Unlock By Matt Hulett

Introduction

When I started taking over companies as the CEO or president, there was no instruction manual I could read to show me how to fix or transform them. Most of the books I could get my hands on talked about optimizing for value. This was code for cutting costs. If you read between the lines, cutting operating expenses was pretty much the only strategy they recommended. I could never figure out why there were not more books written about how to change your market position.

You can change your market position. You can pivot, turn around, and/or refocus your growth business. You can change your course. You can change your destiny. The business world is not Greek theater—nothing is predestined. I truly believe that you can drive a new destiny for your business and for your career.

So how can you turn your business into a high-market-share, high-growth company? I felt compelled to write this book to try and answer that question, and because I couldn’t find any resources for myself

If you take away one thing from this book, let it be this: You need a plan. That is easy to say, but how do you create it? My hope is that with this book in hand, you can determine if your business has the potential to change its trajectory, whether you are at the helm of a cash cow or a startup.Giddy-up!

Is the market big and growing? This helps you identify if the total addressable market (TAM) is large enough for your business to grow.How to score this question:

What Is the Insight Score?

This book walks you (the business leader) through five key questions that will help you determine whether you can unlock value for your company. Instead of wasting dollars and time on an entire strategic planning process, which typically takes months and/or large sums of money paid to a consulting group, this exercise can be condensed into five core questions that will help determine if a company’s market position can be changed.

I’ll take you through each question and inject my own insights with real-world examples. I will add perspectives from other thought leaders and CEOs too. What I hope you achieve is a view of your path ahead so that you can have a balanced win

At the end of each of the five sections, you will be asked to score your response. Think of the Insight Score like your credit score, a weighted calculation that takes aspects of your past and present credit history to determine your creditworthiness. The Insight Score acts in the same way. The equation is simple. You add up the values from questions 1 to 4 and then multiply them by question 5

Each question maps to one of the five sections in the book. You can use this book to supplant your strategic planning process. I remember the Insight Score simply as the acronym TTTPM (TAM, Timing, Track Record, Plan, and Momentum). Or if you want to be hip, it’s T3PM.

Is the market big and growing?

This helps you identify the total addressable market (TAM) is large enough for your business to grow:

Here is an overview of the questions:

• It’s still emerging/undefined. (1 pt.)
• It’s a <$1 billion market. (2 pts.)
• It’s a large, $1-billion-plus market. (3 pts.)

Are the dynamics of the market favorable to you?

This is about timing of market entry and whether the right conditions exist for you to win. Timing is the hardest question to answer, especially if you’re an early-stage company. You are often too early or too late if you’re a newer player.

How to score this question:

• It’s unclear. (1 pt.)
• It’s shifting in our favor. (2 pts.)
• Yup. It’s good for us. (3 pts.)

Do you have a good track record in this space?

You’ll know if you have product/market fit. You’ll have a good sense of your momentum getting customers, working with suppliers, beating the competition, etc.

How to score this question:

• It’s slow going—too soon to tell. (1 pt.)
• We have a strong fit. (2 pts.)
• We have an advantage. (3 pts.)

Do you have an executable plan?

In my experience, when I’m taking over a company, this is typically lacking. If you are in the right place at the right time and have an offering that is working in the marketplace, that’s more than half the battle—but you need a strategic plan. I often find that in turnaround situations, there’s a strategy issue—for example, a company is working on too many businesses or has too many priorities.

How to score this question:

• Not yet, still working on it. (1 pt.)
• Got a plan, no resources. (2 pts.)
• We are ready to go! (3 pts.)

How confident are you that you can attract the talent and resources needed to pull this off?

Sometimes, you’re in a business that may not be attractive for new capital. Typically, if you are getting higher numbers for the first three questions, you have a business that investors should be interested in, and it will be easier to attract and retain talent.

How to score this question:

• Not at all. (1 pt.)
• Pretty confident. (2 pts.)
• Very. No problem! (3 pts.)

Remember to multiply the total from questions 1 to 4 by the total from question 5. I’ve seen high degrees of success if the score is over 24. Anything over 30 is a no-brainer with a high likelihood of success. You typically want to be very confident that you are in a big market with great timing. It’s OK if you don’t have the right plan or the perfect product yet, assuming that you have the ability to attract the right team and capital. Not every business is a scaled market leader or has an edge that delivers high returns to investors. That’s OK. A string of laundromats is very different from a software startup, but both can be viable businesses.

The final score is a guide for you. I would encourage you to really probe in areas that you feel are the tweeners. What I mean by this is that you should question a score where your operator Spidey sense is tingling. You know what I mean; it’s those decisions where you are not quite sure. There are some useful ways to get into the real truth behind each score throughout this book. Providing a score to a business is difficult to do, and business is a team sport. You will be better served by being more inclusive in your assessment, to remove any bias. If you think about it, this makes a ton of sense. It’s like giving yourself a personal grade on a test—you cannot be as objective. But in general, you want to have the highest score possible. Here is a graphic guide for you:

What Is a Good Insight Score?

< 8 Low; 9-15 borderline; 16-23 fair; 24-30 strong; 30+ excellent

I hope you enjoy getting some color in each of the sections. You can skip the Insight Score if you’d like and just read through the different sections in order to pull out an insight or two as part of your strategic planning process

One Alignment to Market Growth Trends

Insight Question #1?Is your tam (total addressable market) large enough?

1 Market Definition

Is the Market Big and Growing?

There’s a common adage that you need at least a billion-dollar market to make an exciting business. That is not necessarily true for all businesses—it’s totally fine to own and run a small, cash flow–positive company. However, the sentiment is definitely true if you are looking to be a venture capital–based business or any business that has scaled long-term growth prospects. We are talking about a business that has the potential to be or is over $100 million. This is because you need to ensure that you have enough clearance in your market to grow market share and support your long-term growth. If you are looking for capital with investors, they are going to want to ensure the market is large enough to support your valuation so that they can get a reasonable return.

So, to reiterate, a $1-billion-plus addressable market is important because you need a high enough ceiling in a marketplace to operate. If your market is small and crowded, you’re going to have compression. The market may be attractive, but that compression inevitably means that you will have new and existing entrants all competing for your customers, suppliers, leads, etc

Big TAM but Where Are You Servicing It?

First of all, you need a big total addressable market or TAM. But you also need a large and growing serviceable market. The SAM—serviceable addressable market—is where your company or products address a set of customers. It’s rare to have a SAM that is as large as your TAM. Identifying an addressable market where you can have some competitive advantage is important, especially if you can find a SAM that is growing faster than the overall market. This is a great opportunity to get an edge in the marketplace. It’s a good place to knock down your first proverbial bowling pin.

I really want to stress the importance of starting off your analysis by being very clear on your TAM and your SAM

Key Takeaways from This Chapter

To assess whether your addressable market is attractive to start and grow a business, consider the following key highlights from this chapter:

• Ideally, you need a $1-billion-plus TAM. To have larger returns, you will need to take an honest look at the market you are playing in. You have a better chance of succeeding with an addressable market that is over a billion dollars. Taking an honest look at your market is the initial step to determine if you have an opportunity to unlock value in your business.
• What is the customer pain? You need to frame the market pain that you are going to address and what market is being addressed. Investors are looking for a TAM that is large enough that the small percentage of the market share that your company addresses could make an interesting business. If you are presenting an opportunity where in five years your $20 million in revenue equates to 50 percent of the TAM, then this is just too small. Investors will typically want you to have a healthy revenue line in five years, equating to single-digit market share.
• You can always make refinements to your go-to-market plan, but you can’t fake the size of the market. If the market is undefined or emerging, then you may be able to get away with not having a billion-dollar market. However, a large market that is growing or a pre-existing market that is ripe for disintermediation are the situations that are primed for unlocking large value opportunities.
• Do your homework. In your business plan, show the overall market opportunity by building out the market segmentation (by demographic psychographic, SIC code, etc.). Get as granular as possible. Layer in specific detail on segmentation growth rates, if possible

Two Timing

Insight Question #2Timing . Are the dynamics of the market favorable to you?

2 Timing Is Everything

Now that we’ve discussed the total addressable market, let’s talk about its cousin—timing. Of the five variables in the Insight Score, timing and TAM are the most important because they are out of your control. They are conditions that happen to you whether you like them or not.

We have all heard the salacious comment, Size doesn’t matter. Well, we just got done talking about TAM. While size does matter for the reasons we described in that section, I would argue that timing matters more. Timing is the single most difficult attribute to score and to gauge, the most elusive. When I put together my thoughts for the Insight Score and this book, I left this section for last, because it’s so difficult. I also struggled with whether I was giving timing the adequate multiplier value because of its importance. However, if you don’t have capital, a large enough market, etc., then the timing is generally moot, so I decided to give timing the same multiplier as the other variables

In the technology space, there are so many examples. The biggest winners made an early bet, either through luck or a key insight, around either a behavioral change, a technology change, or both. Here are some of those examples:

• Dial-up to broadband
• PC to mobile computing
• Mobile feature phone to smartphone
• On-premise to cloud storage

You don’t want to be too early, which is a common issue with companies of any size trying to enter a new market. It’s actually easier to determine if you are too late than too early. There are several pieces of timing, and I’d like to differentiate between two key components: either focus on a small but growing market or identify a technology or behavior change.

Pick a Small but Growing Market

There are lots of ways to enter one of these new markets. But there’s typically one commonality. To have the best chance at success and timing, you need to be pursuing a small market that’s growing very quickly. If you think about it, it makes sense: if you’re focusing on a small market that’s not growing fast or it’s too early, you won’t have a sense of whether you should be entering the market. On the flip side, if it’s too big and there’s already a lot of market entrants, then you have to assume that the world’s best minds have optimized the heck out of it already. It will be expensive to acquire new customers, and entering this market will be very difficult. Of course, you can always have a new take on an existing market, which I think of as redefining an existing market as a small but growing market

So, after you’ve done your work on the addressable market, look at opportunities based on your ability to get alpha or your ability to effect change using your existing resources, team, and momentum. You can actually enter a market that has existing competitors. There are many examples of companies that have redefined an existing market with a similar but different approach

What do you look at in terms of quantitative data to determine whether you are too late or too early in entering a new market?

I tend to look more at either qualitative or gut to really determine timing. I’ll give you a couple of examples. My best timing ever was to join a company called Yahoo! My second-best timing ever was to join a company called Groupon. And the third-best timing ever was to join a company called GoFundMe. I think in all those

Do you have an example of an experience where you entered a market correctly and where luck wasn’t involved? Break down for us what, specifically, you did that made this experience successful

Groupon. Groupon was a pretty good idea. It was this marketplace where you had consumers on one side who wanted access to great local businesses and great deals, and you had merchants on the other side who wanted customers

What are some hacks that you have learned over the years that have helped you determine whether you are entering a market at the right time?

Here’s a great one. I thought GoFundMe was going to be a very typical e-commerce-like business or marketplace business where you could apply the traditional mechanics of how you build a marketplace, how you grow the marketplace, how you acquire customers

Predicting the Next Earthquake

Tectonic plate shifts are hard to predict. But there are often early seismic signs before there are large changes in the movement of the Earth’s crust. It’s important to first remember that the backdrop to timing is identifying a small market (or niche) that is growing fast (or will grow fast). The reason is obvious. If you are too late, the opportunity is gone; too early, the opportunity may never materialize

There are several different views on how to assess when a tectonic shift is going to happen. These tectonic shifts can be executed whether you are a small or a large firm. There are two variables to a timing shift: technology and behavior (or both)

Technology shifts:?These apply some underlying technical innovation that doesn’t necessarily require a behavior shift. In many cases, the customers are already performing some task or function, and the technology shift just enables that function to be a lot more productive and/or adds a ton more in utility.

Behavior shifts:?These occur when customers decide to change their workflow or habits from one thing to another. These shifts are hard because you have to show tremendous value to the customer

How explicit was your strategic planning to capture the shift from paper to digital?

I guess in some ways you could say it was strategic

So we were strategic in looking at a paper process that we knew could be helped. We didn’t totally know how software could fix it

Did you pay attention to market timing, or did you have a hunch about the move from off-line to digital?

We were about having a hunch. The problem we were trying to solve had never been attempted this way—no one had tried to automate the problem, no one. It was literally 100 percent paper and manual. So if there was any sense of market timing for us, it was that the software revolution was on its way, personal computing was on its way

When did you really understand that you had product/market fit at Concur?

Concur was a really interesting company. In one sense, we had product/market fit from the first day. If you can describe the problem you’re trying to solve in one sentence or less, and everyone immediately understands, you’re on to something. If it takes you a paragraph, and people are still kind of confused, you probably don’t have the right idea. And so we had product/market fit in the sense that when you explain to a customer, I’m going to make expense reporting automated and easy, everyone, from the very first day of that company to the end, immediately gets it.

What are some hacks that you have learned over the years that have helped you determine whether you are entering a market at the right time?

The obvious answer to me, where my brain immediately goes, is customer validation. I think there’s a lot of tricks and muscle building for how to get early validation and how to approach it.

Technology and behavior shifts: This is a great place to be. You are riding a change while customers adopt a new technology concept. An example of this is the move from PC to mobile gaming. Consumers were already playing games; they just were not doing so on their phones. The combination of taking advantage of smartphones—which added new computing power, graphics, and new capabilities—with consumers’ existing hunger to play games, opened up a huge opportunity for aspiring companies

How did you know that the shift from PC to mobile was going to be the right driver for your business?

In terms of our success, we had the vision, and we were waiting for the right platform. Of course, you always tell yourself that there is no luck. But getting your own vision aligned with the [consumer demand] and getting the timing right—that is super hard

What were the indicators and frameworks that you looked at to determine whether you were going to be successful in your social/mobile gaming pivot?

In 2003 the multiplayer game was the wrong timing. The tech wasn’t there. The user experience wasn’t there. The whole ecosystem wasn’t there. We had the vision and insight, and we strongly felt that it was coming

What are some hacks that you have learned over the years that have helped you determine whether you are entering a market at the right time?

There were four things: Customer-centric experience; Treating our customers with incredible service; Learn from your MVP (minimum viable product; Use your customers to grow demand

Finding Early Signals for Market Timing

This is one part intuition and one part data. In this section, I will first explore the core questions you should be asking yourself and then walk you through a set of data-validation techniques that can help give you some increased conviction on your market entry timing. The four core questions that you should be asking yourself are:

• Is there a large enough potential customer base for your new technology or service? (By the way, you can answer this first question from the work that you did in the first section.) Are you looking at a large base of customers that can have a large market value to you? Again, unless you are targeting a niche, you do not want to enter into a market where you and your firm garner just a small piece of market share that won’t produce a potentially large business for you
• Is the market that you’re looking at full of competitors or not? The answer is going to be subjective, but you should be wary of seeing a lot of competitors with dominant market share in your addressable market. I would even say that if anyone is in the double-digit penetration, or there are several competitors in a market, you should flag this market as perhaps being close to being late. A folksy way to gauge this is if you already see competitor roundup reviews where editors are comparing and contrasting solutions. That—combined with someone who has a truly dominant share in engagement, consumers, or revenue share—should be a major red flag
• Are the customers you’re targeting underserved? This is another way to get at the competition for the service in terms of how expensive it is to acquire customers and whether customers find your propositions compelling
• Is there some unique insight that tells you that the world is going to shift? This is not the insight about whether you have some interesting idea that only you think would be awesome. We’ve all heard those stories of a founder who believes in an innovation that they find compelling. What I am referring to is the insight that a market is going to change. Are there environmental, legal, macroeconomic, or other factors that are going to cause some form of market shift?

The last question is answered with what I would call intuition. With the first three questions, you can get reasonably close to identifying some early signals that I believe will produce measurable data on your market timing exercise

In general, you can get early signals that answer the core questions we just discussed by doing the following

• Fake the product. Why spend the time building a product if no one is interested in the overall concept? There are many cheap and easy ways to determine if there’s initial interest. One easy way, before you actually build out a product, is just buying ads
• Determine your customer acquisition costs. You can immediately learn how competitive the market for your potential idea is by buying ads that test your value proposition.
• Have a minimum viable product (MVP). We introduced this concept in the first section, and with Angry Birds on Android. The idea is that you build a version of your product that has the absolute scarcest features but can still be used by your earliest customers
• Talk to customers. We have all heard of focus groups. It’s easy to run a virtual focus group or connect with people in your network to discuss a potential idea. There are objective ways to set up these meetings, and I encourage you to do your research on the best way to solicit potential customer feedback

Here is a quick overview on some best practices from Peter Denton, a growth marketer at PSL

What are the key levers and frameworks that you deploy to determine if there’s enough buyer interest in a new concept?

In the end, we get really great signals, both qualitatively through interviews and quantitatively through demand-gen tests that show if and where there’s pull in the market and how strong that pull is

What are the specific tactics that you use to analyze your findings?

One thing that I love about the PMP process is that it not only informs you of the market’s desire for your product or solution, but it also helps you understand your real TAM, SAM, and SOM [share of market]

How important is finding the core customer segment in your analysis?

For us, it’s critical and one of the main areas we focus on early. In early building we are very impacted by how scarce resources are in a young company, especially across product, engineering, and marketing. So having the ability to identify the core customer segment that is motivated for your product or service is so incredibly important

How do you determine if the market is too crowded, from a competitive perspective?

One of the tactics we love to use in determining competition also comes from traditional digital marketing, specifically around keyword research in CPC [cost-per-click] campaigns

Key Takeaways from This Chapter

Timing is the most difficult of the Insight Questions to answer. It takes both intuition and data to determine if you can time a market just right

Solving this Goldilocks problem of not being too late or too early to a market is going to take a keen perspective on the market that will be counter-intuitive to what everyone else is doing—and it will be scary for you as the leader, executive, and entrepreneur. If you’re an early-stage business or a big business that’s looking to pivot into an early-stage capital investment, you have to be aware of being too early. That’s the single biggest thing to look out for.

I always like to say that making a few high-quality decisions on strategy is really what leadership is about. You will not be a market leader by counting on incrementalism. We all cannot be Steve Jobs, who had wicked intuition, but we can all be more thoughtful on how we can produce enough data to determine if a new business, product, or service has a stronger chance of success

Here are some key highlights from this chapter:

• Market timing requires two things: identifying a small but growing market and identifying the likelihood of a technology or behavior shift in the market
• Remember that finding a small and growing market is based on your definition. So when you look at an existing market and are trying to determine if there are too many incumbents, take another look at it from the perspective of whether or not there’s a niche that you can exploit. Is there something in the market that you see could be an edge?
• You should answer the four key questions on market timing and then validate those with Product Market Pull data to validate your assumptions. Identifying the magnitude of the problem you’re trying to solve by looking at customer acquisitions, the competitive landscape, and customer acceptance of your idea should make you more confident that you are not too early or too late to the market

Three Your Track Record

Insight Question #3?Do you have a good track record in this space?

3 Supply Chain Position

Why Do Supply Chain Dynamics Matter?

It is vitally important to understand where you are situated in the supply chain. Those critical points of leverage are important so that you can anticipate how much control you have over your distribution. If you are not careful, you could cede your control to a publisher or aggregator. You must understand not only your current position in the supply chain but also where the potential pitfalls could be in the future. If you are a developer, an aggregator/marketplace, or a publisher, you need to understand how important you are to the source of supply

The first step is to understand where you are in the pecking order. In the software business, you typically have a direct relationship with a customer. You’re a publisher to an aggregator, or an aggregator to a customer. You can also be in both channels at the same time. First, let’s define these roles:

Developer: This is the person or entity that owns the asset

Publisher: This is a company that typically doesn’t create the asset for distribution but has some or all the ownership of the developer asset

Aggregator: You can call the aggregator the distributor. They own a platform that distributes assets. These assets can come directly from a developer or via a publisher

The key is to understand the leverage. You never want to be seen with your proverbial pants down by losing control of your distribution. If you are not careful, you might end up ceding too much control on either side of the equation, whether to the developer, the publisher, or the aggregator. In the worst case, your business could be turned off

The typical area to focus on, especially in the direct-to-consumer space today, is the relationship between a developer and an aggregator. You typically see a natural push-pull relationship between the two. Often the developer wants distribution or they just want more surface area for their product or service

Breaking Apart the Supply by Channel

So, think about trying it yourself. Start with what you are as a developer, publisher, aggregator, or some combination of the three. Then spend some time thinking through possible scenarios on how you see the future playing out. Is this easy? No. Can you be wrong? Most definitely. But you really want to be the most paranoid you can be when you do this analysis. Have a view and lock on it

Here is a quick little template that you can use. You are first going to think through the outlook for each perspective and then think through the supplier’s value proposition. You can start to capture some of those insights here:

To break this down to make it more actionable, I typically look at the position I am in (developer, publisher, aggregator). Then I look at the relative size of each channel as part of my TAM or SAM. This can be difficult to figure out, but you can typically build a proxy for numbers that are directionally correct. Then calculate the cost in each channel from your perspective

Not to belabor my point, but the dance between the owner of the content and the aggregator of the content is ever evolving and never static. Developers will always continue to push for direct channels to customers. The aggregator (platform), if not careful, will have more margin pressure over time. More direct competition then develops and threatens your operating margins

Key Takeaways from This Chapter

You can unlock value by controlling supply, extracting more margin from supply, and offering a diversity of supply. This is critical as you assess whether you like your position

Here are some key highlights from this chapter

• Understand what your position in the distribution chain is today—are you a developer, a publisher, or an aggregator (or a combination of one or more of these categories)? This is key to better understanding your ability to control your own destiny
• Plot a course. Think through where you are today and where you are going to be in the future in terms of your supply position in the market. Whether you are a developer, a publisher, or an aggregator, you will need to understand today’s economics and where they will go in the future. Understanding supply is key to understanding where you have (or don’t have) control over your own distribution.
• Always opt to develop a direct relationship with the consumer and to establish direct distribution as much as you can
• If you are building a business on someone’s platform (a developer relationship), understand the key motivators of that platform. Find out if the platform is seeking to extract more value from their platform. If yes, then start to plan your bypass or exit strategy
• If you are an aggregator, understand how you can either build exclusive content for your platform and/or contractually lock up your supply. The natural instinct over time with developers will be to bypass your aggregation!

4 Customer Value Analysis

You Like Me, You Really Like Me! You Like Me?

You must be really clear on what value you are delivering to your customers. And be clear how your customer value proposition maps to your strategy. This is a very important—if not the most important—thing to understand in Insight Question #3: Do you have a good track record in this space?

For early-stage companies, you commonly hear about product/market fit (PMF) analysis. Everyone has their own definition of product/market fit.

Or as I like to say, everything just sort of works without a lot of effort.

I personally like frameworks to make decisions This book has a lot of frameworks. If you want a good working version of PMF, I love the Silicon Valley mojo (by saying mojo, I am already not that cool) of Rahul Vohra, the founder and CEO of Superhuman. He is prolific in his content marketing on common-sense business frameworks, especially around designing and launching products. He has popularized the product/market fit engine, which is a simple equation to determine if you have product/market fit. The formula is simple: when over 40 percent of users would be very disappointed without your product, then you have product/market fit. Rahul sends out a survey, asks the questions, segments the data based on who says they would be disappointed, then builds a product for that audience after probing them a bit more. Then he continues to iterate to increase that percentage of disappointed users, and voilà, he has built a very targeted product experience for a very targeted audience.

I will stand on the shoulders of giants on PMF. It’s certainly an early signal for an early-stage company. The product should be the most important thing you’re offering customers. You should know your pricing, packaging, and positioning, you also need to be able to dissect your position in the marketplace. This is beyond the product; it’s taking a step back and looking at the chessboard. You really need to understand your position in terms of the strategic value that your product serves its customers.

Pick One: Low-Cost Strategy or Premium?

Value is different—it’s not the actual feature; it’s the perception of the offering as a whole. Companies get this wrong all the time by building products with feature after feature. The best companies decide on how to build a product to a specific set of segments and build a brand to reinforce that proposition. The packaging and pricing are simply an exercise after you have done this work. We will cover this topic later in the book, but do not think about value as anything more than the perception the customer has about your product or service.

Plot Your Customer Segment Value

First, start to plot your current value advantage against each segment. The key thing to focus on is whether you have a segment (e.g., mid-market versus corporate accounts) where you have more advantage. Hopefully you do not find yourself in a position where you don’t have a value advantage in any segments. For extra credit, you can also change the size of the bubble to represent a financial metric or a percentage change in the market segment growth

When you look at your perception plot based on your own offering, you should be as quantitative as possible. For B2B, you can acquire data on verticals relatively easily through publicly available data

Plotting your customers’ perception of your offering is a very good checksum on your operating hypothesis. Arm yourself with enough data to be clear, and insist that you have investors, board members, and your team in the intellectual Thunderdome (this is a reference to the 1985 postapocalyptic action movie Mad Max beyond Thunderdome) with you as you do this exercise. And be wary of an analysis that says that you are attractive to multiple customer segments equally

Plot Your Value Compared to the Competition

Mapping your value compared to the competition is another interesting way to check your assumptions about how your customers perceive your product. Competition is a validation that you have a compelling product and service that customers want

Before you start to map your competition, please do not ask your customers directly about your price point. They won’t give you an honest answer. They won’t want to offend you by saying your product or service is too expensive, so they won’t be open and truthful. I prefer to use questions (like using a Likert scale) that tease out the answer

These types of charts are very clarifying for you, your team, your investors, and your board. Typically, you see an endless array of PowerPoint slides with reams of data. Why not nail your perspective in one slide? At the very least, you should be asking yourself if you are appropriately positioned against other competitive alternatives

Again, this is not a feature stack rank exercise (tech product manager speak for a priority list of features by importance). This is the perception of value and price. You can do this in many different ways. Personally, the quickest way for me to want to jump out of a window is when I hear someone on my team ponder how they would get this insight: talk to customers, send a survey, etc. This should not be hard to figure out and should not take more than a couple of days. No large expensive market research is required

Key Takeaways from This Chapter

My high school track coach, Pat Tyson, who is still a tremendous mentor for me, used to always say two things about the competition: If you look behind you, versus looking forward, you will lose time expending effort, and Never let the competitor get farther than twenty feet ahead of you—there’s an invisible umbilical cord between them and your will. Let that person get too far out ahead, and your will is going to snap. That’s how I think about competition.

Here are some key highlights from this chapter

• Taking an honest and data-driven perspective on your customer value proposition is key to determining whether your product is aligned to where your segmentation is creating value and your competitive value proposition.
• Low-cost or premium differentiated? Pick one of those strategies and lean into it. Do not try to be a tweener. It will be too easy for another player to either lean into value per transaction or price per transaction.
• Map your current customer value proposition by segment using data or qualitative means. This enables you to identify areas of white space (areas you can take advantage of), segments or problem areas, or even areas of focus
• Additionally, map your competitive value proposition. Layer in growth rates as well, to better understand your value advantage versus the competition. If you don’t have a good product proposition, you are in real trouble

5 The Competition You versus Them

As a product manager, you act like an overprotective parent. You fawn over that child (the product) and make sure that nothing bad happens to it. As a recovering product manager, I find that competitive analysis is one of my favorite things. I love the feeling of getting those competitive juices flowing

This section is not competitive analysis on your product or service. This is competitive advantage analysis between your company and the companies you compete with, directly or indirectly. It’s a critical part of dissecting the relative performance of your business. It involves several steps. At a high level, these are

• Relative performance: What is the size and scale of the businesses you are competing with? This involves looking at bookings and EBITDA
• Determine your business advantage versus the competition: List out where you are and are not advantaged
• Summarize your overall advantage

Why is this important? It will help you do the following

Assess a weakness. Understanding how a competitor makes money can be an avenue for an attack, especially when you are

competing with an eight-hundred-pound gorilla

Determine the capital structure. Understanding what advantages a competitor has, whether it’s cash or currency

Relative Performance

This is easy to figure out. Depending on whether the competitor is public or private, you have a huge array of resources to pull from

Call them: yes, talk to competitors. You will be surprised how many will both take a meeting with you and tell you some interesting tidbits about their business.

There are a ton of further examples. The point is that there’s no excuse for not knowing. Here are some additional ideas for you

• Hire a former executive from your top competitor—after first making absolutely sure that you are not violating any terms of a nondisclosure.
• Have a bear versus bull session. Make this a team exercise on how one or more of your competitors could kill you. Make it fun. Hand out prizes to the best team
• Put a target on your competitor—not literally

This type of motivation is electrifying. It emboldens you and focuses you. If you can steer your company toward a goal larger than yourself

Advantage versus Us

This seems obvious: Just list the strengths of your competitor alongside your strengths. While you do it, look to fill in the following

Capital war chest; Key competitive advantages in product; Number of customers; Unit economics analysis (LTV, CAC (customer acquisition cost), renewal, retention rate; Scale advantage: ability to amortize costs across their business; Size advantage: the size of the army (e.g., huge sales team)

When you can get more detailed data, you really start to understand everything about a competitor. It becomes visceral, and it becomes personal

To get a more expert-based/practitioner perspective, I asked product management executive and influencer Soumeya Benghanem to

articulate her perspective on her best practices on competitive frameworks:

How do you think about the competition overall?

when I evaluate who the competitors are for my business or product, I take it a little deeper to make it actionable. I also look at what companies or products are looking to compete for my specific target customers’ money (share of wallet) and what other products my customers will put in their frame of reference for that purchase decision (context is king).

Porter’s Five Forces and SWOT [Strengths, Weaknesses, Opportunities, Threats] are the two frameworks I have used in most of my work

At the end of the day, it’s critical to know who your customer is, what they do well and not as well, and where they can possibly expand, in order for you as the leader to better interpret customer insights, develop your unique value proposition to deliver on your vision, minimize risk, delight your customers, optimize your solution, maximize your credibility, and win

Key Takeaways from This Chapter

While I have said previously that you should not be overly obsessed by competitors, you should understand the relative competitive advantage. How else are you going to decide if you are going to be able to be successful in a new market or moving into an adjacent market?

Here are some key highlights from this chapter:

• Make competitive analysis a team sport. Get your team involved, make it part of your strategic planning, and have fun with it. Know your competitors like you know your favorite sports team.
• Do your homework. Collect and retain a library of competitive data so that you can start to build out a view as to your competitors’ business moves. Capital structure, key hires, etc., are important signals for you to track. At some point, you will more than likely need to raise capital. Understanding your competitors’ strengths and weaknesses can provide clues as to when you need to do this.
• Understand the chinks in the armor. Make sure to understand what your competitors are good at by assessing their relative performance as well as how you are advantaged (or not).

Four Planning

Insight Question #4Do you have an executable plan?

6 Identify Your Strategic Options

If you are feeling good about everything leading up to this question, now is the time to define your plan of attack. Think through where you are applying your energy, capital, and focus based on your unique advantages. By now you have walked through the first three Insight Questions in this book, so figuring out your plan of attack should be fairly simple

Well, it should be. If you are in the right market, with the right timing and some traction, you may be off to the races. The wind is at your back. However, from personal experience, I have seen businesses in this position blow it because they didn’t focus their time and capital on the right initiatives. Even if you have a great business that’s growing in a market that is exciting and lucrative, sometimes you stumble because you don’t earmark the appropriate amount of capital resources on a particular plan.

Every business comes down to controlling four operating dials (more on these below). Each one needs a certain amount of resources and prioritization. In some businesses you’ll need to use some dials rather than others

Reviewing Your Operating Dials

I often find that businesses sometimes aren’t explicit about their focus and don’t coordinate their plans across the company. A common problem is what I call spraying and praying, meaning that you are trying to do too much, and so you are not doing very much well. You may be able to hide this issue during the good times, but the bad times tend to reveal it. I always recall the quote from legendary investor Warren Buffett, who said, Only when the tide goes out do you discover who’s been swimming naked. When your business hits an operating snag, whether it’s slowing sales or capital constraints, you will quickly figure out if you have over-allocated your efforts. If you look down and don’t see any clothes, you’ll know you’ve been caught out.

The four dials that I like to look at are:

Selling more to the same customer (via cross-sell and upsell).; Selling to new customers.; Increasing demand.; Just buying it (inorganic

Operating Dials

Let’s walk through each one.

• Selling More to the Same Customer

I believe the easiest way to generate more efficient sales for your business is to have your current customers buy more than one product from you. They are already a customer, and hopefully you have a good relationship with them

This is also called increasing the share of wallet. This is classically defined as the amount of money that a customer spends with your brand versus a competing brand. By increasing your share of wallet with your customers, you not only generate more revenue from them, but you also crowd out dollars that would be going to the competition. And it’s typically a heck of a lot easier (aka zero to low customer acquisition costs) to generate a sale from a current customer. There are several ways to approach this strategy, including bundling, upselling, and cross-selling.

Bundling is a great way to increase your customer lifetime value while providing your customers with a real or perceived benefit. It’s a common strategy; everyone is familiar with the content programming done on cable and streaming TV. You can make a bundle out of everything. Each bundle has its own value to the consumer, the developer (if they own the content or product), or the aggregator

Upselling is getting an existing customer to increase their spend with you by offering either more or an enhanced version of your product. If you are in technology, this strategy is very common for SaaS (software as a service) products

Cross-selling is selling complementary products to your existing customer base. You can decide to build or partner with new products or services that are effective for cross-selling. You can execute on this strategy in literally any type of busi-ness, whether it’s consumer, SaaS, consulting, or really anything

Nick Gaehde, president of Lexia Learning, examines how this strategy has worked for his business and, most importantly, how it has changed the lives of students:

Can you please explain your process and/or framework for making the decision to build PowerUp?

We looked at our customer base and who the purchasing decision-makers were

How did PowerUp improve your business in terms of either net-new customers or account expansion?

One of the metrics we track carefully is the number of customers who have purchased more than one of our programs. These customers not only have higher average order sizes, but also higher retention rates and higher lifetime value

Did PowerUp help you defend your market position against the competition?

Our goal is to be the preferred partner for schools, school districts, and even state decision-makers when it comes to literacy instruction

Can you give me an example of how you have successfully deployed a partnership strategy?

The concept behind cheap and cheerful is that you enhance the impact of a program by adding a few simple, cost-effective touches. Imagine you’re baking a cake with two layers. Most of the work goes into developing the recipe, creating the batter, and then baking those two layers—and of course, finishing with a great icing. Yet, by adding a third or even a fourth layer, you improve how enticing and tasty the cake is, with only a minor amount of additional effort.

How do you decide which partners would be the right strategy fit for a cross-sell strategy?

If your brand represents an attractive opportunity, there will frequently be companies or individuals looking to partner. I follow a five-tier process to help sift the good opportunities from the bad:

You need to define if the potential relationship is a branding partnership or a supplier relationship

You should be confident that the products and services the partner

Do you see sufficient cultural similarities between your organization and that of the potential partner to enable mutual goodwill, responsiveness, and support for the initiative?

Will this arrangement create significant value? How? What does success look like?

Are you as important to the partner as they are to you?

There should be clear answers to all these questions, with enough specificity to both motivate and engage each side’s teams, and to help ensure the program’s success

What are some things to avoid when building out your partnership strategy?

An equally important question. What is key when engaging with partners is support and alignment within your business. Unless all key participants are committed to the venture’s success, things can fall apart really easily

Partnerships are an obvious strategy that’s often overlooked. You can also license content, other products, etc. You can bundle these products together, include them in your shopping cart, and even execute on mutual bundling strategies

• Selling to New Customers

There are countless books that review the best way to test and build new products. That is outside the scope of this book. You can create a new product in the same market for a different customer or take the same product with the same customer and sell it in a new market. There are several ways in which you can think about selling to new customers. They include geography, segment, and channel.

Geography: Let’s start with one of the most capital-intensive ways to think about selling: geographic expansion

Segment: You can decide to focus on different segments of a B2B market (aka firmographics) or a different customer

Channel: There are many different approaches to channel. You can decide to expand your sales directly or indirectly

Direct: This involves direct sales from a website, a direct sales force, etc.

Indirect: Use a reseller

• Increasing Demand

Drive more customers to your product! Be wary of how effective your marketing is; you do not want to spend more on your customer acquisition than the lifetime value of your customer

Paid: Options range from Google AdWords, Facebook ads, video advertising on streaming TV, etc.

Organic: This includes free traffic from search engines via search engine optimization (SEO), word of mouth, and public relations.

Product-led: This involves building viral features into your product or service so that customers are referred to your product and/or service.

There’s a lot to cover here, but be mindful of the mix of your traffic. Being too reliant on paid marketing over time can be costly

• Just Buying It

Building a business from scratch is very hard. Sometimes buying a business is better. Depending on your capital situation, if you need to enter a market quickly and/or need to add a business to your arsenal to help satisfy more of the market wants and needs, buying a business could be just the right move.

Key Takeaways from This Chapter

There are four operating dials that can really help you focus your plan. They are not mutually exclusive.

Here are some key highlights from this chapter:

• Sell more to the same customer (by cross-selling and upselling). The best way to both expand your sales and crowd out the competition is to sell more products and services to the same customer. The three approaches are to bundle, upsell, and cross-sell. You do not have to rely solely on building a new product, either. Third-party partnerships are a completely viable way to generate net incremental sales without having to build your own product for cross-selling.
• Sell to new customers—this is always a viable approach. Three options to look at are geography, segment, and channel. Geographic expansion is the most difficult approach because it usually requires extensive local market support as well as a lot of capital.
• Increase demand—if your business is working, then put some more gas on it! Just be mindful of your customer acquisition costs, and have a firm handle on your customer lifetime value.
• Just buy it (inorganic)—if you have a business that can be bolstered by another business (and you can finance it), buying another business makes a ton of sense. It can also help you strategically block the competition and lock in customers.

7 Improving Your Customer Value Proposition

This section is a bit more prescriptive due to my personal experience as a product manager. It’s critical that your team focuses on the product in a way that is aligned with your strategy. I like to build what I call a north star framework that aligns what you’re going to build to the customer’s wants and needs. If you do this correctly, everyone is aligned from every echelon in the company. One way to do this is to create a product management framework to help organize your decisions

There are many frameworks to use, and we will walk through several of them below. The bigger the company, the more detailed and thoughtful you have to be with your planning—there’s just more complexity and more teams pulling on a finite set of resources. Smaller companies are a lot easier—it’s so obvious what to do next that you don’t even need to do meetings and planning. You just need to make your choice, hopefully based on the stage and size of your organization.

First, Start with Your North

I have heavily borrowed my personal planning style from Atlassian, the company that makes development tools like Jira and Confluence. For my planning, I like to start with a vision (or north star) that aligns the entire company with the business’s true purpose. I then like to build out key themes that support that vision. A theme can be used as a criterion meaning that it can help you focus on the top three or four areas you are going to work on, to create customer delight and consequently business advantage.

The framework that Atlassian uses for this—and which I have used in the companies I have run—is the VTFM framework. VTFM stands for:

• Vision: This refers to the big picture and the opportunity the product is aiming for. Great vision statements are clear about the market as well as the customer they are trying to serve
• Themes: As mentioned above, these are the core three to four areas that drive customer delight and adoption
• Focus areas: These are the specific ideas and features that deliver on the themes and are generally delivered (in the best organizations) from customers’ unmet needs.
• Measures: These are the metrics that will help to guide your teams as they create guideposts for success with your feature rollout and adoption.

I love this framework because once you agree on the themes, everything else in terms of business planning and product development becomes a natural extension to them. It also aligns your product teams with the goal in the product. In the software world, if your developers are very closely aligned to the goals, they are going to be really focused on obtaining those key outcomes. At the end of the day, the goal is to deliver exceptional customer value. So the idea is to build products that do this—epic products that get customers driving organic word-of-mouth traction for your product

Once you have this framework laid out, you can start to plan out your year. I like to chunk out my planning in all things on a quarterly basis.

Once we have agreed on the north star and themes, I like to keep the planning process very focused on results, to let teams stay focused on making their own decisions to deliver exceptional customer value

Create a Customer Value Road Map

There are several prioritization frameworks you could use when building out your product road map. Regardless of which one you choose, the main focus is to ensure that you are building products that a) customers will pay for and b) customers will continue to use (and buy). This may sound obvious, but too often I see product plans that are not customer-centric. I am often reminded of the prescient words of Warren Buffett’s partner, Charlie Munger: One of our directors said, very simply, ‘We should make a list of everything that irritates the customer, and then we should eliminate those defects one by one.’ That is the way to compete in a service business.

Here is a quick overview of a couple of the customer-centric prioritization frameworks that are worth looking into. They include:

• Value versus complexity: This is one of my favorite frameworks because it’s so simple. It gives product teams a disciplined, simple, and objective way to prioritize features. The scoring mechanism is simple, and you can easily plot the output of your decisions. It works particularly well when you have a long list of features and functionality.
• Benefit versus cost (weighted scoring): This is another good framework. It’s a bit more complicated than value versus complexity. You pick benefit and cost variables to weight, which allows you to prioritize your criteria. Typically, you have a list of different criteria that you can build as a theme, such as increase engagement, speed and performance, etc. This model is great when you have a larger organization with more product complexity and more buy-in needs

One of the different approaches to weighting (and there are many) is weighting all your requests by theme but also by feasibility, desirability, and viability. This idea was cooked up by the design powerhouse IDEO about twenty years ago. It’s an interesting approach because you can get a Goldilocks of building functionality that is just right. A higher score is typically better. A quick way to think about it is via FDV

• Feasible: Is it a solution that your team can currently pull off? For instance, if you are really good at building mobile apps that are engaging, then building some new feature that leverages that team’s strength is highly feasible. The alternative is, let’s say, you don’t have a plan for sustaining life on Mars, yet you are sending humans to Mars—most likely not a very feasible solution.
• Desirable: Is it functionality that really addresses a customer pain point? Desirability solves the pain point and delights the customer
• Viable: Does the functionality support your long-term business model? You could end up making some short-term decisions that positively impact short-term financial results, but that could also build negative consequences for customers longer term.

Measure Twice, Cut Once: Get Buy-Off

Your product team should always be articulating the next set of features and services they plan to work on. I like to do this forty-five days before the end of the quarter. This gets everyone comfortably thinking ahead and on the same page.

I like to get a review and approval on the set of card-level features. What I mean by card level is significant features, not minor items like bug fixes. The objective is to get approval on larger initiatives by theme to ensure that everyone is aligned. I confess I am a tad anal-retentive on measuring the approach to building customer value. To each their own. Ignore this advice if the style doesn’t fit with your culture

This might be a lot of detail, but being vigilant on how the product team delivers value versus the business strategy is so important. Here is how I structure the process

• Review big features. Any major feature that is significant (over some predetermined point total) needs to be reviewed for its market demand and likely acceptance by customers
• Determine your principles. I like to have these stated somewhere in the road map. They must conform to the strategy
• Let the doer present. The product manager and the designer should be available to make their case

Key Takeaways from This Chapter

Being thoughtful about a customer-centric value proposition combines inspiration with tons of planning. With the proper application, you will be able to naturally build epic products and services to unlock new or existing value in your business.

Here are some key highlights from this chapter:

• You have now built a compelling north star. You have integrated your product vision with the business vision. You have identified three or four key themes for your service that are customer-benefit aligned. You have thought about the measures (key outcomes) you will hold yourself and your teams accountable to in order to show progress toward delighting your customers. I prefer the VTFM approach, but feel free to dream up your own.
• You have developed a process. You have built out some form of customer-centric prioritization process, one that is appropriate for ingesting feedback from customers, internal stakeholders, and your own inspired vision. There is a range of options for how to do this, from simple to complex. Pick the one that is right for the size of your organization and the complexity of your product.
• You should regularly review your plan. Things change. You are getting feedback on a quarterly basis on priorities that support the key themes in your business. You are enabling the team to present their own ideas and are making sure that the plan makes sense and is aligned with your business goals.

8 Communicating Your Plan

This chapter sort of slipped into the book by accident, because communication isn’t technically a factor in determining whether you can unlock value in your company. However, establishing a strong culture and focusing on your people is absolutely a key component to executing on your plan. Plans need to be clear, but they also need to be scaled broadly and openly. Everyone in the organization should be able to understand the vision, mission, and cultural values of a business with their eyes closed.

Vision, Mission, and Big Hairy Audacious Goals

Your team wants to be led. Great businesses construct a compelling vision of the future that invites employees, investors, and customers to join the adventure with them

Of course, we can’t go much further on this subject without reciting the guru on the subject, Jim Collins. In his exceptional book Built to Last, Collins writes about how a vision is actually a formula made up of two parts: a core ideology plus an envisioned future. The envisioned future is called a Big Hairy Audacious Goal or BHAG. The BHAG is a clear, descriptive goal that will take a long time to achieve—say, ten to thirty years

Collins details the power of having a clear and compelling goal. I have always liked the research-based sensibility to his writing. What has always stood out to me is that he talks about how much better companies with compelling BHAGs perform than what he calls comparison companies. The BHAG is like a company’s moon mission. When written well, it hits you in the gut. It’s so clear and compelling that people get it right away; it takes little to no explanation

First let’s focus on the vision statement, which is an expression of what tomorrow should look like and what your organization wants to ultimately become. Again, Collins breaks it down into a core ideology plus an envisioned future. The core ideology is made up of core values and a core purpose. Values are guiding principles; they express how you act as a company

Think about yourself—what drives you, and what are your core intrinsic motivators? Me, I am about integrity, passion, freedom, and fun. I look for companies that share those values aligned with a compelling vision of the future (or purpose). That is why cultural values are important. They attract like-minded fellow adventurers to your vision and set the parameters on how you behave. Those values become the basis for a compelling culture. The culture is how the company lives through its values in practice

The second component of a vision statement is the core purpose. This is, as Collins puts it, a company’s most fundamental reason for being. Here are some famous examples of BHAGs:

Nike: Bring inspiration and innovation to every athlete* in the world. (*If you have a body, you are an athlete.)

IKEA: Our vision is to create a better everyday life for the many people.

Apple: To make the best products on earth, and to leave the world better than we found it.

Google To provide access to the world’s information in one click

Putting a Framework around Your Vision

Having a compelling vision transcends the day-to-day grind and gives real meaning to everyone’s work. But don’t stop there! Continue to atomize your plan into years, quarters, months, and weeks. Make it a part of the drumbeat of everything you do. That way, everyone’s goals can be directly tied into your plan. This operating system then reinforces itself, and the performance compounds over time

One of the operating frameworks I like to use is something that I basically stole from Salesforce. It’s their V2MOM framework, which stands for Vision, Values, Methods, Obstacles, and Measures. I adopted it since it reinforces the long-term vision, and it scales goal setting. I added a G for Goals, to create a V2GMOM framework.

I have always thought of Salesforce as a personal mentor and have found Marc Benioff to be a fascinatingly iconoclastic leader. Salesforce’s framework is very simple to articulate, and it drives everyone in the same direction. I have my teams set quarterly OKR-style goals (Objectives and Key Results) against the framework.

You can easily highlight key activities under each method with specific measures. The V2GMOM is an easy framework for your annual plan. This framework can be used over multiple years and can support your vision and your BHAG. I even have my one-on-ones (1:1s) in the V2GMOM framework, so that we are always holding ourselves accountable to the plan.

So let’s break down how to use the framework

• Vision: This represents what you want to achieve. We have already spent a lot of time on this in the section above.
• Values: Values are the principles or beliefs that are most important to your organization as you pursue your vision
• Goals and methods: These are the initiatives that represent how you will achieve your vision. If you look through Salesforce’s methods, they obviously did the 1.0 version. These were created at the dawn of the company.
• Obstacles: I always find that having radical candor and transparency is the key to establishing engagement at your company, as this leads to trust. To me, obstacles are the ultimate expression of candor
• Measures: These are the specific yardsticks that articulate how you gauge your success. For goal setting (using SMART goals or OKRs), think of a measure as your goal

Communicate Constantly

Being able to set and articulate a long-term vision and goal enables you and your team to do the seemingly impossible

We all have better communication tools today than many years ago. Building a healthy habit of creating a system of communication also reinforces to your entire company the progress of your business and enables you to be more flexible without being a control freak. Here are some ideas that I personally follow in the organizations I run

Business Processes

Annual plan and quarterly review: I do an annual plan. It takes the form of the V2GMOM. I usually have an offsite that includes my core executive team to draft the V2GMOM. We review the plan on a quarterly basis with a wider group of executives, where we adjust initiatives and methods based on what’s working or not.

Monthly reviews: I typically have each larger team or unit present their progress on a monthly basis. The format is simple and follows their committed quarterly plan. Materials are sent twenty-four hours in advance.

Board meetings: All of these materials are building toward the eventual quarterly meeting with your board and/or investors

Product planning: I am used to two-week product engineering sprints (where work is chunked out on a recurring set of small tasks). We empower teams but generally help to allocate points by theme every quarter.

Internal financing through stage gates: There are always tests with features, pricing, etc. The key is to not have executives involved with a lot of decisions.

Reinforce, Reinforce, Reinforce

It takes consistent messages on a continual and persistent basis for those discrete themes to stick in your teams’ brains. I try to reinforce the company vision and goals all the time in both informal and formal ways. Here are some examples of what I do

Town halls: Every month or so, we do a town hall meeting. The key to town halls is to celebrate your team first

Drumbeat communication: Slack, Confluence, email, etc. I view these modes of operation as reinforcement to the key plays in our V2GMOM. I also like to reinforce in these channels anything related to our culture, including diversity, equity, and inclusion

Office hours: I do periodic virtual office hours. I did this before COVID-19 hit. The world is only going to go more remote in the future, and your key talent is often not going to be in your office or time zone. But human beings still crave human connection

One-on-ones (1:1s): You need to do these every week with your direct reports. And if you can allocate the time, have the occasional meeting with your directs’ directs (the people that report to your directs). A best practice that I have adopted over time is that I do open one-on-ones

Scorecards: These should be very simple, no more than one or two numbers. For investors and boards, I like to reinforce my goals in a simple format so that they understand how we are trending in a balanced manner

Scale Your Principles, Empower Your People

I work my teams very hard, and I openly talk about it. I am a big fan of creating management onboarding and continual reinforcement, especially for managers, on both how to do their job and on creating a blueprint to define their overall success. I like to create a management philosophy that is available everywhere and reinforced constantly. Empowerment becomes infectious—that is the basis for much of my work with leadership teams

Employee Satisfaction: Keeping You and Leadership in Check

I view my team as the most important piece of my business. As I have said before, if you have a high-functioning, talented team, they will take care of your customers and generate long-term value for your company in turn. You need to be listening to your teams as much as you listen to your customers. Here are some easy ways to keep yourself aligned with your teams:

Employee satisfaction polling: Poll your employees on a regular cadence. Keep the poll down to two questions with an area for open feedback. The two questions I would recommend are: Please rate your level of satisfaction at work and On a scale of 0 to 10, how likely are you to recommend to a friend or colleague?

Recognition: Recognition is the least used but most powerful cheap incentive I have ever seen. Building a system of feedback and a culture of thank you does a tremendous job of reinforcing intrinsically good performance, and it also shows other employees the behaviors that are needed to become recognized

Key Takeaways from This Chapter

It isn’t good enough to have a plan that is well crafted—the plan must become a living component of the daily, weekly, monthly, quarterly, and annual activity of your business

To ensure that you have alignment, consider the following key highlights from this chapter:

• Develop a compelling vision, mission, and BHAG (Big Hairy Audacious Goal). Companies with aspirational long-term visions perform better. You can keep and attract talent more easily, and your strategic plans have a better shot of coming to fruition.
• Have a plan framework. Build out a simple framework for one and three years in the future. Align the plan with quarterly goal setting and reviewing the specific methods on a regular basis, in case you need to do more or less of those particular efforts.
• Communicate your plan and its progress regularly. Build a cadence of formal and informal habits and ceremonies that communicate your vision, goals, and strategies. Curate it to your unique culture.
• Regularly poll your internal stakeholders on their satisfaction. Publish your findings and the discussion of your action plan on how you will remediate your most important priorities. Be honest about what you are not planning to focus on. Employees will want to know the why of your decision-making. You can’t satisfy everyone, but you can establish trust, which drives engagement and loyalty
• Recognize your team. Recognition can be as simple as nonfinancial awards. But the key is to make it public. That encourages more of the behavior you are recognizing from the team member and from the team members not being recognized.

Five Momentum and Your Key Insight

Insight Question #5How confident are you that you can attract the talent and resources needed to pull this off?

9 Using Your Team to Create/Build Momentum

Talent Drives Momentum

Momentum really moves the needle for the Insight Score. It has a multiplier effect in the T3PM calculation (TAM + Timing + Track Record + Plan × Momentum). You can have the best-laid plans, but if you do not have the capital and the team to execute on them, then you can kiss your dreams goodbye. In an early-stage company, most investors are laser-beam focused on the team. There’s no data, there’s no revenue, and the product might not even exist yet. It’s all about the team, and the investor is trying to decide if the entrepreneur has the grit and talent to start to make their grand vision into a reality. As your business grows, you’re going to need different types of people. For example, the brilliant founder who’s technical may not be the right skilled CEO over the long term.

Eventually, I’d like to see more data-driven human resources practices in all companies. Since everything is being measured through software, I am not sure why we don’t have more manager automation tools, such as tools to help us determine what to do at certain times of stage growth, scaling management best practices, etc. I would recommend reading and listening to Josh Bersin, a global human resources research analyst. He does a great job articulating what the future of work looks like, and he has a technology bent to his perspectives

However, you need to have a perspective and a set of frameworks so you can evaluate your team in the context of being positioned as a market leader. This section is going to cover the following ideas: Team-centric metrics.; Organizational future state. Reviewing talent depth—is it the right team?; Evaluating diversity—of talent, products, and personality.

I believe that your team is the most important asset in your business. If you’re large enough to hire a human resources professional, you should be treating that person as one of your most important right-hand leaders. Over time, as you and your leaders deal with constant growth, you will need to focus more on your team. Making sure that you have a smart, talented, and culturally aligned group is very important for the long haul.

Measures to Track Your Talent

You and your management team should be tracking some pretty common team metrics. If your company is too small and you are laughing as you read this, trust me, that is a good problem to have—and you’ll be big enough someday that you will say to yourself, I wish I had tracked these metrics more closely.

I like to look at my team metrics on par with my financial metrics. I’m always a fan of looking at metrics on a continuous basis as a macro indicator, since your team really drives the results, and the hunger for great talent is getting more competitive. You do not have the luxury of resting on your proverbial laurels with a feedback mechanism that is only annual. Employee data must be real-time, continuous, and built into the culture of your company.

Some of these indicators are easy to measure (we will walk through a sample). Others are more subtle and could be more specific to the type of business you’re building. For instance, if you’re building a services company, you don’t care about how many engineers you need to hire. By the way, if you do a broad search on HR metrics, you will find that there are a ton of metrics that you could measure. I have a bias toward measuring fewer KPIs (key performance indicators), because too many leads to analysis paralysis. In terms of the Insight Score, you just need to answer two questions: Do I have the right people (to take me to the next level)? Am I confident that I can retain them?

Let’s walk through some measures:

Employee happiness: I was the chief product officer at a company called TINYpulse, which is a platform that builds employee engagement technology to determine employee happiness. This is a topic I have spent a lot of time thinking about. Employee satisfaction is an important metric that you should be tracking on a regular basis. The key piece of this metric is to measure it regularly. The annual employee survey is going the way of the dodo bird.

Retention rate: This is a key indicator of how your organization is retaining its employees. There are two types of employee turnover: voluntary and involuntary. The way that I remember the distinction is by saying to myself: An employee voluntarily left the business to go someplace else, and another employee was involuntarily let go from the business. I also like to track employees who leave voluntarily and whether the loss was regrettable or not regrettable—not everyone that leaves your business is regrettable, but you want to make sure you do not lose your high-potential employees.

Financial efficiency: There’s a panoply of data on this topic. I like to look at revenue per full-time employee and EBITDA by full-time employee. I follow these metrics over time to see how the numbers are trending. I also like to understand the benchmarks from other competitors or similar businesses

Organizational Future State

If you have done the work throughout this book and have a sense of where you are going (your vision) and whether you are feeding the existing business or moving to another one (or somewhere in between), I always recommend building a future state of what your organization should look like in terms of the roles and aptitude you will need and how it could look in the future. If you spend an enormous amount of time building annual and multiyear plans, why wouldn’t you also do the work to think about what the future structure and team should look like to support the business? Don’t put current people in those spots, though, because a whole host of biases will enter into your decision-making and thought processes

Reviewing Talent Depth: Is It the Right Team (for Where You Are Going)?

Once you understand what the future state of your organization should look like, then you should dig into the detail of the types of team members you have today. It’s super important to do the hard work on your people analysis when you are considering how confident you are that you have the right team in place to unlock value in your company—and if you don’t, then you’d better figure out a plan to get there.

When you are looking at making a leap to the next box as a market-leading star, you need to know whether you have the right team or not. This is especially important if you pivot into a different business that requires different skill sets, and/or the scale of your business now requires different skill sets. The chart below, which I call the virtuous cycle of talent management, will help you with this review. Let’s go through it in some detail:

Identification of critical roles: After you have done the future-state organization, you might notice that you have some holes, such as skills or roles that you don’t have, etc. Start by writing down all the skills and capabilities you need. For instance, perhaps you need to upgrade your sales leader because your current head of sales is lacking analytical skills. They have not built a strong sales operational capability within the organization and aren’t interested in doing that Create a simple job description and the attributes that you would want or need to fill that gap. (It’s totally OK if your team is perfect, too. In that case, consider yourself lucky!)

Nine-box assessment: The nine-box process is an oldie but a goodie. It’s a great way to evaluate your current team. You basically plot them on a nine-box chart, as shown below

The GE-McKinsey Nine-Box Matrix

Potential: The ability to assume increasingly broad or complex roles as business needs change

Performance (based on current job): The extent to which the individual: a) Delivers business/functional results; b) Demonstrates core competencies; c) Acts in the spirit of the company’s values.

I find that the nine-box model is powerful because of its simplicity and effectiveness. You plot potential and performance on a grid with performance measured along the x-axis and potential along the y-axis. The most valuable position is the top right box. That person would be the highest-ranking in both performance and potential

You should use the nine-box model for succession planning and to evaluate talent in your organization. This is literally one of those times that I like being inside the box. It forces me to make decisions and action plans on talent. When you assess your employees, it’s important to understand what performance and potential are in this context

Skill-gap analysis and readiness assessment: After you have evaluated your team(s), you should have a list of skills that are consistent for your organization and that should be worked on. Look at your team, and determine any gaps in these key areas. As the manager and leader, you should be allocating your time to determining development actions that need to be taken to enable their growth.

Perform a skill-gap analysis. Pay special attention to each team member’s time to readiness—how long will it take to develop this person? Readiness is a tricky topic. Every good coach or manager does a good job of highlighting areas of improvement in isolated sets of development practice. I am not a golfer, but I have always wanted to be. In the last year, I have taken two lessons. The first lesson had the instructor literally giving me four or five things to work on within the span of five minutes. There was no way that I could get enough reps on all those things in one lesson to see an improvement. The other lesson had the instructor walking me through one thing to focus on for the entire lesson, which I was much more able to do. The improvement was clear, and I was happy that I could see it right away

Readiness is one of those areas where I think it’s wise to find one or two areas of development. It’s an obvious red flag if one of your key lieutenants has a tremendous amount of work to do across all the skills. Some of the skills that are easier to approach are obtaining more experience and specialized skills. You can focus on giving that team member more challenging tasks or special projects, or you can invest in education or certificate programs for them

Development planning: Lastly, have a development plan. But have your team member draft and devise their own plan. If you can afford it, have the employee seek help from an executive coach. But the key is to have a plan so that the skills gaps are being addressed and you are their accountability partner. I have done this process many times, and it becomes even more powerful if you are willing to share your development plan with a wider group of people. The key is to have an active plan so that you can develop your people as your business grows.

Another way you can help is to introduce stop/start/keep doing surveys with your team. You literally ask your teams what each team member should start doing, stop doing, and keep doing. Use this practice to better provide feedback and to keep the process of skill-gap analysis on track. This is just good management

The key point is that you do not want to surprise someone. Help your team members grow, and cultivate a culture of learning

Final Word

If you could wave your magic wand, you would love to have the best talent at every position. The best way to have an awesome team is to hire the smartest people and grow them along with your graph. But that’s not always possible. Reed Hastings, in his book No Rules Rules: Netflix and the Culture of Reinvention, discussed his belief that having talent density in the most important roles is one of the keys to Netflix’s success. His book is chock-full of solid advice. On the surface it seems simple: Hire the best people, then build a culture of performance with radical candor and feedback.

Evaluating Diversity

Diversity, equity, and inclusion (DE&I) is getting more and more attention in the corporate world, which is absolutely right from a moral and social justice perspective. If you are the living embodiment of Ebenezer Scrooge, then it’s also just good for business

Here are a couple of ideas to kickstart your thinking: Start with the top of the funnel; Blind résumés; Demand diverse hiring; Consistent hiring practices; Find talent in unexpected places; Have diversity KPIs; Career development; Be public about your efforts

Diversity in Your Products

Just like we mentioned in above, diversity in the workplace still has a ways to go. Just as important as diversity in your teams is building diversity into your products

Diversity of Personality

It’s extremely valuable to have different perspectives that include diversity of gender, ethnicity, and sexual orientation—but also diversity of thought. If you build out a team that looks and acts exactly like you, you will get exactly that type of company

There are many examples of how this has worked out really well for some companies. I think of the early days of Microsoft, where every Microsoft person I had a meeting with felt like a mini replica of Bill Gates: smart, hard-charging, tenacious, and sometimes very rude

The main criteria represent the following personality types:

Dominant: These team members are task-oriented. People with D personalities tend to be confident and decisive, and they value the importance of accomplishing bottom-line results. They represent 10 percent of the population.

Inspiring: These team members are more people-oriented. They tend to be communicative and place an emphasis on relationships. They are usually the most outgoing team members, and they seek to persuade or influence others. This personality type encompasses about 25 to 30 percent of the population

Supportive: These team members are people-oriented too, but they are also more reserved. They tend to be dependable and place the emphasis on cooperation and stability. They represent 30 to 35 percent of the population.

Cautious: These team members are task-oriented and more reserved. They are really focused on quality and accuracy. They make up about 20 to 25 percent of the population.

I have been working with Judy Goldberg as my executive coach for years. She is the founder of Wondershift LLC, which she describes as a firm focused on results-driven transformation, helping leaders to shift their businesses and employees to be more successful, productive, strategic, and present. Here are her thoughts on the value of embracing cognitive diversity:

How have you used personality assessments (communication assessment tools) when working with leadership teams?

Leaders, like all humans, think and behave differently. By using assessments, my goal is to create a platform that provides a new and easily understandable lens for leaders to recognize the power of cognitive diversity (diversity of thought) and how it impacts their approach to developing solutions, exploring ideas, and embracing opportunities

What are the best practices on how to use the data and insights from this process?

Accountability: Pair up team members who think differently from each other to act as opposite profile advisors

Communication audit: Review emails, team communications, company-wide keynotes—ask yourself if you are writing from your personal preference and perspective or creating a whole-brain communication that will be received well by all.

Share and compare: The more open people are to share preferences, the more we can learn about one another. It takes two to tango, as the old saying goes, so both people may need to flex preferences to get the most out of a conversation.

Diversifying your team: As your team evolves, in addition to considering performance and potential, you also must consider every aspect of

diversity, including cognitive diversity and neurodiversity, when building a team.

What are the common issues that you see when working with leadership teams?

I am often asked, Can you help me work with this difficult person? Communicating with them is so hard. My response is always the same: Who is the difficult one? At times this brings a little nervous laughter, and I go on to say, Is it that they are difficult or could they just be different?

Key Takeaways from This Chapter

Your team can be a major accelerator if you have determined that your ability to unlock value in your company is high and you have a shot at being a market leader. Taking the time to evaluate your team against the journey and growth path that you want to take is an important part of evaluating how much momentum you can generate. The questions are tough: What talent do I need for the next stage of growth? How should my business be structured to support that momentum?

Here are some key highlights from this chapter. Using your team to build momentum is a process where you do the following:

• Evaluate your team using the nine-box matrix to determine their current performance and future potential. Conduct a skill-gap analysis to determine any gaps related to competencies, skills, experience, and education as defined for a particular role. You have already identified the skills you need from the first step. Make sure to build development plans to help you close any skills gaps.
• Create a system of diversity that incorporates inclusive hiring and interview processes and the evaluation of diversity outcomes.
• Build diversity by design into everything you do. Ensure that you are incorporating cultural and social principles in all aspects of your product design and creation.
• Understand your team’s personality diversity so that you can have a team that is not only action-oriented but also long-term oriented and thoughtful about the future, as this will support your company’s growth goals.

10 Using Capital to Increase Your Momentum

Throughout this book I’ve told stories of existing legacy companies as well as startups. To be honest, it’s been a struggle to offer equally great advice to business leaders who are at all these different stages. This chapter focuses heavily on venture capital–based financing—that early-stage, very risky financing where the chances of success are limited, but success will bring transformational outcomes.

I toyed with taking this section out of the book, but I decided that my personal-investing pitch style might work for you. So if you’re a business leader working for an established business, you can skip this chapter.

If you are still reading, this chapter provides a cursory example of the common financing mechanisms for most companies, both public and private. I would highly recommend Brad Feld’s book on raising capital, Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist. Brad is a phenomenal teacher and investor. I almost partnered with him years ago on an early-stage idea, and I have to say that he was both wicked smart and incredibly kind. His book is approachable for any audience.

Trust me when I say that there’s a plethora of ways to find financing with an infinite number of good choices for you as the business owner. You just need to make sure that you have a good business, a business plan, or cash flow from one of your businesses to have a solid venture.

Bootstrapping: You can actually do this form of financing as a public or private company. In essence, bootstrapping is using your own cash or personal finances for your business

Debt: There are a ton of options with debt. When interest rates are low, make sure to get debt. With debt you are not giving away a piece of your business like you are with equity

Venture capital: A venture capital (VC) investment is a form of private equity that primarily focuses on investments in startups and small businesses. These investments are typically made when the business has little to no real revenue traction. This is considered a riskier asset class because the investments have a high rate of failure, especially with earlier investments

Private equity: A similar but different notion to venture capital is private equity, except the return profile is different and varied. PE firms are looking for more predictable returns from existing businesses where they either purchase the whole company or a portion of the company

Public company fundraising: You can have a field day with different ways to raise money in the capital markets. Being a public company has its pain; there are tons of regulatory and compliance costs. It can also force management teams to be extremely short-sighted by focusing on quarterly results

Determine How Much Capital to Raise and When

Capital allocation is the most important piece of a CEO’s job

Whether you’re a private or public company, I wanted to jot down some of my golden rules for capital requirements:

Have at least twelve months of operating cash. Always have enough in the tank. I’ve been in many situations as a startup where I almost couldn’t make payroll.

Understand capital allocation. Understand where your dollars go to the highest return. There are some great frameworks out there

Be clear about your planned use of proceeds. Whether you are trying to fund your business or project internally or externally, you must be clear about what you will do with the capital proceeds

Set up stage gates. Many investments are what a former colleague would have called heaven on whiteboard. Simply put, you can make anything successful in a spreadsheet. I always advise setting up stage gates. These are a predefined set of hurdles to determine if your investment idea has merit.

Executive Summary Slides

Following your title slide, I recommend that your executive summary slides provide a true snapshot of your entire company in a succinct fashion. This is the fifty-thousand-foot view with only the key information. I have provided a template for your elevator pitch and one for a company snapshot. These can be combined into one slide where appropriate.

On slide 2, I suggest providing the following information:

• Summary positioning statement:

This can include your company’s core value proposition, mission, and/or vision. We already discussed the vision and mission in Chapter 8. Under your positioning statement, add two or three concise points that provide reasons to believe that you can deliver on this vision.

• Unique intellectual property:

For investors, this is where you are putting your emphasis in terms of your intellectual property big bet. You will want to think long and hard on where you focus your development resources. This one- or two-bullet section will help answer investors’ questions about why your product or solution will have defensibility over your competition and why your solution will have strategic interest in an exit.

• High-level projections:

You will want to make a quick statement in one or two bullets on some key metrics and projections for your business. You should emphasize any traction that you have today. For instance, if you are a pre-revenue company, then emphasize any data you have from customers.

Your executive summary slides should answer the question of what your company does and why this opportunity is interesting. Finally, you need to make the investor comfortable with the executive team that will be executing on the mission and vision

• Team

I sometimes move the team slide into the executive summary slide. Obviously, this is not as important when we are talking about an internally funded project

• Market Position

This slide should address (actually readdress, since you summarized your solution in the earlier slide) what solution you are providing in the marketplace. Your goal in this slide is to present the following points

Define your specific solution. You will want to be sure that potential investors are absolutely clear about what your solution is and what it would do for your customers. This is a common problem for entrepreneurs; they tend to get verbose and don’t clearly articulate what it is that they are actually delivering to the marketplace

What market pain (problem) is being addressed, and why is your solution needed? Or you can state what the customer pain is, which is an even better approach. For example, Millions of people today

have this problem, and they currently use X. We have developed a solution that is faster, better, and cheaper.

How big is this market pain? (Note: you will already have this information from the first section on TAM.) Be as explicit as you can in painting a picture for the investor—both in describing the size of the problem and your unique solution for a big market

• Market Share and Total Addressable Market

The market share slide is very important because most institutional investors need you to answer the following questions: Is this opportunity big enough? Can your team fill the need in the market you are addressing? I have provided two common formats. Your slide needs to show what market pain is addressed and what market is being addressed

• Business Momentum and KPIs

This slide should show whatever key performance indicators you might have on your current product or solution. If you are at an early stage, you will not have much to show, so you might want to show early results from customer tests or trials

• Product Demos

Investors sometimes clamor to see a demo early in your presentation. You will have to be flexible and determine the ideal time to show a demo. I recommend that you start with your story about your solution and the opportunity. Investors will then be chomping at the bit to see if you have built real technology. Of course, if you have a real product to show, show it!

I recommend spending half of your pitch time (five to ten minutes) on your demo. The demo should be well prepared and scripted. Show investors your happy path—be intentional about what features you show and the sequence in which you show them

I recommend that you prep the devices you will display the product on. Do the following in advance so that you are prepared:

Turn off any alert-oriented applications like email, push notifications, or instant messaging on all of the devices you will use. These can be extremely annoying to your audience (and potentially embarrassing for you).

If you are planning a live demo of a mobile product, ensure that you are well practiced at shifting between the demo device (tablet, phone, etc.) and the platform you are using to project the pitch.

Prepare a clean desktop and home screen by removing any personal background images or arrays of icons.

Have your demo scripts or files organized and ready to go in one folder that is easy to find and access. I find preloading pages in different

tabs works extremely well to avoid slow-loading pages

Download any cloud-based docs so that you can easily reference them if a backup is needed.

Your demonstration should be constructed to reinforce the one key point that you made in slides 2 to 4. You will only want to show features that reinforce your points on unique technology or attractiveness to the audience in your TAM. Layer specific examples in the demonstration

• Unique IP Slide

This is where you talk about your secret sauce. The investor has already been blown away by your demo. Now you get to explain at a very high level how it works. If you are doing your investor presentations with a technical leader (e.g., the chief technical officer), have that person explain your intellectual property.

You will want to highlight the following:

Have a simple graphic showing your product or service from a diagram perspective

Your diagram and/or graphic should be very simple

Highlight anything in your solution that is unique versus the competition or the market in general

• Competition

Any company that says they don’t have competition is not telling the truth. If you don’t, the market you are addressing must be so inconsequential that no one wants to be in it. Be prepared to talk about your competitors

Having as much detail as possible will earn you major respect with your potential investors.

In particular, be prepared to answer the following

Who are the competitors, and what are their relative strengths and weaknesses?

How does your service or product compare to the competitors’?

What is the sustainable competitive advantage that will protect the company from existing or future competitive products?

The competition slide template is meant to illustrate these points in a very simple format. You should be prepared to talk about the top three or four key success factors of your solution versus the competitors’, and only focus on those that you know you can win. Put at least two companies at the top of the grid. You should have any detailed quantifiable data as talking points to this slide. If you have detailed information about a competitor’s cost model (especially if it’s a public company), then make sure to use that. You will want to illustrate by each success factor how your solution provides efficiency, cost, or scale benefits against the competition.

• Timeline

This slide is meant to articulate your operational road map. I recommend breaking up the timeline into innovation and general company milestones. This slide should explicitly show investors that you and your team can execute on your mission. In other words, it shows that you have done real work and were thoughtful about how you did it. You want investors to look at this and say, This team is getting shit done!

Here are some ideas on what to put in the timeline: Key feature releases.; Key awards or industry recognition.; Operational metrics layered across the timeline. Examples would be revenue, number of customers, unique users, a large customer win, etc.

• Partners

If applicable, list all the specific revenue, supplier, or customer partners you have. A tip: If you do not have a laundry list of partners, show logos of your partners instead. Big logos sell—every time.

• The Ask Slide

We just finished discussing how important it is to define the use of proceeds.

In addition, I do not recommend supplying valuation information to potential investors, because you don’t want to state a number that is too high or too low. The exception, of course, is if you receive a term sheet with a valuation and you now have the ammunition to shop your term sheet to other investors. Of course, if you are a public company and are funding something internally, please ignore this comment.

This slide should provide a basic overview of:

Financing history: Provide details on past investors and the amounts you have received.

Current investment amount: State specifically how much money you are looking to raise.

Use of proceeds: Provide a high-level breakout on how you would use the proceeds of the investment. This should be broken out for things like CAPEX (capital expenditure), labor, contract workers, variable marketing, etc.

Investors are going to assess whether the company is asking for enough money to achieve the next key benchmarks. You should also be prepared to talk about (not in the slide) what a potential exit would be like and from whom. For private investing, you should also be prepared to talk about how many rounds of financing you think your company will need.

• Appendix Slides

I recommend that you have two slides as either backup materials or as a soft copy follow-up to investors:

Financial projections and sales model: Financial projections (cash flow and profit and loss) are best made with a one-page spreadsheet showing units shipped, revenue

Your sales model should show

Revenue: Investors prefer bottom-up forecasts supported by real plans.

Expenses, or the monthly burn rate for both the current period and after investment, should be shown: Profit before taxes; EBITDA.; Cash flow.; Capital investment; Proceeds from sale of equity.

Some additional notes on this slide: Key assumptions and useful related information should be available on backup slides

• Capitalization table slide:

Make sure to supply the details on the total shares outstanding, the ownership stake and absolute number of shares by preferred stockholders (investors), and common shares. You will also want to be explicit on this slide about stating the pre- and post-money valuations for each round of financing

Key Takeaways from This Chapter

I’m old-school simple on this. Raise the most money to be the market leader where you have an advantage (or a high Insight Score) in business. Allocate capital appropriately based on expected future returns. And always have enough capital to live through a downturn or catastrophe to fund your growth when you need it.

Here are some key highlights from this chapter

• Make the right investment decisions based on what you want to do long term. Do the appropriate work on your strategy and business planning. Don’t worry as much about the suitable financial instrument.
• Have the appropriate plan for funding your business in both good times and bad times
• Have a clear use of proceeds so that you understand what the expected use of capital is to generate a compelling investor return. Be specific on where you will spend the capital, as this gives you a better chance of getting what you asked for
• Build a future-state investor deck that shows you have already thought through the investor ask and the key salient business points required to raise your capital.

Conclusion Your Insight Score

Socrates reportedly once said (because he never wrote shit down) that the unexamined life is not worth living. Well, I believe that the unexamined business is not worth living. I wrote this book to enable you to continually be examining what you want from your business. Neither you nor your business are on a predetermined path. Where you go is up to you.

We are now at the end of our journey together. I hope you have had a chance to tally up your thoughts through the five key questions

I want to conclude with some sample Insight Scores from my own experience. Not everything I have done has worked out. I have found that when I pursued opportunities in either a subject area that I was not personally passionate about or one I wasn’t sure would deliver personal financial gain, those concerns overshadowed the practice of thinking about the practicality of which businesses would be winners or—most germane to this book—had the chance to be winners. Here are a couple of examples on how I would score my ability to use the Insight Score.

Rosetta Stone’s Insight Score

When I was recruited, a lot of peers and mentors I am close to really tried to discourage me from taking the role. I remember comments like, It’s a dinosaur, What a shit show, and my favorite, Are they still around? My initial reaction to the business was a strong interest in wanting to give back to society. In fact, it was Rosetta Stone’s literacy division (Lexia Learning) that was my biggest draw to the company, since both my son and I suffer from dyslexia, and Lexia’s software dramatically improves literacy for young kids and adults.

I also saw Rosetta Stone as an opportunity where I knew I could make a difference, since I have spent a lot of time helping existing businesses perfect their strategies and go-to-market execution. Taking a step back and looking at Rosetta Stone in late 2017, before we initiated the turnaround work, here is how I looked at the business:

TAM: A huge market (language learning is estimated to be a nearly $50 billion market). Also, we applied a tighter view on our serviceable addressable market (SAM), carving out a premium niche for the business. Score: 3.

Timing: Digital language-learning products were growing fast, and we had a product that, while not optimized, was far enough along to take advantage of the timing. We had enough of a web and mobile product open to enhancement that were not completely out of the game. Customers liked the speech-first pedagogy, and the move to more native mobile experiences was a natural for the iconic CD-ROM product the company had pioneered. Also, none of the competition had a large enough lead, so we didn’t feel we were too far removed from being competitive. Score: 3.

Track Record: We previously had a strong record (but didn’t when I started) and had a crazy edge with the most-recognized brand. To be honest, the team, the strategy, and the tech stack were a real mess. But the brand and pedagogy were strong enough that we felt we could move from a B2B business back to our consumer business roots. Score: 1.

Plan: But we didn’t have a focused plan—we had lots of different strategies, and we were focused on B2B sales, not on our iconic consumer business (the consumer had the larger market and strong brand awareness). The language business didn’t really have a cohesive plan or a strong operational structure. The team definitely had a lot of work to do here, hence the low score. Score: 1. And last but not least:

Momentum: We had some ability to attract investment and talent. I wavered on whether I should score this as a 2 or a 3. In many cases, we were able to bring in some fantastic new team members who had just the right experience in the areas we wanted to enhance in the plan. The draw of working on an iconic brand that helps learners around the world certainly helped.

Did I have the capital I needed to accelerate the business? Technically, no. We were a small-cap ed-tech business that had been in turnaround mode for quite a while. We also spent much of our cash to help fuel Lexia, which was the appropriate decision, but it didn’t leave us with many options for reinvestment. For instance, we had to pull back on much of our larger initiatives, like reinvestment in our brand. So the score could have been a 16 if I were to score this with a 2. I opted to leave it at a 3, which adds up to a solid 24. Score: 3.

Insight Score: 24.

Interpreting Your Score

If your TAM and timing totals are low and your score is under 24, then you’d better pivot. If you can control the momentum component because you’re doing something as a leader, or if an operator is sabotaging your business, then you can fix that. The easier components to solve are track record and plan, because they are typically in your control—unlike the macro environment

Here are some overall thoughts on how to approach a low score, organized by variable.

I’m not trying to be prescriptive for every business, because every business is unique. But as you walk through the scoring, issues will surface. Work through those findings and observations with your team, your mentors, and industry experts. Collaboration and transparency are vital to ensure that you don’t waste time and capital.

The Ability to Act

Hopefully this book was able to contribute to your analysis of your business. The Insight Score can be a helpful guide for evaluating whether you can change or enhance your market position. As I mentioned in the beginning, I am not of the mind that you have to throw in the proverbial towel if you are not already a market leader. There are many paths to the top. Every business is different, and only you and your team, after careful study, will have the best view on the path forward. Please do not immediately take an investor’s or a board member’s advice on hiring an expensive consulting firm. This outsourcing of your business IQ only masks the heavy lifting of your own strategic planning process—and your accountability to the plan. It’s always easy to say that it was the consultants’ plan.

I would encourage you to take on the task of your business’s self-actualization. Drive a planning process using the work in this book, and hopefully I will hear all about your amazing success. And remember to enjoy the journey. You only have one life, and work comprises such a large part of what gives us value and meaning. Don’t squander your time on a venture that doesn’t feed you

You might have guessed that I am a huge superhero aficionado. As a kid, I loved how Stan Lee, the founder of Marvel Comics, would sign off each comic book to his readers with an enthusiastic, Excelsior! It’s a Latin word for ever upward. Well, true believers, you pioneers, you stewards of potential..

Excelsior!

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