2. Steve Jobs said: “Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.”
There is no shortcut to excellence. You will have to make the commitment to make excellence your priority. Use your talents, abilities, and skills in the best way possible and get ahead of others by giving that little extra. Live by a higher standard and pay attention to the details that really do make the difference. Excellence is not difficult – simply decide right now to give it your best shot – and you will be amazed with what life gives you back.

3. Steve Jobs said: “The only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it.”
I’ve got it down to four words: “Do what you love.” Seek out an occupation that gives you a sense of meaning, direction and satisfaction in life. Having a sense of purpose and striving towards goals gives life meaning, direction and satisfaction. It not only contributes to health and longevity, but also makes you feel better in difficult times. Do you jump out of bed on Monday mornings and look forward to the work week? If the answer is ‘no’ keep looking, you’ll know when you find it.

4. Steve Jobs said: “You know, we don’t grow most of the food we eat. We wear clothes other people make. We speak a language that other people developed. We use a mathematics that other people evolved… I mean, we’re constantly taking things. It’s a wonderful, ecstatic feeling to create something that puts it back in the pool of human experience and knowledge.”
Live in a way that is ethically responsible. Try to make a difference in this world and contribute to the higher good. You’ll find it gives more meaning to your life and it’s a great antidote to boredom. There is always so much to be done. And talk to others about what you are doing. Don’t preach or be self-righteous, or fanatical about it, that just puts people off, but at the same time, don’t be shy about setting an example, and use opportunities that arise to let others know what you are doing.

5. Steve Jobs said: “Be entrepreneurial.”
Look for the next big thing. Find a set of ideas that need to be quickly and decisively acted upon and jump through that window. Sometimes the first step is the hardest one. Just take it! Have the courage to follow your heart and intuition.

6. Steve Jobs said: “Do your best.”
Do your best at every job. No sleep! Success generates more success. So be hungry for it.

7. Steve Jobs said: “I’m the only person I know that’s lost a quarter of a billion dollars in one year…. It’s very character-building.”
Don’t equate making mistakes with being a mistake. There is no such thing as a successful person who has not failed or made mistakes, there are successful people who made mistakes and changed their lives or performance in response to them, and so got it right the next time. They viewed mistakes as warnings rather than signs of hopeless inadequacy. Never making a mistake means never living life to the full.

8. Steve Jobs said: “Ask for feedback.”
Ask for feedback from people with diverse backgrounds. Each one will tell you one useful thing. If you’re at the top of the chain, sometimes people won’t give you honest feedback because they’re afraid. In this case, disguise yourself, or get feedback from other sources. Focus on those who will use your product – listen to your customers first.

9. Steve Jobs said: “We’re here to put a dent in the universe. Otherwise why else even be here?”
Strive to be a market leader. Own and control the primary technology in everything you do. If there’s a better technology available, use it no matter if anyone else is not using it. Be the first, and make it an industry standard.

10. Steve Jobs said: “Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of other’s opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”
Are you tired of living someone else’s dream? No doubt, its your life and you have every right to spend it in your own individual way without any hurdles or barriers from others. Give yourself a chance to nurture your creative qualities in a fear-free and pressure-free climate. Live a life that YOU choose and be your own boss.
Each lesson might be difficult to integrate into your life at first, but if you ease your way into each lesson, one at a time, you’ll notice an immediate improvement in your overall performance. So go ahead, give them a try.

“The world has lost a visionary. And there may be no greater tribute to Steve’s success than the fact that much of the world learned of his passing on a device he invented.”

The president was joined by political, technology, entertainment and business leaders around the world in paying tribute to Jobs. A selection:

BILL GATES, MICROSOFT CO-FOUNDER AND CHAIRMAN

“Steve and I first met nearly 30 years ago, and have been colleagues, competitors and friends over the course of more than half our lives. The world rarely sees someone who has had the profound impact Steve has had, the effects of which will be felt for many generations to come. For those of us lucky enough to get to work with him, it’s been an insanely great honor.”

RUPERT MURDOCH, CEO OF NEWS CORP

“Today, we lost one of the most influential thinkers, creators and entrepreneurs of all time. Steve Jobs was simply the greatest CEO of his generation. While I am deeply saddened by his passing, I’m reminded of the stunning impact he had in revolutionizing the way people consume media and entertainment.”

MARK ZUCKERBERG, FACEBOOK FOUNDER AND CEO, ON FACEBOOK

“Steve, thank you for being a mentor and a friend. Thanks for showing that what you build can change the world. I will miss you.”

SAMSUNG ELECTRONICS CHIEF EXECUTIVE, G.S. CHOI

“Chairman Steve Jobs introduced numerous revolutionary changes to the information technology industry and was a great entrepreneur. His innovative spirit and remarkable accomplishments will forever be remembered by people around the world.”

SONY CEO HOWARD STRINGER

“The digital age has lost its leading light, but Steve’s innovation and creativity will inspire dreamers and thinkers for generations.”

AT&T CHAIRMAN AND CEO RANDALL STEPHENSON

“Steve was an iconic inventor, visionary, and entrepreneur, and we had the privilege to know him as partner and friend.”

BOB IGER, CEO OF WALT DISNEY CO

“Steve Jobs was a great friend as well as a trusted advisor. His legacy will extend far beyond the products he created or the businesses he built. It will be the millions of people he inspired, the lives he changed, and the culture he defined. Steve was such an ‘original,’ with a thoroughly creative, imaginative mind that defined an era. Despite all he accomplished, it feels like he was just getting started.”

MITT ROMNEY, REPUBLICAN PRESIDENTIAL HOPEFUL, ON TWITTER

“Steve Jobs is an inspiration to American entrepreneurs. He will be missed.”

ARNOLD SCHWARZENEGGER, FORMER CALIFORNIA GOVERNOR, ON TWITTER

“Steve lived the California Dream every day of his life and he changed the world and inspired all of us.”

MASAYOSHI SON, FOUNDER OF SOFTBANK, JAPAN’S NO.3 MOBILE PHONE SERVICE OPERATOR

“Steve was truly a genius of our time, a man with a rare ability to fuse art and technology. In centuries from now, he will be remembered alongside Leonardo da Vinci.”

MARK CUBAN, ENTREPRENEUR, ON TWITTER

“The PC era is officially over. #RIP #STEVEJOBS

INVESTOR MARC ANDREESSEN

“Steve was the best of the best. Like Mozart and Picasso, he may never be equaled.”

PAUL ALLEN, CO-FOUNDER OF MICROSOFT

“We’ve lost a unique tech pioneer and auteur who knew how to make amazingly great products. Steve fought a long battle against tough odds in a very brave way. He kept doing amazing things in the face of all that adversity.

MICHAEL DELL, CEO OF DELL INC

“Today the world lost a visionary leader, the technology industry lost an iconic legend and I lost a friend and fellow founder. The legacy of Steve Jobs will be remembered for generations to come.”

LARRY PAGE, CEO OF GOOGLE, ON GOOGLE+

“He was a great man with incredible achievements and amazing brilliance. He always seemed to be able to say in very few words what you actually should have been thinking before you thought it. His focus on the user experience above all else has always been an inspiration to me.”

STEVE CASE, FOUNDER OF AOL, ON TWITTER

“I feel honored to have known Steve Jobs. He was the most innovative entrepreneur of our generation. His legacy will live on for the ages.”

JEFF BEWKES, CEO OF TIME WARNER

“The world is a better place because of Steve, and the stories our company tells have been made richer by the products he created. He was a dynamic and fearless competitor, collaborator, and friend. In a society that has seen incredible technological innovation during our lifetimes, Steve may be the one true icon whose legacy will be remembered for a thousand years.”

DICK COSTOLO, CEO OF TWITTER, ON TWITTER

“Once in a rare while, somebody comes along who doesn’t just raise the bar, they create an entirely new standard of measurement. #RIPSteveJobs”

ARTHUR SULZBERGER, CHAIRMAN OF THE NEW YORK TIMES CO

“Steve Jobs was a visionary and a wonderful friend of The New York Times. He pushed the boundaries of how all providers of news and information interact with our users. I am among the many who deeply regret his passing.”

JOHN RICCITIELLO, CEO OF ELECTRONIC ARTS

“Steve was one of a kind. For many of us working in technology and entertainment, Steve was a new kind of hero that lead with big, bold moves and would not settle for less than perfection. He is the best role model for a leader that aspires to be great.”

JOHN LASSETER AND ED CATMULL, CHIEF CREATIVE OFFICER AND PRESIDENT, WALT DISNEY and PIXAR ANIMATION STUDIOS

“Steve … saw the potential of what Pixar could be before the rest of us, and beyond what anyone ever imagined. Steve took a chance on us and believed in our crazy dream of making computer animated films; the one thing he always said was to simply ‘make it great.’ He is why Pixar turned out the way we did and his strength, integrity and love of life has made us all better people. He will forever be a part of Pixar’s DNA.”

SPIKE LEE, PRODUCER/DIRECTOR/ACTOR, ON TWITTER

“VISIONARIES are always called CRAZY in the beginning. A VISIONARY sees things that everybody else says is IMPOSSIBLE, sees a World that People can’t invision (sic)-MAC, IPOD, IPAD, IPHONE, ITUNES and PIXAR. I have nothing but Love for Mr. Jobs and Apple, they have always given me and my films L-O-V-E. Peace and Blessings to his family.”

By: Josh Bernoff August 24, 2011

Josh Bernoff
So, Steve Jobs is gone — resigned as CEO of Apple.

Consider, for a moment, the meaning of Steve.

By my count, Steve Jobs changed the world five times. Five.

He introduced the Apple II when I was a teenager. Sure, there were Altairs before, but there were no “personal” computers — such a thing was unimaginable. After that, we knew anyone could own a computer. That changed everything.

He introduced the Macintosh when I was working at Software Arts, the company that created the first spreadsheet, VisiCalc. I remember the Mac’s predecessor, the Lisa — we had one in a special room behind a locked door. My 24-year-old mind saw it and boggled — this was a completely different way to use a computer. Mouse, windows, icons, graphical UI — and I saw what happened when children started playing with it and using “Paint.” This would change everything. And it did. Sure, there was Xerox PARC, but it was Steve Jobs that changed everything.

After Jobs left Apple, it went way downhill, eventually under the unimaginative Gil Amelio. I actually wrote a piece about it for Forrester Research, with a heading that read “Wake Up and Smell the Toast.” Toast it would have been, but Jobs came back.

When Apple introduced the iPod, the interface on the hardware was a revelation. Still, the iPod was just another music player until Jobs made iTunes happen. ITunes changed everything. The music industry turned inside out. A new device, microprocessor controlled, caught fire — probably the first really significant one since the game console. Sure, there had been MP3 devices from the likes of Creative, but Steve Jobs changed the world — made us realize what a cool device connected to a cool service could do. He changed the world again.

The iPhone changed the world. It changed the dynamics of the phone industry — it was subsidized, but Apple controlled the interface, not the carriers. It became your real-time, all-the-time portal to the world, in your pocket. The apps, the multitouch interface — another revelation. It changed the world yet again — now, increasingly, we all have devices like this in our pockets.

The iPad was the fifth change. It’s destroying the PC industry with a new mode of interaction.

(If you want to stretch it, Pixar changed a whole industry, too. Call it five-and-a-half times.)

Nobody else comes close.

Bill Gates changed the world twice — once with DOS and once with Windows.

Sergey Brin and Larry Page changed it once, with Google.

David Sarnoff once, with color TV.

Tim Berners-Lee and then Marc Andreessen once, with the web and the browser.

Dan Bricklin and Bob Frankston once, with the spreadsheet.

No entrepreneur changes the whole world five times. Not since Edison, at last.

You can admit that Steve is out of all of our leagues. But what is the meaning of Steve? What can we learn?

1. Strategy. See the whole board. The content companies, the carriers, the hardware manufacturers, the engineers, the patents. Jobs saw not just what was possible, but what industries would be affected and how to bully, cajole, sweet-talk and persuade them into working with him.

2. Timing. As I mentioned, Jobs, was often not the first. But he saw what technologies were on the verge of being possible — and what technologies consumers were ready to accept. There could have been no iPhone without the habits created by iPods and BlackBerry, no Mac without Apple and IBM PCs embraced by those who came before. Timing is crucial.

3. Supply chain and differentiation. Apple doesn’t make flash memory, microprocessors, touchscreens or, for the most part, websites. It just puts them all together. Profit margin comes from assembling commodities in a fantastic, must-have package.

4. Design. Apple’s products are the first family of computing devices that tell people about your style. The other ingredient is lots of advertising. Design plus advertising equals lust. Lust is good for an entrepreneur.

5. Audacity. Imagine the impossible, possible. Persuade with showmanship. Make people believe.

None of us has all of these. But you, reading this, have some of them. You can be audacious and have great timing. You could excel at strategy and design. You can’t be Steve Jobs. But you can learn from him. Work on it. If you want to change the world, now you know where to start.

Saturday, August 13, 2011
What Entrepreneurs Can Learn From Reality TV
I’m not much of a television person, but my family loves one of the popular “reality” shows, called “So You Think You Can Dance,” so I’m sort of forced to watch it every week on Fox. Over time, I’ve concluded that even startup entrepreneurs can learn a few things from this one. Of course, you must ignore the pomp and circumstance of the TV staging.

I’m on the selection committee of our local angels group, so I know that every CEO approaching our group for funding goes through ten minutes of creative “dancing,” to give us a basis for selecting startups that are most qualified and “ready” to proceed to the next level. If selected, they go through it again in the real meeting of 20-40 investors. It’s tough and not fun for either side.

The business “dance” obviously has different particulars than TV dancing, but there is serious business and artistry involved in both cases. Here are some observations I can offer to startup founders looking for funding, analogous to the aspiring dancers on the show, hoping to move to the next level:

Judges evaluate the person first. Investors want to look the CEO in the eye, and be convinced that he or she can lead the company to success – it’s more important than the creative idea. On the TV show, I’m sure you all see contenders that have lost before they start, just because they lack the enthusiasm, presence, and confidence of a winner.

You only get a few minutes to make the case. In fact, your case is usually won or lost in the first couple of minutes. In business, as on the show, wins can turn to a loss if you bungle or skip relevant basics in the short time allotted. Everyone wants a longer time or second chance to win you back, but it would rarely ever change anything.
Skip the bravado, but don’t be immobilized with fear. I subscribe to a quote from another TV show too old to mention, where the hero said “He who is not afraid – he’s a fool.” Let your adrenalin help you deliver an outstanding performance, but trying to wow investors with jokes or stories of unending success will not move you up a level.

Play to the audience in front of you, and adapt your message. If the panel is looking for value and return for the investor, skip the technology pitch, or customer sales pitch. Some entrepreneurs give the same talk, no matter what the audience. If you have only one dance, don’t be surprised if it wears thin quickly with the judges.
Dress appropriately and professionally. Under-dressed may impress on TV, but it’s better to be over-dressed in the business world. Business casual is the standard for investor presentations. Remember that most investors are from a generation where faded and torn jeans were on the wrong side of success in business.
Practice, practice, practice. Even if you are an experienced dancer, you practice your craft with renewed determination before a big show. Business entrepreneurs need to do the same thing, maybe in “presidential debate” style with their team for critics, until they master the timing and can handle every unanticipated slip or challenge.
Even though I’m certainly no expert on dancing (I’ve taken Beginning Ballroom Dancing three times now), most of the reviews I have seen call the TV show realistic, with the panel of judges giving reasonable critical and technical feedback. That’s a welcome relief from Donald Trump’s pompous calls on “Celebrity Apprentice.”

Depending on one’s perspective, this is either the perfect time or an awful one to start a business. So, if you plan to face a business version of the dancing challenge soon, watch the show and check the recommendations above. Show some energy and enthusiasm, and don’t let the technical steps required overshadow your creativity. Break a leg!

Marty Zwilling

Friday, August 12, 2011 founder
Startups, Avoid 10 Common Million-Dollar Mistakes
It’s a well-accepted axiom in the investor community that entrepreneurs learn more from their failures than their successes. Thus a well-explained startup failure often can actually improve your odds of funding in the next go-round. Yet, there is no doubt that the best strategy is to learn from someone else’s mistakes, so you can enjoy the millions that someone else lost in learning.

Certainly there are innumerable possible mistakes to be made, but there is a thread of common ones that I see across the range of all startups. Ryan Blair, a serial entrepreneur who admits to his share of million dollar mistakes, as well as some multi-million dollar successes, sums these up nicely in his current bestseller “Nothing to Lose, Everything to Gain:”

Don’t make wildly optimistic sales forecasts. Test and adjust your projections, based on experienced advisor input and industry norms, rather than the Google high exception. Excel spreadsheets can easily project dramatic growth, with no connection to reality.

Don’t hire people who like your ideas all the time. Flattery feels good, but it doesn’t pay the bills. Look for the thoughtful challenge to your ideas, and practice active listening, when you are selling your vision. High three-digit intelligence has value.

Don’t focus too much on the competition. It’s always more productive to focus on making your offering successful, rather than killing your competitors. Doing things like dismantling their leadership team, or highlighting their shortcomings is lose-lose.

Don’t waste time caring what others think. No matter how hard you try, you won’t make everyone happy. Don’t be afraid to follow your vision, learn from your mistakes, and pivot the business, just because someone will see the change as a disappointment.

Don’t mix business with pleasure. This is especially true of relationships. Do not fraternize with your employees, and choose your partners wisely. Thou shall not “do your business” where you do business.

Be quick to fire and slow to hire. Pull the trigger fast when a new hire isn’t working, but don’t forget to be human and follow all the steps. On the other side, hiring after one interview is like hopping a red-eye to Vegas to get married after one date.

Don’t put your company before your people. A company is an entity that can be pivoted at will. Your team of people has a collective passion and intelligence with a real worth that’s hard to manipulate. Make the company fit the people, rather than vice versa.

Don’t under-forecast cash needs. When you have people and their families depending on you for their paychecks, and you are out of money, that’s another lose-lose situation. Even if you can find someone willing to help, it’s a very, very expensive proposition.

Don’t try to do too much all at once. You hear about all the parallel entrepreneurs, like Steve Jobs running Apple and Pixar at the same time. Make sure you have the aptitude to run one business well, with one product line, before you start a couple more.

Never write something you wouldn’t want to come back to you. Every one of us has sent a sensitive email to the wrong party, or had it misinterpreted by the receiver. Save the hard and easily misinterpreted messages for face-to-face calm discussions.

There are more, but I think you get the idea. Of course, the biggest mistake is failing to learn from the mistakes of others, or even from your mistakes. You can only learn from your mistake after you admit you’ve made it. Wise people admit their mistakes easily, and move the focus away from blame management and towards learning. Wise people can become great entrepreneurs. Where are you along this spectrum?

Marty Zwilling

Thursday, August 11, 2011
7 Skills Not Found at Birth in Most Entrepreneurs
Many people believe that good entrepreneurs are naturally born, rather than trained or experienced in the art of business. I believe there is a natural born component required, but often I tend to agree with Peter Drucker, who said “It’s not magic, it’s not mysterious, and it has nothing to do with genes. It’s a discipline, and like any discipline, it can be learned.”

On the natural born side, some entrepreneurs seem to have a strong vision and the ability to inspirationally lead others. It is this vision that is the beacon to drive the right people behavior, leading to the success of the business. If you don’t feel a vision in your heart, or if you don’t have the strength to inspire people, entrepreneurship is probably the wrong road for you.

If you feel you have the vision characteristics, you still could benefit from some of the key learnable skills that can improve the success and impact of every entrepreneur, assembled from an interview with Herb Kelleher of Southwest Airlines and other executives:

Ability to set priorities and focus on goals. Many people allow themselves to be driven by the crisis of the moment. Personal discipline is the key word here. Set yourself some priorities and goals, and live by them.

Able to identify important issues. Some people call this common sense; others call it “street smarts.” In the normal startup environment, there are multiple forces competing for your attention every day, and you need to learn to delegate or ignore many. It relates back to experience and knowledge, more than genes.

Conviction to be a passionate advocate. When you believe in something enough to turn your passion into action, you have become an advocate. That power and voice is then used to persuade others to make the correct decision. An effective advocate requires conviction, usually acquired during related first hand experience or training.

Broad knowledge and experience. Experience allows one to tackle challenges with confidence in a given area. Broad knowledge facilitates the same success in other business areas. Entrepreneurs need this, because their challenges are across the spectrum from technical to legal, operational, financial, and organizational.

Active listening skills. Above all, the ability to listen and understand the real meaning of what people are saying (and not saying) is paramount, because the most important information never arrives in reports or email. Some people pick this up from experience, and others find classroom courses most helpful in setting the focus.

Sound judgment. I don’t think anyone is born with sound judgment; it has to be learned, but can be started at a very early age. Every entrepreneur must have the capacity to assess situations or circumstances shrewdly and to draw proper conclusions.

Pleasant skepticism. Skepticism is not doubting, but applying reason and critical thinking to determine validity. It’s the process of searching for a supportable conclusion, as opposed to justifying a preconceived conclusion. It is a learned skill.

These all revolve around the larger theme of team building. In short, to succeed, the entrepreneur must see and articulate a vision in order to attract and motivate a team, then be able to identify the key issues, challenge the views held within the team, and make judgments from among the varying perspectives in the team.

Every entrepreneur enters the game with a unique combination of genes and skills. If the things mentioned here feel natural to you, and you are young at heart, have a healthy curiosity and zest for life, the entrepreneurial world may have a place for you, too. Give it a try. If you are having fun, you probably have what it takes.

Marty Zwilling

Wednesday, August 10, 2011
You Built a Great Startup, But Can You Scale It?
Once you are able to achieve some real “traction” with your business (paying customers, revenue stream), it may seem the time to relax a bit, but in fact this is the point where many founders start to flounder. All the skills and instincts you needed to get to this level can actually start working against you, and you can fail to scale.

Investors often say that successfully navigating the early stages of a startup requires lots of street smarts, guts, and luck. For successful scaling of the business, there has to be a transition to “executive” mode in the more traditional business sense. Certain behaviors between these two modes are incompatible, and can cause real problems.

Way back in 2002, John Hamm published some early work on this subject in “Why Entrepreneurs Don’t Scale” in the Harvard Business Review. Here is my interpretation of that work, incorporating my personal experience, identifying some strengths of an entrepreneur during early startup stages which can become a problem for scaling:

Perseverance. This is generally a required quality for a successful entrepreneur, but it can turn into an unhealthy stubbornness during the scaling stage. The key is to make decisions from data and feedback, once your business has real customers and real products. Trusting your gut at this stage isn’t good enough.
Absolute control. During the early stages, you are the company, processes are not documented, you don’t have much help, so you need a fanatical attention to detail. To scale the business, you have to find people who can do the tasks, and delegate appropriately. Control freaks are doomed to failure.
Individual loyalty. Most founders form very close relationships with the small team that gets the startup off the ground, and that is important. Scaling requires that you expand the team, probably with people you haven’t known. You also have to deal with the inevitable personnel challenges, even within the original team. Total loyalty can be toxic.
Isolated and insulated. Working in isolation is fine during the creative phase of the startup, where the founder is often the designer and architect, as well as the builder. Now this same individual has to step into the spotlight, and meet with customers, analysts, and investors. Insulation from the real world will not work during scaling.
Tactical versus strategic. Early stage startup founders have to think tactically. Even business school courses don’t teach you to operate strategically, deal with people objectively, and create loyalty within a diverse workforce. These are areas where past stumbles are the best teachers. Investors don’t want to fund your stumbles.
Every founder moving into the executive role has to step back and take a hard look at what works, and what doesn’t work. The best ones can do that, and they adapt. Investors and advisors see this as a critical part of their role, and often are the “bad guys” who ask the founder to step aside, while they bring in a “more experienced” CEO to take over the helm.

Unfortunately, some founders won’t adapt, and won’t step aside. Even if they are pushed out, they can cause terminal damage to the business by negative versions of their strengths, now seen as stubbornness, unwillingness to give up control, testing loyalty, and hiding from reality.

Thus my best recommendation, if you want to scale and to survive, is to open up and work closely with an “outsider” that you trust, such as a respected board member, a coach, a mentor, or an investor. The key is to expedite your learning, and take deliberate steps to confront your shortcomings. That way, you will become the leader your company needs, learn to stop floundering, and begin to fly.

Marty Zwilling

Tuesday, August 9, 2011
Eight Ways to be Your Own Worst Enemy for Funding
A while back I received a discouraging note from an entrepreneur with a patent and a medical software application who couldn’t find a dime of investment, and was grousing that seed funding just wasn’t available anymore. After exchanging a couple of notes, I concluded that she was more likely a victim of item #1 on my reject list below, rather than a drought on seed funding.

Too many people still believe the urban myth that you can sketch your idea on a napkin, and people will throw money at you. Fundraising is indeed brutally tough at all stages, and the seed funding is the hardest to find. The simple answer is that if you need funding, do your homework early and completely.

I seem to see common threads in the stories from people who don’t get money, so I checked my list against ones quoted in a recent book by Barry H. Cohen and Michael Rybarski, titled “Start-Up Smarts.” We agree on issues we see sabotaging most funding efforts, in decreasing priority sequence:

Lack of a compelling story. That story has to begin with a painful problem shared by a large collection of viable customers, with your competitive solution. Additionally, you need to be able to communicate the essence that story and value to investors in a couple of sentences – your elevator pitch.

Lack of clear objectives/goals. Often, the number one question that entrepreneurs fail to address is: “How much money do you need, and what valuation do you place on your company?” Then you have to have evidence to support your request. I’ve asked this question many times of presenters in angel meetings, and often get a blank look.

Failure to prepare for due diligence. Any serious investor will perform a thorough review of your business and personal background before signing the check. They don’t like surprises, so you should explain any possible issues first, in the best possible light, before being asked.

Lack of understanding of the funding process/rules. The key here is to create a win-win partner situation for your investors. Discussion of risks and rewards in an open fashion, without sleight-of-hand or shortcuts, will convince investors that they can count on you, and will avoid shareholder lawsuits later.

Reliance on inappropriate business professionals. Using well-respected professionals to bolster your endeavor is key. If you can attract well-known advisors, attorneys, and accountants, it will give potential investors comfort that you have been able to get implied endorsement of your concept, as well as your integrity.

Poor choice of funding sources. It is not helpful to you for funders to love an idea that does not fit the criteria for their investing capability. Don’t waste time talking to VCs for requests less than $1M, or very early stage, and don’t expect professional investors to jump in if you have no “skin in the game.”

Not doing due diligence on the funding source. You need to complete due diligence on your prospective funders as they complete due diligence on you. Find out what they have invested in recently, what stage, and what is their track record of expectations and follow-through. You don’t need surprises or disappointments either.

Being unprepared for the next steps. After a good elevator pitch or initial presentation, investors will ask for your formal business plan and financial projections. Don’t derail their enthusiasm or risk your professional image by not having these materials immediately available. The same thing goes for incorporating your company, having key hires lined up, and facilities arranged as required.

There are many others opportunities for you to shoot yourself in the foot. Rather than play the victim, you can be proactive on all these items, and stay one step ahead of your “competitors” in professionalism, timing, and preparation. The resources are out there to help you, like the book mentioned, this blog, and many more. Use them and win.

Marty Zwilling

Monday, August 8, 2011
The Power of Negative Events in Your Startup
Managing and motivating a team in a startup is more than just using the right interpersonal skills. It’s more than providing recognition, tangible incentives, and clear work goals. A key influencer of satisfaction and motivation, top-ranked by employees, is positive progress and the completion of meaningful work. Sometimes you have to manage progress, not people.

“Busy work” and “grunt work” are deadly terms in a startup environment. So are setbacks, project cancellations, and frequent changes of direction that make people doubt that the work they are doing will ever see the light of day. These points are illustrated in detail in “The Progress Principle,” a new book from the Harvard Business School, by Teresa Amabile and Steven Kramer.

They explain that work progress and setbacks matter so much because one of the most basic human drives is toward a person’s belief that he or she is individually capable of planning and executing the tasks required to achieve desired goals (self-efficacy).

Negative events cause uncertainty, doubt, or confusion in people’s sense of themselves, and lowers their motivation for the work. In fact, an analysis of thousands of detailed logs from employees show that setbacks have more power to sway work satisfaction than progress:

The effect of setbacks on emotions is stronger than the effect of progress. The power of setbacks to diminish happiness appears to be more than twice as strong as the power of progress to boost happiness. The power of setbacks to increase frustration is more than three times as strong as the power of progress to decrease frustration.
Small losses can overwhelm small wins. The asymmetry between the power of setbacks and progress events appears to apply even to relatively minor triggers. Similarly, small everyday hassles hold more sway than small everyday assists. Any manager’s job description should start with facilitating subordinates progress every day.
Negative leader behaviors affect work satisfaction for everyone. Managers should avoid actions that negate the value of work in progress. One way is dismissing a team member’s work, or changing priorities arbitrarily, or inadequate communication. Don’t assign people who are clearly unqualified, or over-qualified, to a task.
Failure to facilitate progress and remove obstacles. Consistent daily progress by individual employees fuels both the success of the organization and the quality of those employees inner work lives. This progress principle should be the driving force and the number one objective of every leader.
Other types of negative events – not just setbacks – are more powerful than their mirror-image positive events. Based on employee logs, the connection between mood and negative events is about five times stronger than the connection between mood and positive events. Employees recall more negative leader actions than positive actions.
People often say, “it’s business, it’s not personal.” But work is personal. If people feel capable, then they see difficult problems as positive challenges and opportunities to succeed. Put another way, they develop a “sense of empowerment.” This need grows throughout their career as people compare their achievement with those of their peers as well as their own “personal best.”

As an example, entrepreneurs often have great difficulty relinquishing top leadership positions when their companies have grown beyond their own management capacities, because they have invested so much of their personal identities in what they have built.

In many cases, only you as the founder can remove barriers to progress, such as meaningless tasks and toxic relationships, before they disrupt employee motivation and productivity. Only you can activate the positive forces that enable progress, including “catalysts” and “nourishers.” Start today in your own startup, to eliminate the negatives, as well as accentuate the positive.

Marty Zwilling

Sunday, August 7, 2011
Startups Can Make You Work Hard and Still Be Happy
Building a startup is hard work for low pay, it’s risky, and it requires total responsibility to make it work. Yet, many entrepreneurs are the happiest people I know. On the other hand, I know many unhappy individuals who are always partying, have minimal commitments, and little responsibility. I suspect the real parameters of happiness have eluded these people.

According to one of my favorite authors, Brian Tracy, in his book “The Power of Self-Discipline,” happiness is not even a goal that you can aim at and achieve in and of itself, but it is a by-product that comes to you when you are engaged in doing something you really enjoy while in the company of people you like and respect.

He defines the five key ingredients of happiness that every potential and existing entrepreneur (and every person) should evaluate relative to their own situation:

Happy relationships. Fully 85 percent of your happiness – or unhappiness – will come from your relationships with other people. For entrepreneurs, that includes business colleagues, but it also still includes spouse, children and friends.

Meaningful work. You must be doing things that you love and give you a sense of fulfillment, as well as making a contribution. Studies have shown that the three most motivating business factors include challenging work, opportunities for growth, and pleasant coworkers.

Financial independence. The happiest of all people are those who have reached the point at which they no longer worry about money. That doesn’t mean unlimited funds, but enough that they don’t fear being destitute, without funds, or dependent on others.

Health and energy. It is only when you enjoy high levels of pain-free health and a continuous flow of energy that you feel truly happy. For many, health is only a “deficiency need,” meaning you don’t think much about it until you are deprived of it.

Self-actualization. This is the big one, the feeling that you are becoming everything you are capable of becoming. Before this can happen, you must first feel that all deficiency needs are satisfied, and you have achieved self-esteem:

Survival. Basic survival is the top deficiency need, meaning sufficient food, water, clothing, and shelter to preserve your life and well-being. You cannot be happy, and you will experience tremendous stress, until survival requirements are met.

Security. The second deficiency need encompasses financial, emotional, and physical security. You have to have enough money, security in your relationships, and physical security to assure that you are not in imminent jeopardy of any kind.

Belongingness. The final deficiency need reminds us that we are social people, and we need social relationships with others, both at home and at work. You need to be recognized and accepted by other people who count in your world.

Self-esteem. Your self-esteem is the core of your personality and largely determines how you feel about everything that happens to you. Are you liked and appreciated by peers, doing a good job and being recognized for it, and achieving your ideals?

According to Abraham Maslow, a noted psychologist, less than two percent of the population ever reaches this height of self-actualization and personal fulfillment. But the wonderful thing about self-actualization needs is that they never need to be completely satisfied. As you stretch yourself in this direction, you experience a steady flow of happiness and contentment.

In all of these areas, you need to exert self-discipline and willpower to overcome the tendency to take shortcuts. When you keep going in spite of all obstacles and hardships, you feel powerful. Your self-esteem and self-confidence increase, and then as you move, step by step, toward your ideals, you feel genuinely happy. Are you a happy entrepreneur?

Marty Zwilling

Published: Tuesday August 09, 2011

PITTSBURGH, PA. – Leadership has many meanings and applications to people. Whether a business executive or a parent, a school class office holder or active in a charitable institution, we all assert leadership and/or are subject to it.

As the former president of Pittsburgh Theological Seminary and currently visiting professor at the University of Pittsburgh’s Katz School of Business, Dr. Calian details seven keys to effective leadership in his most recent book, The Spirit-Driven Leader: Seven Keys to Succeeding Under Pressure (June 2010).

Each chapter is devoted to one of these keys: creativity, competence, commitment, character, collegiality, compassion and courage. Each chapter draws on anecdotes to emphasize the author’s point.

How creative is the leadership you have experienced? Dr. Calian points out that creativity often is not welcomed in organizations because they tend to cling to the status quo. He emphasizes that it is to the organizations advantage to be flexible rather than entrenched.

In discussing competency, the author notes that “how we perform is influenced in part by how we learn-from reading listening, writing, or questioning.” He mentions Professor Ronald A. Heifetz of Harvard University, a leadership expert who warns that the “lone-warrior modes of leadership is heroic suicide. Neither leadership nor fellowship can be exercised alone. Partners are needed, both within and without.”

Are you listening, questioning, reading and learning before deciding?

Dr. Calian’s chapter on commitment was probably the most controversial. We both agree that commitment is important and he sites some excellent examples. He sounded harsh on the business community while giving charitable organizations more of a free pass.

However, the spiritual side of leadership including faith, hope and love when practiced together can add to our leadership abilities. This also can influence a person’s character, which is discussed short, but meaningful chapter in the book. Here he points out the traits admired in people of good character, trust being one of those traits. Once lost, it is hard to regain.

In his chapter on congeniality, the sharing of responsibility in a group endeavor is mentioned. Dr. Calian mentions the need for more dialogue, a trait that may be lost in our religious and non-profit organizations. He emphasizes the need to meaningful conversations to inquire and learn. He covers many important areas including salary based on performance, a need to build a climate of consensus and the importance of honesty and apology in performance in any organization.

The segment on compassion revealed Dr. Calian’s cultural and theological background showing his concern for both legal and illegal immigrants and the emphasis on applying the Golden Rule. He discusses eight questions set forth by the late management guru Peter Drucker, emphasizing the need for everyone in an organization to be part of a “we” team, not an “I” team.

Dr. Calian’s chapter of courage may be his best as he referred to a trip to Pakistan with his wife, Doris. He discussed the efforts by a Muslim lawyer representing two Christians-a father and son. They had been sentenced to death under Pakistan’s divine law, the Shariah. The two Christian’s had the sentence reversed on appeal and they left.

The country immediately to avoid the anger of the Muslim community.

Editor’s note: Born in New York City and raised in Los Angeles, Rev. Dr. Calian is a son of Armenian immigrants who became one of the longest-serving seminary presidents in the nation, having retired from Pittsburgh Theological Seminary in 2006 after 25 years of service; he has also been board member of Beirut’s Haigazian University. Fred Mickaelian has been a friend of the author for over six decades.

By: Al Ries Published: August 02, 2011

Who decides: 1) What products and services to offer; 2) What to name those products and services; and 3) What distribution channels to use to sell those products and services?
In my opinion, these are primarily marketing issues. Yet in our work with companies large and small, we don’t see many marketing people calling the shots on 1) Products; 2) Names; and 3) Distribution.

Instead, marketing people tend to focus on “communications” issues. They spend most of their time figuring out how to interest prospects in their companies’ current product lines. Sure, communications are important, but they are only the tactics of a marketing program. The other half, the more important half, is strategy.

The two are related. In order to improve the communications, it often is necessary to make changes in strategy. In products, names, pricing, distribution, etc. And who is in a better position to suggest such changes than an experienced marketing person?

Yet who is calling the shots on marketing strategy? Mostly top management people.

What’s the strategy of Hewlett-Packard?
As best as I can determine, here is H-P’s new strategy as outlined in an interview The Wall Street Journal conducted with its new CEO Leo Apotheker.

• Invest more in software, networking and storage.
• Emphasize systems that combine these functions.
• Increase spending on research.
• Focus on cloud computing.
• Build a business helping companies build cloud-computing setups.
• Increase sales to telecom firms.

This is typical of a top-management approach to strategy. Let’s increase sales by expanding the brand in all directions.
Now, how is marketing going to execute Hewlett-Packard’s new strategy? By positioning the company as a leader in “software, networking, storage and cloud computing”? And, of course, personal computers.

Most companies take a similar approach. What’s the strategy of Dell, the world’s third-largest seller of PCs? Same as H-P. Expand the brand in all directions.

What’s the strategy of Wells Fargo?
According to the Journal, “Wells Fargo plans insurance growth.”

“The effort comes at a time when loan demand remains tepid and, given the size of Wells, growth in banking is hard to achieve,” reported the Journal. “Other units the bank is expanding include securities brokerage and investment banking.”

Insurance makes up a tiny portion of the bank’s revenues, last year, about 2.5%. Didn’t Wells Fargo study what happened when Citicorp merged with Travelers Group to form Citigroup? (Four years later, Citigroup spun off Travelers in an IPO.)

Maybe this is heresy in a world smitten with the line-extension religion, but why doesn’t Wells Fargo focus on banking? It’s the smallest of the big four, after Citigroup, Bank of America and JPMorgan Chase.

I would think Well Fargo would want to move up the banking ladder before trying to climb the insurance ladder.

What’s the strategy of Romney, Bachmann, Cain, et al?
So far, there are eight Republican presidential candidates: Mitt Romney, Michele Bachmann, Herman Cain, Ron Paul, Newt Gingrich, Tim Pawlenty, Rick Santorum and Jon Huntsman.

Do you know the verbal position of any of these eight?

I don’t think they have any.

Doesn’t anyone remember “Change we can believe in?” After Barack Obama’s victory in 2008, I would have thought that any future presidential candidate would summarize his or her campaign with a few memorable words. But so far, no one has.

Apparently, nobody wants to be tied down to a single idea or concept. Everybody wants to be free to expand their campaigns in all directions, depending on which way the wind blows.

Take Jon Huntsman. “He resigned just 11 weeks ago as the U.S. ambassador to China,” reported The Journal, “but already Jon Huntsman has a logo, a musical theme, a small arsenal of promotional videos, a Hollywood narrator and a line of travel mugs, lapel pins, baseball caps and T-shirts emblazoned with the distinctive H of his infant presidential campaign. He even has a generation named after himself. Generation H, his campaign calls it.”

Jon Huntsman has everything except a marketing strategy.

What is strategy anyway?
Dictionary definition: “The science of planning and directing large-scale military operations, specifically maneuvering forces into the most advantageous position prior to engagement with the enemy.”

And what is the most advantageous position? According to Carl von Clausewitz, the world’s most-famous military strategist, “Keep the forces concentrated in an overpowering mass. The fundamental idea always to be aimed at before all and as far as possible.”

Strategy is like a garden hose with an adjustable nozzle. Turn it one way to increase the concentration and out comes a powerful stream of water that could knock down a child. Turn it the other way and out comes a fine mist that wouldn’t harm a butterfly.

Almost every military strategist recommends “concentration of forces,” while almost every business strategist recommends “scatteration of forces.”

We used to run a series of seminars entitled “Marketing Warfare.” One of our luncheon speakers was William Westmoreland, the four-star general who commanded U.S. military operations in Vietnam. After watching some of our presentations, Gen. Westmoreland expressed surprise that marketing people found anything new in our lectures. Everybody knows these military principles, he said.

Not so.

Hewlett-Packard has just 17.5% of the world market for personal computers. One would think the company would focus on making Hewlett-Packard a dominant brand like Windows (90%) or Google (75%) or iPod (70%) before trying to expand in all directions.

Everything about marketing strategy parallels military strategy. The principle of force. The superiority of the defense. The advantage of flanking. And most importantly, the principle of focus.

There is one difference. Marketing is about brands, not companies. You can successfully expand a company, but not usually a brand.

Apple has become the world’s second most-valuable company, not by expanding the Apple brand, but by launching new brands: Macintosh, iPod, iPhone, iPad.

Marketing: A discipline in decline?
Is this what marketing has become? A discipline that execute strategies designed by somebody else. If so, I have a message for marketers, borrowed from Tennyson.

Forward Marketing Brigade!
Was there a person dismay’d?
Not tho’ marketers knew
Someone had blunder’d:
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do and die:
Into the valley of Death
Rode the six hundred.

A new workplace is a foreign land, full of new customs, traps and potential allies and enemies.

The dynamic is not unlike situations faced every day by soldiers in Afghanistan and Iraq (although the stakes are drastically lower). What’s the best way to proceed in such an environment?

To address that question, we checked in with Jeff Weiss, who has taught negotiation techniques to West Point cadets for eight years. Weiss, who is also a partner at Vantage Partners LLC, a Boston-based corporate negotiating consultancy, has drawn up a simple framework for soldiers, based on nearly a decade of interviews with former field commanders.

What he found is sound advice for new bosses looking to win buy-in from subordinates and corporate foot-soldiers hoping to climb the ladder or secure more power and money.

The most important advice? Tone down the swagger and strong-arm tactics, at least until they are called for. “Many of us walk around with a default setting and a belief that to be a good negotiator you should use threats, anchoring, bluffing, banging the table and a general show of power,” Weiss said. “Frankly, what I have seen in good negotiators — whether they are a 30-year-old captain in the Army or a 40-year old salesman — are folks that say ‘There’s a time and a place to do that, and it’s not often.’”

Keep that in mind at every step of Weiss’s five-point plan:

1. Get the Big Picture
Get a lay of the land at the outset, particularly the opinions and view-points of other parties. In other words, don’t dive in and try striking deals right away. Be humble and curious.

2. Uncover and Elaborate
Learn the motivations and concerns of other parties. Propose multiple solutions and invite your counterparts to improve on them.

3. Elicit Genuine Buy-in
Win others to your side with reasoned arguments, not power plays or brute force. Avoid threats.

4. Build Trust First
Directly linked to No. 4, this tactic is all about building a foundation of success. Don’t try to ‘buy’ support. Rather, make incremental commitments of good faith.

5. Focus on process
Forget about results, or lack thereof. Put your energy into having a healthy and robust discussion free from knee-jerk reactions.

Check out more of Weiss’s research here.

It’s a hirer’s market, but when it comes to salary negotiation, too often people sell themselves short simply because they don’t know how to tackle the compensation question. Whether you’re moving from one job to another or unemployed and looking for work, there are steps you can take to make sure you get the best possible salary offer, says Charlotte Weeks, Chicago-based career coach and resume writer.

“There [are] a lot of people out there who accept salaries lower than they could have gotten,” she says. “So many people don’t know how to negotiate.”

Here are some of the most common ways you can expect to encounter the salary question when applying for a job and the best ways to tackle the challenge:

Avoid Talking Numbers Early On
It’s a good rule of thumb to avoid answering the question of what salary you’re willing to settle for, whether on your job application or in the early stages of your interview, says Weeks. “Usually the first person to name a number doesn’t have the upper hand when negotiating,” she says. “If possible, it’s best to be a little vague.” On a job application she suggests writing “negotiable” in the space allotted for salary rather than a specific figure.

If you encounter this question in preliminary interviews, don’t be alarmed. “If we are talking salary early on, it means we are interested in pursuing that candidate further,” says Tami Vanderpool, recruiting Senior Manager at Citigroup. “What we want to avoid is putting the candidate in front of a hiring manager and they fall in love with them but we are $30,000 apart in expectations.”

When you hear the question early on, it’s wise to deflect your answer by talking about what you can offer the company instead. “When they are really interested in you, then you can start negotiating on salary,” says Lynne Eisaguirre, author of the book: We Need to Talk Tough Conversations with Your Boss: Tackle Any Topic With Sensitivity and Smarts.

Remember Where You’re Coming From
Your negotiating power will vary depending on your current employment situation. For instance, if are unemployed and applying for work, expect to earn approximately what your old salary was or slightly less, says Don Hurzeler, author of the book: The Way Up: How to Keep Your Career Moving in the Right Direction.

On the other hand, if you are being hired away from an existing position, Hurzeler doesn’t suggest settling for less than a 20% salary increase unless you are completely unhappy. “Why would you leave a situation you know for one you don’t know unless there is a breakthrough in salary?” he says.

Don’t Sell Yourself Short
Whether you’re moving from one job to another or unemployed and seeking work, you can expect to be asked about what you were making at your old job, so be ready with an answer.

One common mistake when talking about previous salary is forgetting to include benefits as part of your total compensation, says Hurzeler, an oversight that can hurt you in the negotiation process. For example, if you are earning $100,000 a year with a 20% bonus plus health, dental and other incidental benefits, you should answer the question by saying, “$120,000 plus generous benefits.”

This will prove useful if you find you’re not able to negotiate on the amount of money you’re earning. For example, if you’re coming from a job where you had five weeks of paid vacation to one where you will only have two, negotiating more time off might be easier than winning a higher salary, says Marsha Egan, a Pennsylvania-based career coach.

Have a Range Rather Than a Single Figure
When pressed for your salary requirements, you should always be sure to offer a range based on what others in the field are earning, rather than a single fixed number, says Karen Lawson, founder and president of Lawson Consulting Group, Inc., , a Pa.-based Management and organizational development consulting firm. That’s where doing your market research becomes critical.

Check out similar positions online and network with others in the field to determine the standard pay and what the higher end salary might be for such a role, says Weeks. For example, if you apply for a job that typically pays $40,000 a year but see it advertised as paying $48,000 occasionally, you can set your range at $40,000 to $50,000, she says.

Handling the Low-ball Offer
Employers expect you to negotiate, so don’t be anxious about countering a low offer, says Weeks. That’s why knowing the salary range for a position similar to yours in your geographic region is key, says Weeks. “That’s what you can use as your weapon for negotiating,” she says.

If you’re coming out of unemployment, don’t expect to have as much negotiating power, says Lawson. In fact, you might have to settle for less. Rather than outright rejecting a pay cut from your previous job, talk to your potential boss about revisiting the salary question once you’ve had time to prove yourself on the job, suggests Lawson. While you won’t be able to get it in writing, it’s worth asking if you can revisit the issue six months into the job, she suggests.

And don’t be too quick to let a low-ball offer close the door to a job opportunity. “If you get a job and can show your value, that money is going to come back to you down the road,” says Hurzeler.

Take Time to Decide
You might feel the pressure to jump on an offer right away, but it’s wise to take a few days to think about it before making a decision, says Egan. Be sure to ask for the offer in writing so that you can see how it breaks down in terms of salary and benefits. Request anywhere from a day to a week to decide, depending on the company’s time-frame.

“You never have to make a decision on the spot,” says Egan. “It’s a life decision.”

Published: July 06, 2011
Al Ries
Last month, J.C. Penney hired a new chief executive who used to run Apple stores. In a New York Times article, here’s how CEO Ron Johnson described his plans for Penney: “Take this great American brand and make it become something unbelievably exciting.”
Fat chance.
Most department stores are infected
You seldom see a department-store advertisement based on anything except a sale. The latest J.C. Penney ad was a six-page insert promoting a “Fourth of July sale.”
In addition to dozens of “super hot buys,” the insert features “Red Zone clearance, final-markdowns 80% off. New markdowns 50-70% off.” Also featured is “jcpCA$H,” offering consumers “$10 off any purchase totaling $25 & up.”
Belk, Dillards, Kohl’s, Macy’s, Sears and most mainstream department stores are also infected bydiscountitus.
Kohl’s, in particular. A typical mailing: “Start with these incredible sale prices of 20-60% off. Take an extra 15% off everything. Plus add a $5 bonus.”
Airlines to pizza to car insurance
In industry after industry, the discount is the focus of the advertising.
Here’s the opening dialog of a typical Progressive commercial featuring Flo and a potential customer.
“Are you a safe driver?”
“Yes.”
“Discount! Do you own a home?”
“Yes.”
“Discount! Are you gonna buy online?”
“Yes.”
“Discount!”
Over at Geico, “15 minutes could save you 15% or more on car insurance.” Geico and Progressive are the biggest spenders in the category. Last year Geico spent $741 million on advertising. Progressive, $506 million. Longtime car-insurance leaders like State Farm ($453 million) and Allstate ($368 million) are lagging behind.
Penney vs. Apple
Over at J.C. Penney, if Ron Johnson plans to use an Apple strategy to turn his company around, it’s too late. Once discountitus has spread through an industry, it’s awfully hard to eradicate.
Take airlines. Yesterday, airline companies competed on the basis of who could build the better brand. Today, airline companies compete on the basis of who can offer the bigger discounts. No wonder Southwest Airlines is a big winner, and most airline customers can’t explain the difference between American, Delta and United.
One reason why discountitus is spreading so rapidly is the internet. Clipping coupons is being replaced by typing on keyboards. Groupon and the other daily-deal websites are only one factor. Anybody who owns a computer today can get competitive prices on a host of items almost instantly.
Unless you want to spend the rest of your life doing discount marketing, you should be asking yourself, “What’s the cure?”
Believers vs. agnostics
Take a closer look at the consumer a company is trying to reach with its advertising and PR.
Psychologically, consumers can be divided into two categories: 1) Brand believers and 2) Brand agnostics. And they vary by category. They can be believers in one category (ketchup) and agnostics in another category (airlines).
Watch believers go through the Sunday supplements. They only clip coupons for brands they already use.
Watch agnostics go through the Sunday supplements. They ignore brands and clip coupons for categories. (Extreme agnostics don’t buy anything without a coupon.)
Discountitus is turning brand believers into brand agnostics. The lure of a “big discount” is enough to seduce a consumer into thinking that all brands in the category are pretty much alike.
In categories that have not been seriously contaminated, the cure for discountitus is a dose of positioning. But as Prophet, a leading marketing consultancy, reported in its latest state of marketing study: “Positioning has always been about differentiation. But in this unfolding environment, differentiation is short-lived.”
We differ on that. The cure for discountitus is not differentiation. Nor is positioning essentially about differentiation, either.
Positioning is owning a word in the mind
As discountitus spreads its way through the marketing community, that word more often than not is “leadership.”
Leadership is what makes Google the most powerful brand in the “search” category. Leadership is what makes iPod the most powerful brand in the “MP3 player” category. Leadership is what makes Heinz, Hertz, Haagen-Daz, Hellmann’s, Home Depot and a host of other brands powerful in their categories.
But how to you get to be the leader? And how does the leader keep from catching the discountitus disease?
Launch a new brand in a new category
Over the past few decades, it’s become clear that the only way to become a leader is to launch a new brand in a new category.
Like Apple did with the iPad, the first tablet-computer. Currently, the iPad has some 75% of the tablet market.
An also-ran that has been line-extended to death has no hope of ever becoming the market leader. The best it can do is to narrow its focus to shore up a position in a segment of the category.
Has Pepsi-Cola ever substantially increased its share of the cola market with Pepsi-Cola Retro, Pepsi Throwback, Pepsi Twist, Pepsi Natural, Pepsi Raw, Pepsi A.M., Pepsi Kona, Pepsi Light, Pepsi Max, Pepsi XL, Pepsi Blue, Pepsi One or Crystal Pepsi?
No, it has not. In fact, regular Pepsi-Cola has fallen behind Diet Coke to third place in the cola category.
What’s next for Pepsi-Cola? More of the same. Pepsi Next.
Lower the boom on price
If you read the papers, you know the regular price of most products or services on the market today is “50% off.”
Every Thursday, our local newspaper, The Atlanta Journal-Constitution, features “This week’s best deals.” Last week, there were eight. One was “free.” One was “40% off” and the other six were “50% off.”
That’s not unusual. By far, the vast majority of daily deals are 50% off or BOGO — buy one, get one free.
When rumors of Apple’s imminent launch of a tablet computer circulated on the internet, the pundits predicted the product would be priced around a thousand dollars.
Apple surprised them with a list price of $495. The company lowered the boom at a level that competitors had difficulty getting under. Today, you find the table-computer market remarkably free of discountitus.
Apple used the same strategy with its iTunes brand by insisting on a 99-cent price. (Don’t feel sorry for Apple. The company is making its money on volume, not on margin.)
When you’re the leader in a category, you cannot be overtaken by a competitor who thinks differentiation is going to make a big difference.
And when you’re the leader in the category and you lower the boom on price, you can inoculate the category from the disease of discountitus.

ABOUT THE AUTHOR
Al Ries is chairman of Ries & Ries, an Atlanta-based marketing strategy firm he runs with his daughter Laura.