Blog

Lessons from inventor James Dyson

dyson

PHOTO: JUDE EDGINTON FOR THE WALL STREET JOURNAL

James Dyson is a highly successful inventor who has built an empire of high-tech, design-centric consumer products, including  vacuum cleaners, supersonic hairdryers and air-purifying fans. His background is somewhat different than the typical U.S.-based engineer/founder:

Mr. Dyson, 70, was born in Norfolk, England. He had no formal engineering training. Instead, he went to art school and then studied design at the Royal College of Art.

There are some important lessons in the Wall Street Journal article James Dyson’s Big Ideas that are far from unique, but seem to be key elements of successful founders.

The first his his attitude towards market research, which is virtually identical to Steve Jobs:

Market research at the time said that customers weren’t especially interested in cordless vacuums, but Mr. Dyson decided to ignore it. “You can’t ask your customers to tell you what to do next,” he says. “They don’t know. That’s our job.”

The second is his attitude towards failure and the need for perseverance.

He credits his success to “perseverance, taking risks and having a willingness to fail.” “Inventors rarely have ‘eureka’ moments,” he says. “Developing an idea and making it work takes time and patience.” He adds, “We fail every day. Failure is the best medicine—as long as you learn something.

N.B. that failure is ok – as long as you learn something! There’s too much lip service paid to the value of failure in the startup world and not enough attention paid to the need for continuous learning.

In my 30+ years of working with entrepreneurs I’ve found that persistence/perseverance and continuous learning/improvement are the key determinants of success. For example, Tim Westergren the founder of Pandora was turned down by 150 VCs before finally landing an investment.

So here’s a little self-test for founders: if you aren’t willing, able, and passionate about working extremely hard to realize your vision, usually for years and usually taking well below market compensation,  don’t even start. Go to work for someone else.

I used to wonder why successful song writers kept writing songs even well after they became multi-millionaires and could easily have retired. The answer is simple, the can not NOT write songs! It’s something they are driven to do. And founders have to have the same motivation, it is not about money, fame, power or other stuff more easily found on Wall Street or elsewhere – it’s about the unquenchable drive to build out their vision. James Dyson at age 70 is still going strong, and why not! Money, fame, power, etc. are the byproducts of a successful startup, not the reasons for starting a company. There are lots of easier ways to get rich, if not famous.

*In a 1998 interview with Businessweek, he famously stated:

“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”

Great quote re mentoring

 

flower

John Brandon’s article This Mentoring Tip Will Rock YourWorld Today from Inc. has a great quote regarding mentoring:

If you treat an individual as he is, he will remain how he is. But if you treat him as if he were what he ought to be and could be, he will become what he ought to be and could be.

The quote comes from a writer and statesman names Johann Wolfgang von Goethe who died in 1832, but it’s incredibly relevant today if you run a small company or lead a team of any size. It hit home for me because it is one of the best ways to mentor people.

If you are mentoring, stop trying to see the person for their current skill level. Don’t evaluate people on their current personality traits or knowledge, stop trying to push someone to make quick progress and excel at their current endeavors only. Start seeing the person you are mentoring for who they will become eventually(say, after you are done with the mentoring).

This is why I always try to start my mentoring sessions by asking the founder where it is they are trying to get to, what it is they are trying to accomplish. Because mentoring is not about the present, it’s about the future. What the founder wants to build, for whom and why. As mentoring usually starts very close to the birth of a venture most of our time will be spent with the growth and development of the founder and their company.

So it is critical that we see the founders and their ventures as they “ought to be and could be” – our advice, guidance and feedback will help them get to get there. That’s why, while intros are important, given the limited time we have in a mentoring session focusing on “what’s next” is critical, not what’s come before. As Mr. Brandon concludes:

If you can somehow muster the outlook that your mentoring will be effective, that the process will work beyond your wildest dreams, you will be surprised by the growth. You might also receive a note thanking you for taking the time to make it happen.

Why people don’t change

trying

Abbey Lossing

I just got around to reading last week’s Sunday New York Times business section and was amused to find the article Why Trying New Things Is So Hard to Do by Sendhil Mullainathan. I just wrote about how people hate to change three days ago!

Professor Mullainathan’s article is written from a first-person viewpoint. He admits to having a massive Diet Coke habit – two liters a day – and uses that as an example of why people don’t change. He points out that he could easily and cheaply experiment by trying a cheaper, generic soda. If he liked it he’d save a lot of money over years of soda drinking. And if he didn’t he could either try another generic soda, maybe a store brand, or go back to Diet Coke.

He points out the relative upsides and downsides of experimenting:

When the same choice is made over and over again, the downside of trying something different is limited and fixed — that one soda is unappealing — while the potential gains are disproportionately large. One study estimated that 47 percent of human behaviors are of this habitual variety.

Keep that number in mind if you decide your latest greatest invention will require consumers to change their behavior!

There are at least three reasons people don’t or won’t change their habits:

  1. Habits are powerful. We persist with many of them because we tend to give undue emphasis to the present. Trying something new can be painful: I might not like what I get and must forgo something I already enjoy. That cost is immediate, while any benefits — even if they are large — will be enjoyed in a future that feels abstract and distant.

  2. Overconfidence also holds us back. I am unduly certain in my guesses of what the alternatives will be like, even though I haven’t tried them.

  3. Finally, many so-called choices are not really choices at all. Walking down the supermarket aisle, I do not make a considered decision about soda. I don’t even pause at the generics. I act without thinking; I automatically grab bottles of Diet Coke as I wheel my cart by.

There’s a strong bias on the part of consumers as well as government policy makers in favor of the status quo. So again, founders beware – if your invention is going to require any change in government policy, rules or regulations. This is one reason why biotech companies need to raise so much capital – the very high cost of experimentation and attendant government regulation.

Oddly Professor Mullainathan, who is an economist, never brings up the scientific method, which is truly the bedrock of scientific progress and is built on the process of experimentation. He sees things through a personal, not scientific, lens:

Experimentation is an act of humility, an acknowledgment that there is simply no way of knowing without trying something different.

Understanding that truth is a first step, but it is important to act on it.

Founders must realize that though you may follow the scientific method with your startup: creating a hypothesis, designing an experiment to test it, gathering data, analyzing the results and deciding if the hypothesis was correct or not on those results, this is NOT how your customers either think, decide, or behave. Perhaps I’m biased by my undergraduate degree in social psychology, but I believe that understanding the social sciences, in particular psychology, sociology, and cultural anthropology can help founders better understand their customers and as a result of that understanding, better serve them.

Why targeting the right customer isn’t enough

india.jpg

Cellphone users in Jodhpur, India, where Google sent a researcher this week to get feedback about apps. Google is changing core products in India to use less data and work better on low-end smartphones. CreditRebecca Conway for The New York Times

From Steve Blank, the dean of entrepreneurial education from where I sit, on down, we mentors and educators are constantly harping on the issue of targeting the right customer. And indeed segmenting a market and defining your customer is indeed necessary, but it’s often not sufficient for the holy grail of product/market fit.

The New York Times article Google Missed Out on China. Can It Flourish in India? is an excellent case study in how Google realized the one huge difference between customers in India and the West – the relatively tiny mobile data budgets and primitive mobile phones used by most Indians.

Many of the new Indian users have basic phones, which make it difficult for them to run certain apps or to store big files like videos. Data plans are limited, and despite a telecom price war that has cut the price of a megabyte of data by as much as 97 percent, some customers are unable to afford more data when they run out.

Google actually has a unit called Next Billion Users, dedicated to creating products for emerging markets like India, Brazil and Indonesia. Google has marshaled some of its best developers, designers and researchers to figure out how to adapt or completely rethink products like YouTube to serve the needs of mobile internet users with smaller budgets but big aspirations.

But instead of just dumbing down or shrinking its existing products to fit the low end mobile phones and small data plans, Google did extensive research into how people really use their phones, what needs are unmet, and how the company’s apps are received.

Google’s developers were actually, whether they knew it or not, acting as cultural anthropologists, quizzing Indians about their internet use, their habits, even how they commuted to work, collecting information to take back to the team.

One result of this research was the development of a new product called Datally, aimed at users with tight data plan constraints. Google also found that language has been a barrier to Internet adoption in India and now its voice-driven assistant is very popular, accounting for 28% of all Google searches conducted by voice.

As a startup there’s no doubt you only have a tiny percentage of the resources of a Google, but that shouldn’t prevent you from emulating their methodology for understanding their customers, their needs, and how they use their mobile devices.

And if you are beyond the startup stage and looking to expand into new markets, the lessons of how Google has approached its customers in emerging markets are even more relevant.

Product/market fit is shorthand. It leaves a lot out, like how the user experience fits the needs of the customer, what are the trends in the market, what changes are taking place in infrastructure and platforms that most developers build upon, and more.

The deeper you can go and the more you can learn about what devices, platforms and services your customers use now, which ones they aspire to use, and where you can fill an important gap, the more likely you will be to onboard a whole new cohort of customers.

People hate change!

 

donut

ILLUSTRATION: ALEX NABAUM

As a mentor I’m seeing more and more attempts to use technology – usually smartphone apps – to help people monitor and manage their health. While these founders are very smart, technically accomplished, and highly motivated they most often run into a brick wall. That brick wall is the assumption that their customers will change their behavior in order to take advantage of the wearable or other tech the founders are working on.

I encourage all founders, not just those focused on consumer health care, to read the Wall Street Journal article The Hype of Virtual Medicine – High tech health care hasn’t proved effective at changing patient’s bad habits by Ezekiel J. Manuel. Dr. Emanuel is the vice provost and chair of the department of medical ethics and health policy at the University of Pennsylvania and venture partner with Oak HC/FT. His most recent book is Prescription for the Future.

Here’s a classic medical problem and a high tech attempt to solve it:

Consider the problem of patients who do not take their medication properly, leading to higher rates of complications, hospitalization and even mortality. Researchers at Harvard, in collaboration with CVS, published a study in JAMA Internal Medicine in May comparing different low-cost devices for encouraging patients to take their medication as prescribed. The more than 50,000 participants were randomly assigned to one of three options: high-tech pill bottles with digital timer caps, pillboxes with daily compartments or standard plastic pillboxes. The high-tech pill bottles did nothing to increase compliance.

Many years ago I worked with Professor Christopher A. Bartlett of The Harvard Business School to turn his book Managing Across Borders: The Transnational Solution into an interactive CD-ROM case. Harvard had, and still has, a highly profitable business selling reprints of its cases to other B-schools. I still remember the one caution I received from Professor Bartlett as we embarked on the project: People hate change! And of course that is exactly what we were trying to do, get professors and students to move away from passive, text/paper-based business cases to using technology to improve learning by creating interactive cases. And despite our best efforts we hardly made a dent in the sales of print cases.

Dr. Emanuel goes on to cite numerous studies whose conclusions are all the same: technology has failed to help patients change their behavior to improve their health. He has one good reason for this failure:

Why is virtual medicine falling short of the techno-optimists’ expectations? Most medicine isn’t about closely monitoring every passing physiological change. Except for patients in the ICU, moment-to-moment numbers on blood pressure, weight or heart rate often don’t really matter. After all, people don’t become obese by overeating for one meal or go into heart failure from one extra-large sugary soft drink. And with the exception of insulin and drugs administered intravenously in the hospital, most medications work over 12- or 24-hour cycles, so the continuous monitoring promised by technology is largely a waste.

He concludes:

The only interventions that seem to change the behavior of patients in a lasting way are financial incentives (mainly to stop smoking) and long-term, face-to-face relationships with nurses and health-care coordinators. These interventions are decidedly not high-tech. They are high-touch, and they remain our most effective prescriptions to treat chronic illnesses.

Of course being a reformed serial entrepreneur I feel like the problem of changing patients’ behavior on a long term basis is great opportunity, not an insoluble problem.

If financial incentives work, why not sell a subscription service and use a portion of that revenue to financially reward patients for changing their behavior? If long term face-to face relationships with health care providers are effective, why not try using Skype or other visual/virtual meeting technology to provide frequent patient/care giver personal interactions in a much more cost-effective, efficient manner? Finally, founders need to target the right customer segment. Chronic disease is most common amongst the elderly, who also are the least technological adept segment of the patient population.

So here’s a great entrepreneurial opportunity: figure out how to use technology to help patients change behavior, whether it is eating habit that lead to obesity or failure to take their medications regularly. Image a socio-medical network of patients tackling a similar health care problem, such as obesity, that combines financial incentives with frequent and helpful tech-enabled interactions with caregivers? From what I’ve seen there has been far too much emphasis on collecting patient information via devices like the FitBit and Apple iWatch. But as Dr. Emmanuel points out we have learned from behavioral economics, information alone doesn’t change behavior.

In fact a former colleague of mine attempted to build an app to help people change their habits based on the book The Power of Habit: Why We Do What We Do in Life and Business by Charles Duhigg. But that project failed, for at least two reasons, one, I learned decades ago that simple transcoding media – turning a book into an interactive case – doesn’t work. Secondly, founders need to focus on a small niche which they can dominate, then move out from there to a wider population. 

There have been three major successes in the past decade when it comes to changing people’s habit: smoking has gone down dramatically, hydration has gone up even more dramatically, and to my amazement, people have been trained to pick up their dog’s waste and dispose of it properly!

While Dr. Emmanuel’s article may seem discouraging it is actually presenting an opportunity for the right team: an experienced health care provider, a social anthropologist, and skilled software/hardware engineers to find how to help patients change their behavior to improve their health care – even if it takes financial incentives!

Finally I can personally attest to the success of using high tech to treat a chronic health problem. I have suffered from idiopathic peripheral neuropathy for about the past three years. Having seen five different neurologists, taken innumerable pills, and tried virtually everything I could find to help ameliorate this very painful disorder, which has no cure, I finally landed on a successful way to ameliorate my pain: a TENS machine called Quell Relief  from a VC-backed startup called Neurometrix,

The company’s mission is improve health through technology. While it’s far too early to declare victory in my particular case as I’ve only used the device for the past three weeks I can attest to the modest change in behavior the TENS device requires is a no-brainer given the level of relief it supplies. NeuroMetrix has tackled one the world’s largest problems – chronic pain. Here’s their origin story:

Founded in 1996 as a spinoff from the Harvard-MIT Division of Health Sciences and Technology, NeuroMetrix is a commercial stage company that integrates neurostimulation and digital medicine innovations to address chronic health conditions including chronic pain, sleep disorders and diabetes.

And how did I discover this very helpful solution to my chronic pain problem? Not from the many doctors and other healthcare providers I’ve seen, but from reading about them in tech news! Again, it’s probably too early to declare victory for NeuroMetrix, but their story is a great counter to Dr. Emanuel’s dour article.

Self-confident or arrogant?

kickass

I wrote a post earlier this year Self-confident, conceited or charismatic? Yesterday I attended a 90 minute workshop on mentoring confidence put on by The Sandbox Fund at MIT. The presenter was Alyssa Dver, Chief Confidence Officer. At the rate CXX titles are growing pretty soon employees without a CXX title will be a minority! Be that as it may, she has a research and coaching certification from the AmericanConfidenceInstitute.com and has a book and blog entitled Kickass-Confidence.

She defines confidence as Being certain and acting according to your own values and beliefs.

You might consider this post a continuance of my previous post. What I found most useful from the work shop was a listing of characteristics of confident people. They:

  • Stay calm
  • Listen better than most
  • Are diplomatic, but decisive
  • Apologize appropriately – no dissembling!
  • Are not defensive
  • Are eager to learn – are curious
  • Sit up or stand up straight – they don’t slouch
  • Make good, appropriate eye contact
  • Don’t speak either too softly or too loudly

I think that every mentee who has anything to do with sales in any manner, shape or form, from direct sales to customer support, could benefit from this work shop. Sales people must not only appear confident, they must be confident – about their product and their company.

Ms. Dver ran through a number of role playing exercises with volunteers from the audience, most were directly at how to deal with people who are not confident. They may be cocky, be bullies, be indifferent, rude or worse. The value of silence was brought up several times. I’ve written about this myself in the post Silence is Golden. What impressed me the most was she was willing to admit there are some situations in which you just can’t win over a bully or indifferent person and it’s best to realize that and ask if perhaps there might be a better time to meet. When one or more people insist on talking over you and/or constantly interrupting you this may be the time to excuse yourself from the meeting.

Ms. Dver had four recommendations for training in confidence

  1. Awareness – make sure the mentee knows what the potential risk/pain is and mitigate it with logic
  2. Structure – identify specific memories that remind the mentee of his/her ability
  3. Small win – break the solution into smaller parts
  4. Accountability – identify how to measure and report back to you with progress

Where I do differ somewhat from Ms. Dver is in two areas. One, I believe that to be a successful entrepreneur you have to be on the verge of arrogance if not past it, because it takes some arrogance to believe you can build a product better than X Co, Y Co or any other company in the world! Just being confident may not be enough to overcome the massive hurdles that face every startup founder. The other issue is that I find that practice breeds confidence. As a New England Patriots football fan I closely follow 40 year-old quarterback Tom Brady, who makes it plain that the reason he is so confident is that in his 18-year pro career he’s seen every possible defensive scheme, live and on video, multiple times. And he out-practices everyone, every day.

In fact I encourage my mentees to practice their pitches over and over again. Even Steve Jobs, one of the world’s best presenters ever, spent hours practicing his keynotes. And believe me, from just meeting with him briefly, he exuded confidence – as well as charisma.

So whether you are a mentor or a founder, confidence is an important ingredient in the stew of entrepreneurial success and an attribute that should not be taken for granted, nor assumed to be wired into one’s DNA, or not. It can be learned, and should be, if you want to be a successful founder or mentor.

The Top Reasons Startups Fail

startups fail

Nail McCarthy’s article in Forbes on the reason why startups fail joins a bevy of articles on this subject.  Bill Gross of Idealab pinpointed the single most important reason, and it isn’t even listed in the CB Insights chart! According to his research it’s timing. 

The chart above from Statistica is well worth studying by founders.

Either way you look at it the odds are against founders:

According to CB Insights, 70 percent of upstart tech companies fail, usually about 20 months after first raising financing. The failure rate is even worse for consumer hardware startups with 97 percent of seed crowdfunded companies failing or turning into “zombies”.

Let’s take a look at some of the reasons CB Insights discovered. The number one reason is No market need, at 42% it dwarfs all other factors This jibes with research done by NSA on why scientists and researchers fail to commercialize their inventions or discoveries.  MIT is one of several sites running the I-Corps program for post-docs.

The National Science Foundation (NSF) I-Corps program prepares scientists and engineers to extend their focus beyond the university laboratory, and accelerates the economic and societal benefits of NSF-funded, basic-research projects that are ready to move toward commercialization.

Through I-Corps, NSF grantees learn to identify valuable product opportunities that can emerge from academic research, and gain skills in entrepreneurship through training in customer discovery and guidance from established entrepreneurs.

Even if you are not a post-doc I highly recommend you study Steve Blank’s work on customer discovery which is a critical part of the I-Corps curriculum. He has several books, including The Startup Owner’s Manual: The Step-By-Step Guide for Building a Great Company. Steve’s web site has a wealth of resources for founders and many videos on YouTube about customer discovery.  So as they say, an ounce of prevention is worth a pound of cure. In this case you need a pound of prevention in discovering who your customers are and why they would want your product. Don’t be a solution in search of a problem!

The second big reason startups fail is running out of cash, at 29%. But this is misleading. Obviously you run out of cash because your expenses exceed your cash on hand, which could be an investment or customer revenue. Not creating a product the market wants means you have zero customer revenue, so ipso facto, you will run out of cash eventually no matter how big your investment. So my advice to founders is start charging from the get-go. Meaning if you secure a pilot, get your customer to pay, even if you have to offer a hefty discount. And make it clear that after X period, if the pilot is a success the price needs to go up so you can re-invest it in the company. I’m very pleased to say one of my mentee companies just landed a paid pilot that could lead to significant revenues if it’s successful. Don’t just do a pilot as a proof of concept. Pilots need to be step one on the best way to stay cash flow positive: generate customer revenue.

Not the right team comes in third at 23%. Since this data comes from post mortems with failed companies keep in mind all hindsight is 20/20. Founders have two major responsibilities. The first is customer discovery. But the second is building the right team. And because no one bats 1.000 in hiring realize your team is going to change, for a variety of reasons. One way to be prepared for changes in the team is what I call talent tracking.  One of the reasons for the enduring success of The New England Patriots is that they literally have a book on every single player in the NFL, including practice squads. So if they lose a player due to injury or cut him due to poor performance, they know exactly who to go after for a replacement.  Keep in mind that founders must be aligned tightly on their personal and company goals or your company will indeed fail if you can’t replace a founder who isn’t a fit.

The next most frequently cited reason for failure is Got outcompeted. This is why virtually ever investor I’ve ever talked with asks “What is your barrier to entry?” The good news about startups is that it’s never been so cheap or so easy to pull together a team and build a product. And that’s the bad news as well. So you need to start thinking about how you will fend off competitors, which come in two flavors: incumbents and copy cat startups. You need a different strategy for each. Back in the last century every VC would ask me: But what if Microsoft decides to do this, how will you ever compete with them? Then the subject of that sentence became Google. Today it’s probably Facebook or Amazon. The reality is that the bigger the company the harder it is for them to justify going after what they think is a small market. The classic case of this was mobile apps. Both Microsoft and Facebook ignored mobile for years. The difference was Facebook woke up sooner and to Mark Zuckerberg’s credit he drove everyone in a mobile-first direction quickly and very successfully. Here’s where reading a book may help: Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kin and Renee Mauborgne. 

blue

Rounding out the top five reasons startups fail is Pricing/Cost issues. This does not surprise me. For after customer acquisition the most common problem brought into mentoring sessions is How do I price my product or service? Obviously books have been written, seminars conducted, research papers published, etc. on this subject.  I’d refer you to Steve Blank’s book mentioned above for help here. But one question should be answered: are you pricing to gain market share (which was Microsoft’s strategy for years) or to generate high margins (which was Apple Computer’s strategy, and still is despite their name change to Apple.) Get your customers to help you. Once you have captured their imaginations you need to ask them: “Ok, but what would you pay for this product? How does $XXXX a month sound?  And would you prefer we offer on a monthly subscription basis or on a one-time sale basis, with charges for new versions? Like real estate, the best way to price a product is to look at comparables. And more specifically, the comparables purchased by your prospective customer. If you have enough prospects A-B testing can help you find the pricing sweet spot. In my experience startups under price their products and services, which leads to reason two for failure: running out of cash. Do not try to compete on price – it’s a race to the bottom. Keep a tight rein on your costs and make sure your pricing will cover your costs before you run out of cash!

One last comment. You’ll notice that Product mis-timed comes in at number 10 at only 13%. This is certainly contrary to Bill Gross’ finding that it’s the number one reason. From my experience many companies are too early and the market infrastructure wasn’t their (I was doing mobile apps in 2000) or you are too late and the market has a dominant player (Search – Google). So I believe timing is something founders need to look at as their startup is gestating.

One question I often ask founders is “If your company fails 2 years from now, what will be the major reason?” This bar chart can be turned into a checklist for founders – review it weekly and ensure that you and your team are taking the right steps to avoid these reasons for failure.