Why Good Businesses Fail and How You Can Avoid It

Over the last 15 years, I have had diverse roles such as consultant, product manager, account director, and executive; and through the lens of these roles, I have seen many businesses succeed and fail. The reasons for success vary and depend on a number of factors such as technology, timing, team, and just plain luck. Fortunately (or unfortunately), the reasons for business failure typically come down to a few common areas: market, product/service, sales, and technology.

Market

The first and most important element to business success is the market. Specifically, how large is the market and is it growing? If you happen to find a large market, add 1-point for the good guys. If you have a market that is growing, even better. If you are in a market that is growing, with minimal competition, you have potentially hit the jackpot. I say potentially because any lucrative and growing market will attract competitors like flies to dung. I don’t say this to discourage you. I say this to make sure that you are aware of both the market size and your competitors. Any time you speak with bankers, investors, or potential customers, you should know these items in detail:

  • What is the market?
  • How large is the market?
  • Is it growing or shrinking? If so, by how much per year?
  • Who are your competitors?
  • What are their strengths and weaknesses?
  • What are the alternatives to your product or service?
  • How would you rank your product/service against your competitors and alternatives?
  • What advantages do you have over your competitors?

If you have straightforward, simple, and quantitative answers to these questions, you should be in good shape.

 

Product/Service

Every business can be simplified down to providing a product or service in exchange for a fee. For example:

  • Grocery Stores: groceries
  • Construction Firms: labor and expertise for new buildings or renovations
  • Consulting Firms: expertise and advice on a range of topics and industries
  • Software Development Firms: software engineering and labor
  • Creative Agencies: design and creative expertise

Each of these examples comes down to finding the right niche for your product or service, but most importantly, it requires the business managers to find the right product or service at a sufficient profit margin to sustain and grow the business. If you cannot sell your product with the right margins, your business will stagnate and eventually fail. If you cannot sell your product at all, maybe you should consider that no one wants what you are sell and there is no market. There are times when you are creating a new market and over time sales will come, however, the most likely outcome is a zombie business: there is still movement but no meaningful activity.

 

Sales

As I always tell my clients, sales are the lifeblood of a company. If you aren’t properly nurturing your leads, prospects, and sales, you will soon find yourself in a dying organization. Every day, you should be gathering new leads on the Internet, over the phone, by email, and/or in-person. These leads should be tracked in what is called a Customer Relationship Management (CRM) system. What you sell will determine how you qualify each lead to make a decision on whether to move forward to try and make the sale. Once you have made the decision to move forward, you will estimate the labor, price the product, or write a proposal (your industry will determine what is appropriate) and close the deal. This is a simplified overview of what needs to happen but gives you a good idea of what you should be doing to manage your sales effectively. I teach teams to review their sales pipeline each week to make sure that each lead and deal is moving along and nothing is stagnant. If you do find that a deal is not moving along, you will need to do some digging around with the salesperson, estimator, account manager, etc. to uncover the issue.

 

Technology

I group all of the systems, and tools that are needed to improve a business’ survival under the term “Technology.” First and most importantly is the company’s website. Not only should the site be visually appealing, it should be easy to navigate, find information, and clearly show the purpose of the business, products, and services. A key element that I see overlooked even in 2018, is a lack of focus on lead generation on many companies’ websites. As stated previously, lead generation is a key element in the sales process and needs appropriate attention at the most senior levels of the business. Another element to the website is to ensure that the site is secure using what is called SSL (the little green padlock in the browser address bar). Given that SSL can now be set up for free or very low cost, there is no longer a reason to have an insecure site.

Another element that is critical is the CRM as previously mentioned. The CRM is the central place for all of your customer, lead, and deal information. In other words, the CRM will contain all of the information about your customers leading up to you closing the deal. I have found and set up free and low-cost CRM options for my clients that have resulted in both in millions in new revenue and a detailed record of what led to the new revenue.

There are many other systems that are critical to a business but the website and CRM are the two that I find provide the largest ROI for every business that I have personally worked with in the past.


Daniel is a venture architect and advisor specializing in technology strategy, investment, and implementation. He has helped clients as diverse as the US government and automobile manufacturers manage their technical needs and endeavors. Formerly management consultant at Booz Allen Hamilton, he helped launch a $200+ million enterprise collaboration line of business. Daniel also doubled automotive vertical revenue to $25 million in less than 2 years. With B.S. and M.S. degrees in Computer Science and Technology Management respectively, he has become an expert in vendor management and business development utilizing technology and strategy skills.

 

U.S. Treasury awards $3.5 billion, New Markets Tax Credit allocations

Back in February, the U.S. Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund) announced the awarding of $3.5 billion in allocations of New Markets Tax Credit (NMTC). For those of you that are not familiar with NMTC, it is a program run by the Treasury Department that allocated tax credits to community development entities (CDE). Those CDEs then go out and attract investors to their fund and in-turn, the investor gets a tax credit allocation of 39% on the total investment over 7 years.

According to the CDFI Fund, NMTC awards have historically generated $8 of private investment for every dollar invested by the federal government. Since 2001, NMTCs have generated more than $44.4 billion in investments in low-income communities and businesses, resulting in the creation or retention of more than 750,000 jobs, and the construction or rehabilitation of more than 190 million square feet of commercial real estate.

This year’s NMTC allocations were made to 73 community development entities in 29 states, the District of Columbia, and Guam. Read the list of entities known as Community Development Entities (CDEs) in the NMTC award book [PDF 5.2 MB]

I am working on a new project called Urban Deal Flow that is focused on NMTC and a new program that was created at the end of 2017 via the tax bill call Opportunity Zones (OZones). When I first learned about OZones in February and researched the program in more detail, I correctly guessed that the OZones would be managed by the CDFI Fund given that both programs had similar characteristics and objectives. I will be posted here about the project over the next few weeks. In the meantime, you can sign up for early access to Urban Deal Flow.

10 Ideas For Disney

As part of my personal self-improvement, I have been following James Altucher’s 10 ideas per day mental ritual. As a part of my process, I decided to share my ideas as part of a series of posts that I am calling “10 Ideas.” This is the first post in this series.

Disney is one of the world’s iconic brands and my family’s favorite amusement park in the last few years. We aren’t big on spending at parks (Disney World and Disneyland) but we do enjoy the rides and the overall experience, especially now that we have a son that can enjoy it with us. During our last trip to Disneyland a few weeks ago, I thought about a few areas of improvement and innovation that they could implement fairly quickly.

1. Mickey’s Loft: a luxury condo development at Disney World

Disney has built several high-end communities in Orlando and attracted some fairly wealthy residents to the development. I would like to see them build some high-end condos that are family-friendly with easy access to the parks and attractions.

2. AR/VR app that simulates an MCU battle in the viewer’s city or town

I would like to see Disney (or an AR/VR team) develop an app that would show a simulated Marvel Comics Universe battle in their own city. You would simply view the battle through your phone’s screen (similar to Pokémon Go).

3. Disney World Monopoly

Create a game using Disney Characters but use the Disney parks locations as the real estate. If the game is online, you could sync it with the real ride and visitor data and have the players earn in-game cash based on that day’s data.

4. Dystopian Disney: Black Mirror Spoof of Disney Characters

Although the relationship between Disney and Netflix is not as strong as it once was, I would love to see a Black Mirror episode with the traditional Disney characters. It could be an amazing episode incorporating the usual tech and cultural surprises that Black Mirror has come to embody.

5. AI Mickey

I would personally love to see an AI Mickey that can answer questions, reenact any Mickey Mouse scene, and learn from human interaction.

6. Jedi Training videos and content

Video content showing young Jedi in training with their masters. It could have fictional registration for new students, with the winners being selected to be trained as Jedi’s.

7. Sith Training videos and content

Similar concept as the Jedi training except for Sith. This would have a darker feel to it since it is, of course, the dark side of the force.

8. Knights of Ren Training videos and content

Similar concept as the Jedi and Sith training except for Knights of Ren. This would have a much darker feel to it.

9. allow families to know where everyone is in the park by Adding family users to Disney app

On our recent trip to Disneyland, I found the app extremely useful in navigating the park and seeing the actual wait times for the rides. However, I was quite frustrated when we got separated at the end of the day and found everyone in our party through trial and error (in the rain). I would have loved to open the app and it shows where everyone was located and put a pin on the map where we should all meet.

10. Add the ability to do FastPass in the Disney app

This is a big request and I think I understand why this doesn’t exist, but it would be great to be able to do reserve FastPass a limited number of times in the app then simply show and scan a barcode on my phone.

Strategy: 3 Reasons Why You Should Not Ask Potential Investors or Partners to Sign an NDA

NDAAs I have continued to advise startups and other businesses over that last few years, I have seen a common theme arise: startups and entrepreneurs asking me and others to sign an NDA. I will first say that I understand the need to protect your intellectual property (IP). I also understand the fear that someone may try and steal your idea. However, I personally feel that an NDA is mostly useless and is the telltale sign of an amateur.

There are a few things to remember about your idea that may help you in the future and steer you away from asking investors and partners to sign an NDA.

  1. Your idea probably isn’t that good.
  2. If it is good, there is a really good chance that multiple people or teams are working on a similar idea.
  3. Most people are too lazy or caught up in the there own lives and businesses to steal your idea.

Your Idea Probably Isn’t that Good

Most people have an inflated sense of how good their ideas are (I am guilty of this every day). Some of it is due to the superstar status that successful startup founders can now achieve and the belief that one idea is the ticket to stardom. What many entrepreneurs need to understand is that ideas in themselves are not what is valuable. It is the ability to execute on those ideas. History is filled with teams that had an initial idea and another team came along with better execution (see Facebook vs. Harvard Connect; Google vs. Bing; Microsoft vs. Sun). My advice is always to just focus more on the execution of the idea and less on getting signatures for NDAs. How long do you think you could survive if all of your energy goes to enforcing an NDA while your competitor is closing more deals, winning more customers, and acquiring more users?

If it is good, there is a really good chance that multiple people or teams are working on a similar idea.

There is a quote that I will paraphrase that says “Every good idea has at least 10 other people working on it somewhere else in the world. Every great idea has at least 100 people working on it.” For proof, just look at some of the greatest inventions in the history of mankind. Calculus was invented simultaneously by Sir Isaac Newton and Gottfried Leibniz in the 17th century. Charles Darwin and Alfred Russell Wallace discovered that they had developed theories of natural selection separately in 1858. If some of the greatest discoveries in history were being worked on simultaneously, you can bet that your social cloud image-sharing app is not unique in the world.

Most people are too lazy or caught up in the there own lives and businesses to steal your idea.

Most people really have no interest in stealing your idea. I truly believe that after almost 20 years of technology, consulting, and advising. I attribute most of this to pure laziness. In addition to laziness, people have their own lives and work to deal with that have nothing to do with you or your idea. If more people had the drive or real interest, they might steal your ideas, execute on them, and become the next startup billionaire. However, it is more likely that you will share your idea, they will tell you how great it is, then move on to the next topic. If they truly want in on the idea, they will ask you what you need from them and proceed to tell you how they can help bring your vision to reality (through funding, introductions, coding, design, etc.).

I say all of this simply to show you that an NDA is not the path to protecting your idea or success. It simply shows potential investors and partners that you may have talent, but you are still playing JV ball. I follow James Altucher’s advice and simple life strategy to just give ideas away to others every day with no expectation of anything in return. If you are coming up with new ideas every day, then no single idea will hold any significance for you. You get rid of the fear of someone stealing your ideas and focus on executing only on the ideas that give you pleasure and match your interests.


Daniel is a digital consultant specializing in IT advisory on technology strategy, investment, and implementation. He helps companies solve complex and strategic problems across multiple industries and domains. His drive to find solutions for clients and attain personal growth for himself is what keeps him at the forefront of innovation and helps him guide teams and organizations to cultivate amazing products and services. He can be found on Twitter at @dewilliams.

How to Differentiate You Product Using a Competitive Matrix

beat the competition

Every business that provides a product or service needs to differentiate themselves from their competitors or alternative solutions. For purposes of this article, I don’t really make a distinction between competitors and alternatives since both will keep customers from using your product or service. For example, Amazon Books technically competes with Barnes and Noble (B&N), but an alternative to Amazon and B&N would be your local library where books are free.

 

When developing your differentiation strategy, you should look at the problems that your target customers have and how your product or service solves those problems. List each problem in a table or spreadsheet down the first column as in Table 1:

Competitive Matrix
Table 1: Competitive Matrix

When scoring your product, try to be as objective as possible, not overvaluing your product and undervaluing competitive or alternative products that solve your customers’ problems. Also, prior to putting together this matrix, your should already have a firm grasp of the problem(s) you are solving and who are your target customers.

The next step in this process is to do a quick calculation comparing your product against the average score of your competition’s ability to solve your customers’ problems. The process involves pretty simple math:

  • Take the average of your competitors/alternatives for each problem line (ex for line 1: (1.00+1.00+3.00+2.00+3.00)/5 = 2.00)
  • Subtract the average for each line from your product’s score for that line (ex: for line 1: 4 – 2.00 = 2.00)
  • Take the average of the difference for each line.

Table 2 below shows how this fictional “Fancy Problem Solver” stacks up against the competition with an overall score of 1.53.

Competitive Score
Table 2: Competitive Score

In my experience, anything less that a 1.5 has some serious competitive problems. Also, anytime you have this many competitors and alternatives, you should consider solving a different problem or creating a new category that doesn’t exist. This does not mean that you are making up a BS category to avoid the hard work of competing. What it means is that you create a new category in the minds of customers so that they no longer associate your product or the problems you solve with any other alternatives.

I have personally helped may clients define their product, competitive landscape, and how to position their solution in the minds of their customers. For example, I have a client that provides a luxury, high-end service. They were have trouble defining the services and attracting customers on a recurring basis. In looking at what they offered, I first determined that they were defining their services in the sports therapy category, when they should be defined in the luxury therapy category. Once we had a new category definition, we then reached out to multiple luxury car dealerships in the area (this is a very posh, well-to-do community in Southern CA) to offer memberships to the dealerships’ customers. All they need to do is show up with their key fob and they were treated like royalty. This has translated into an increase in foot traffic and most importantly, an increase in sales and profit margins.

If you would like to discuss how I can help with your product or service strategy, feel free to contact me via the comments or LinkedIn.

Life Strategy: Mental Models

I discovered the wisdom of Charlie Munger a few years ago and have been obsessed with his concept of Mental Models for solving both complex and everyday problems. I’ve been slowly working through mastery of each mental model recently as a refresher and to tackle some new challenges in life and business. I highly recommend going through the list and rank you knowledge of each from 0-5 (0 being no knowledge and 5 being mastery of the mental model). While I wouldn’t call myself a master of any of them yet, I have self-ranked 3-4 on a few of them that I find most useful and use frequently. Hope you enjoy!

Mental Models

Problem Solving: 5 Reasons Staff Augmentation Sucks and What to Do About It

In my role selling professional consulting services and IT solutions to Fortune 500 customers, I see a variety of support models ranging from simple staff augmentation to large-scale managed services contracts. Although best practices across multiple industries over the last 10 years has seen a gradual migration away from staff augmentation towards managed services, I still see push back for various logical (and illogical) reasons.

What if there was a intermediate step between staff-aug and managed services? Fortunately, there is such a step called “Managed Capacity.” This support model combines many of the perceived benefits of staff augmentation (flexibility, onboarding consultants quickly) with the benefits of managed services (vendor takes on responsibilities for deliverables, outcomes, and management of resources). We still recommend that clients start on the path to managed services, but we have seen the best outcomes when customers start with managed capacity to get accustomed to an outcome-based support model, then move to managed services with all of the enterprise advantages that it brings. Here are the 5 signs you are ready and should move from staff augmentation to managed capacity.

  1. Reason #1: You are seeing budget constraints from unplanned staffing or project costs.
    Every organization experiences unplanned costs due to staffing, projects, or changes in direction / strategy. Unfortunately, the easiest (and costliest) way to deal with this is to throw more bodies at the issue through staffing. In my experience, we have helped clients work through these issues via managed capacity where we take on the burden of managing deliverables, outcomes, and time/cost tracking.
  2. Reason #2: You aren’t seeing the project outcomes / progress that you expect from your vendors.
    No enterprise project portfolio is perfect and issues / failures do happen. However, if you are seeing a pattern of delays, quality issues, and/or project failures, then maybe the delivery model needs to be adjusted. One question I get from customers is “How would managed capacity help with project delays/failures?” One way in which managed capacity helps is the focus on delivery of required skills to get the project done and not just a “butt in a seat.” Secondly, customers get predictable and cost-effective outcomes. Third and most importantly, customers get active knowledge management that is retained and shared across the customer and project teams, reducing the risk of valuable IC leaving the if there is staff turnover.
  3. Reason #3: You constantly need to ramp teams up and down quickly for new projects or initiatives.
    Projects are one of the core elements of an enterprise and ideally, you would only work on planned projects on a carefully crafted roadmap. However, anyone that spent any time on a medium-to-large organization call attest that this is not always possible due to competing priorities, internal politics, and sometime just dumb luck. This is where managed capacity can help manage the shock of fluctuating project needs by outsourcing the overhead and maintenance of staff capacity to an external vendor with the experience and track record of outcome-based delivery.
  4. Reason #4: You are working on new, complex projects requiring specialized skills.
    Many projects that enterprises undertake are pretty routine and straightforward (maintenance, enhancements, etc.). However, in order to stay competitive, organizations must innovate with complex projects requiring specialized skills such as new application development, data migration, cloud migration, or new strategy development. Managed Capacity allows us to support a range of skills with minimal risk to the customer. We take on the staffing, deliverable, and outcome risks of complex projects where there many “unknown unknowns.”
  5. Reason #5: You are facing new threats (internal and external) and need your project teams to be more efficient and effective.
    There are always new threats to your organization (both internal and external) that you need to address and overcome on a daily basis. How you take on these threats can affect your success or failure in the short-, medium-, and long-term. If you go with a pure staffing model, you will get the ramp up in bodies, but what is the guarantee that you will have the staff you need in the right place at the right time? With new pressures from large enterprises, SMBs and startups, the ability to deliver better outcomes at a lower overall cost could be the key to your organization keeping into advantages and the key to your individual success as a manager or executive.

If you are interested in learning more about managed capacity or managed services, feel free to contact me in the comments or on LinkedIn.

Podcast: The Beauty of a Bad Idea

Masters of Scale

I found this episode on the Masters of Scale podcast incredibly insightful, with advice on dealing with rejection in business and what to do when you are convinced that you are onto a great idea. Enjoy!

Show Info:
The best business ideas often seem laughable at first glance. So if you’re hearing a chorus of “No’s” it may actually be a good sign… Google, Facebook, LinkedIn, Airbnb — they all sounded crazy before they scaled spectacularly. So don’t be discouraged by rejection. Instead, learn to hear the nuance between the different kinds of “no.” That’s what Tristan Walker did. After stints at two successful startups, he launched out on his own with Walker & Company, makers of the Bevel razor — and learned to navigate the entrepreneurial minefield of investors who may or may not share your vision.

Elon Musk, Telsa, SpaceX, and First Principles Thinking

Wait But Why

I spent almost 2 weeks reading a  4 -part series on Elon Musk, Telsa, SpaceX and the goal of Getting to Mars, and First Principles Thinking on Wait But Why. The posts are from 2015, but are still relevant today given what we know about the success of Telsa and SpaceX. As I read through each post, I felt like I was going deeper and deeper into a rabbit hole of the importance of engineering, physics, and the need to solve the world’s biggest challenges. By the end, I felt myself asking why more companies aren’t trying to solve big problems and why governments aren’t taking the issues of climate change, population growth, and the probability of humanity being wiped out by a man-made or natural disaster seriously.  I highly recommend reading the entire series for anyone interested in science, tech, engineering, and entreprenuership.