotions, both positive and negative, to run especially high.
Additionally, the industry is controlled, like most industries, by an exclusive "inner circle" that is difficult to penetrate.
Fred Wilson talks about this concept in a blog titled "Insurgents vs. Incumbents." In it he says: "The startup world is about insurgents. A person or a few people with an idea. And they drop everything and go for it. They are going up against the incumbents and that doesn't just mean the big companies that occupy the market position they want. That means all the people, institutions, and organizations that are in cahoots with the big companies."
In golf, this would be the PGA of America, PGA Tour, The First Tee, USGA, LPGA and a few others.
If you're a current or aspiring golf entrepreneur, be prepared to feel the opposite of loved by these groups. And that's okay. The golf industry has been contracting for a decade so these folks have reason to be defensive, and the data clearly shows that the current way of doing things is not working. It's also a $76 billion industry in a volatile environment, making it a great time/place for disruption.
Being an "insurgent" is awesome. It's thrilling, purposeful, educational, humbling and an opportunity to do something significant and meaningful. But be prepared to face people every day - every hour, even - who don't share your vision. Who will try to derail you. Who will be dismissive. Who will react negatively to the very premise of your concept.
But if you're getting this type of response from incumbents, know that you're on to something good. Be resilient. Because if what you were doing wasn't a threat to them, they either wouldn't care or would try to help.
We've faced this for years at TGA with success so it's definitely possible to overcome. And now that we've reached a point where our footprint is too large to ignore - two franchise systems, 67 franchisees, >150k students, strong growth and huge opportunities on the horizon for 2012 - the "inner circle" is starting to open up their arms.
I'm okay with having to prove ourselves to the incumbents and you should be too. The goal is to be one of them, soon. We just need to make sure that if/when that happens, we continue to be innovators. It goes back to something I wrote about in the past - it's the pace of innovation that determines the winners, not the original idea.
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