Leverage |ˈlev(ə)rijˈlēv(ə)rij| noun. 1 the exertion of force by means of a lever or an object used in the manner of a lever: my spade hit something solid that wouldn’t respond to leverage.
• mechanical advantage gained by using leverage: use a metal bar to increase the leverage.
• the power to influence a person or situation to achieve a particular outcome: the right wing had lost much of its political leverage in the Assembly.
I still remember being totally amazed when first introduced to the concept of leverage in elementary school, where the demonstration included a lever and a fulcrum upon which it rested, enabling a man to lift a boulder too heavy for him to raise unaided. Magic!
Later I learned of the quote from Archimedes, Give me a lever long enough and a fulcrum on which to place it, and I shall move the world. Sounded a bit hyperbolic to me, but I got the point, using leverage one can accomplish far more than possible with simple brute force.
For as long as I’ve been a mentor I’ve encouraged founders to seek out leverage. Which I describe is the ability to generate greater results than they could unaided by employing a lever of their ideas and the fulcrum of their business.
One simple example may suffice. Startups all need to do both primary and secondary market research. I always advise founders to perform primary research – talking with prospective customers and partners – themselves, both to insure that what is said doesn’t get lost in translation and to improve their interview skills.
But doing secondary market research, such as using the LexisNexis database, can be time consuming and has a high opportunity cost for a founder. So I used to advise founders to find an intern either a business major or MBA candidate. While this is still good advice, there’s another way to conduct market research that can generate more and perhaps better results. In the course of starting and running a higher education publishing company I got to know professors of business. And in getting to know them I learned that virtually every business major or MBA student needs to do a market research project, most often done in teams. So rather that simply prevail on one of my professor friends for an intern I started asking if they would assign one of their market research teams to our company, to answer questions we had about the market, it’s growth, it’s market drivers, and most importantly how we should price our product. Presto, instead of one intern working a few hours a week on their own all of a sudden we had a team of five MBA students working all semester for us. This was a very rare win-win-win. Obviously we won by getting both primary and secondary research done by a team of smart business school students, but the students won also given their abiding interest in startups. And for the professor, she was assured of an exciting project for one of her MBA student teams, leaving one less project for her to assign.
While triple wins may be the apotheosis of leverage, a more simple win-win should often be a characteristic of attaining leverage, as you are accessing the resources of another entity to help your venture in some ways. So as in all business development, always be thinking What’s in it for them? For you should know what is in it for you. And if you don’t go back to the drawing board until you do. Learning how to ask is a key skill for entrepreneurs. Asks need to be clear, simple, and engaging. You should push the envelope, but not exceed it. A good way to learn about the art of the ask is to read Walter Isaacson’s biography of Steve Jobs. As among his many other skills Jobs was a master of the art of the ask, not to speak of king of leverage.
There are many other ways to get leverage. In fact LexisNexis, a valuable service for business is very expensive to access. But it is usually available free of charge to business school students. So by hiring a B-school intern you also gain access to LexisNexis.
Another way of looking at leverage is where the output exceeds the input, just as use of a lever enables one to lift something far heavier than possible without it, just as a man with a bicycle is faster than any animal on earth, though a cheetah is easily faster than a man on foot. Steve Jobs famously said, A computer is a bicycle for the mind.
As a founder you should always be looking for ways to leverage your efforts and you should also teach the concept and execution to your staff. You may not be able to move the world but you may well be able to move a market.
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