I couldn’t miss an event billed “How I beat my competition by out-executing them with Gurbaksh Chahal and Lyle Fong “, a VLAB Emerging Business Event in their “Entrepreneurs Uncensored” series. Gurbaksh and Lyle are two very inspiring entrepreneurs. Just hearing their stories made for a great event.  But they were there with a message to start-ups: you can compete with bigger competitors by executing better, by competing – and winning – on execution.

Panel moderator Ravi Belani of Draper Fisher Jurvetson kicked off the discussion by sharing the story of an accomplished pianist. When told by an admirer “I could never play as well as you” the pianist replied, why yes you could, if you practice 6 hours a day, year after year, giving up lots of other things you could be doing. The lesson of execution is nothing is wrapped up in a bow, the reality is a lot of hard work just do it get it done.  Ravi’s story reminded me of the “10,000 hour rule” from Malcolm Gladwell’s book Outliers. Behind every “natural genius” or “overnight success” is 10,000 hours of hard work – and some luck.

Lyle left UC Berkeley because he hated learning from books, and started doing what he loved (gaming). He turned that into a series of increasingly impressive businesses. Lyle is now CEO of the Social CRM company he founded, Lithium Technologies, the largest in its space.

Gurbaksh had a problem to solve (he needed to make some money). He was turned down for a job flipping hamburgers, so at age 16 he started an internet advertising business and never looked back. He sold his second company BlueLithium to Yahoo! for $300M in cash. He is off and running again with a virtual currency platform company gWallet, a best selling inspirational book about his journey “The Dream” and even an Oprah interview.

Lyle is a case study in “do what you love and the money will follow”. Gurbaksh is a case study in “just do it”. Both are entrepreneurs who, in Gurbaksh’s words, “started with a low-capital plan and executed. At the end of the day, it’s all about execution. It’s sweat equity.”

As true as this message is, hard work is not the same as execution. Many people work really hard at their jobs, but their company as a whole doesn’t execute well.  Many more entrepreneurs don’t create a successful business than those that do. Yet with very few exceptions, they all worked really, really hard. Hard work is necessary, but insufficient.

Gurbaksh shared this insight: “There is a reason startups exist. They exist for an ability to execute. It takes big companies a long time to execute.” So do startups have some natural ability to execute? Well, no, not any more than there is a natural pianist; it takes many hours of hard work. But we know hard work isn’t enough.

Let’s do some quick math. Let’s say you are part of a team of three co-founders. You’ve committed to working really hard for one year to get your first product out the door.  You put in the hours so in one year you have roughly 3500*3=10,500 hours into your first product. Now add people. Everyone’s working hard and the hours add up. But not quite as smoothly.

When you were three people, you knew what to work on, and differences were resolved quickly. As you grow, it gets harder and harder for everyone to know what to work on and when, what to prioritize, how to solve issues. You gain hours but you also lose hours, hours on miscommunication, hours working on the wrong things.  Left unchecked, the bigger you grow, the more hours you lose. It slows your output, your ability to execute.

Big companies usually don’t execute well because they lose a lot of hours. There’s just a lot of unproductive or counter-productive stuff going on. Startups have less, and so can typically execute better. But not always, and not for long. Not unless startups are mindful of, and build in, what it takes to execute as they grow.  Successful execution is about alignment and motivation that grow from and are sustained by core values. It’s about building a company where you would want to work.

Entrepreneurs often resist the idea of core values as more of that big company unproductive stuff.  Zappos’ CEO Tony Hsieh was one.  In a NYTimes Corner Office interview, Hsieh recalled “I was very hesitant, because it just felt like one of those big-company things to do. But within a couple of months, it just made such a huge difference. It gave everyone a common language, and just created a lot more alignment in terms of how everyone in the company was thinking. If I could do it all over again, I would roll out our core values from Day 1.”

Execution is about hard work, but it’s also about all that hard work moving in the same direction. Gurbaksh and Lyle are remarkable entrepreneurs. Their advice is golden: Pick a vertical where you can be very strong. Solve one problem really well, learn and grow into the entire space. Execution is everything.

How startups can out-execute the big guys, part two

This post first appeared on Blogging Innovation as Helping Others Go Vertical on 3/7/2010

Keen Mobility is a story of innovation, invention and entrepreneurship. Innovation is often focused on inventions and new products, but innovation is also a new way of thinking about conventional wisdom.  Jeffrey Phillips wrote an insightful post “Innovation, Invention and Entrepreneurs”, defining innovation as “a new idea that is put into valuable or profitable action.”  What is so wonderful about the Keen Mobility story is how Vail Blackwell Horton and Jerry Carleton combined innovation, invention and entrepreneurship to deliver value for a large, under served population and create a profitable, growing business.

Keen Mobility was founded by Vail Blackwell Horton and Jerry Carleton. Vail and Jerry were college roommates at the University of Portland (UP). Vail, born without legs, had been using artificial legs to walk but the crutches he needed to use with the artificial legs were destroying his shoulders. He wanted to find a better way to keep walking – for him, and for others. Vail went in search of a way to fulfill this mission.

Vail brought an idea for a new type of crutch – one with shock absorbing technology – to a group of engineering students at UP. He suggested the engineers try to build a working prototype for their senior project. They agreed, and the student engineers went to work. The concept worked! The engineering students successfully built a working prototype, and Vail and Jerry realized their concept could fly. They set off to start a company to build a product that would help Vail stay vertically mobile, and help others do so as well.

Full of enthusiasm, Jerry and Vail looked at each other across the table of their rented student digs in North Portland, asking what all entrepreneurs ask at this point, “What now?” They had zero idea how to launch a company and needed expertise and funding. Financing is tough at the best of times, but this was in 2001, in the midst of the dot com and telecom bust.

Jerry and Vail called the UP Center for Entrepreneurship. They also set up every meeting, coffee and lunch they could with people they could learn from. By approaching people for mentorship, not funding, they built relationships for the long haul. The company wasn’t bankable at this time, but many of these early contacts later became investors.

The UP Center for Entrepreneurship encouraged the team to enter UP’s Entrepreneurs Challenge and other business competitions. By April 2002 they had won the $10,000 first prize in the UP competition and third place in Portland Business Journal’s business plan competition, winning $35,000 in cash and services. UP sent them to more competitions around the U.S. where they consistently finished in the top three.

The team also looked for other sources of funding. They wrote a successful proposal to UP to fund their trade show booth and travel costs.  They contacted the National Collegiate Inventors and Innovators Alliance (NCIIA). With support from the Lemelson Foundation, NCIIA awards approximately 2 million dollars in grants annually to college students or recent graduates of member institutions.  Keen was awarded a $10,000 NCIIA grant funding prototype development and provisional patent filing costs.

A great partnership, Vail focused on creating the product and the vision for company while Jerry continued fundraising efforts. The VC environment continued to be difficult. Jerry “took every meeting he could get”.  Innovation continued. They partnered with universities where student engineering teams would apply to NCIIA to prototype Keen’s new product ideas. Frugality reigned supreme. In one example, now part of the company’s lore, Jerry opened the company bank account at US Bank because of their “Five Star Service Guarantee” that said if you waited in line for more than five minutes, they credited $5 to your account.  Jerry made sure to pick the longest line in the bank every time.

The business plan competitions were great for press, as was their compelling mission to keep Vail and others vertically mobile.  Jerry recalls, “We were never in crisis capital mode, we had options.” When they went out to raise their first preferred round, they “couldn’t stomach” the VC terms, so they turned to angel investors. Jerry was on the road, once meeting in six different states in 48 hours. Jerry had the mindset, “every person was a potential investor, or knew a potential investor.” Jerry hit the mark – the company’s first preferred round was oversubscribed.

Innovation also comes from understanding your market. One of Keen Mobility’s best selling products lines today, Tru-Relief^™ foam, started as an important addition to their shock absorbing crutch.  When looking for a solution for shock absorbing underarm foam, they discovered a superb foam that could also relieve pressure points. Pressure sores can cause severe discomfort to wheelchair users and can be life threatening.

A crutch with shock absorbing technology was the company inspiration but ultimately represented only a small market. The team realized they needed a full suite of “world-class products focused on safety, mobility, and comfort for the disabled, elderly and injured.” They now focused their efforts on building out their product line.

The team went on to close their Series B preferred, again oversubscribed, with about half coming from Series A investors, and half new investors. In 2005, Keen added their first institutional investor, Crobern Management Partnership, after the Series B close. Jerry describes Crobern as “a venture firm with an angel attitude”. Crobern’s focus in health care, and their ability to provide value beyond the dollars, has been a great fit with Keen. Jerry points to their early years as an important training ground. “The training we received in the lean years gave us such a respect for the money we raised.” Needing only half of the first tranche, the company gained credibility with their new investor when they bought CD’s with the extra money.

Keen Mobility today has “over $2.5 million in annual sales, 25 different product lines, more than $1.7 million in capital, and 12 employees. Keen Mobility has also been recognized by the Oregon Entrepreneurs Forum as one of the three most successful growth-stage companies in the state, ranked number 30 on the 100 Fastest Growing Private Companies List, and was placed on the Governor’s Honor Role for Employers of People with Disabilities.” Keen Mobility has been named in 2008 and in 2009 to Inc.‘s annual ranking of the fastest-growing private companies in America and to the Portland Business Journal’s Oregon 100 Fastest Growing Private Companies list three consecutive years. Vail and Jerry were both named to the “Top Forty Under Forty” list by the Portland Business Journal.

Vail holds numerous honors, including his appointment to the Secretary of State Advisory Committee for Worldwide Disability Policy and was named an “Oregon Healthcare Hero” by Senator Gordon Smith on the floor of the US Senate.  Vail is also founder and chairman of Incight Foundation, dedicated to empowering people with disabilities through education, employment, networking and independence.

Jerry, who from year two was amazingly attending law school at night, was admitted to the Oregon Bar in 2007 and joined Bullivant Houser Bailey PC.  “Having a real life case study to immediately apply my classroom lessons was an incredible opportunity.” Jerry’s hard won lessons in founding and growing Keen Mobility inspired him to “pay that forward, taking companies into and through the trenches.” He continues to be part of Keen Mobility as a Director and Officer of the company.

Vail and Jerry’s story, the story of Keen Mobility, is a story of innovation, invention and entrepreneurship.  From Vail’s initial inspiration and invention, they used creativity, ingenuity, dedication and hard work to grow their company. What Vail and Jerry show us is that innovation is a mindset, that when confronted with challenges, new ideas can change the game.

My guest post on SuccessFactors Business Execution blog 11/6/09:

CEO’s continue to rate execution excellence as their top challenge. But what does “excellence in execution” actually mean? The CEO wants to turn the wheel and have the ship respond, but according to extensive research repeated year after year, only 10-15% of wheel turns get the ship moving in the intended direction. This means most ships are positioned poorly to weather a storm, and are also very likely to miss the trade winds of opportunity.

This disconnect between the captain, crew and ship is what I call the execution gap. Nobody argues there isn’t an execution gap in most companies. No one argues the execution gap isn’t costly – after all 85% of financial performance comes from execution. The big question is why? Why is there an execution gap? The basics of good business execution are thoroughly researched and described:

• Business alignment and
• People performance.

Excellence in execution requires an organization aligned around simple and clear business values. But the best practices on business alignment and people performance fly in the face of many of our deeply held but unexamined assumptions about leadership, teams and motivation.

There is a whole body of research around these deeply held but unexamined assumptions – social proof, fixed mindset, the liking effect, our oversimplified models of human behavior to name a few. Each of us has our own unique set of these assumptions, and companies are challenged to get complicated messages across such a diverse backdrop.

Excellence in execution is infrastructure, because processes and tools can incorporate and model best practices in execution to a degree and with a speed and flexibility not previously achievable for most organizations. And the results are clear. Companies that use processes and tools that incorporate execution best practices outperform their competitors.

Business execution software platforms like SuccessFactors propagate the company strategy to help the crew prioritize the one thing they need to do today from the 10,000 demands on their time. Crews who understand the priorities can apply their own wisdom and judgment – an execution best practice that increases company performance and individual motivation.

Together with social media software platforms like Spigit for internal innovation and Jive, SocialText, PBWorks, and Yammer for internal collaboration, these execution platforms create huge opportunities for companies to get their execution culture right and get it implemented. Internal collaboration and innovation tools create a dialogue within the company, allowing all crew members to inform the strategy and improve processes. Social networking communities, blogs, forums and Twitter let companies extend their culture and values beyond the organization and engage with their customers at a whole new level.

CEO’s no longer have to shout over the wind while crew members rush around trying to find and do their jobs, making their best guess as to what direction to set the sail. CEO’s can now steer an interconnected ship. The crew is connected to the CEO and to each other. The crew also has connections to the outside world that they can bring into discussions of the ship’s performance.

The execution gap is real, and is costing you money. The problem is not strategy, or analysis. “People know what to do but don’t do it”. Create a backbone for excellence in execution with tools and processes that model your values and incorporate best practices and you’ll fly across the seven seas.

I love working with scrappy tech companies. You know the kind: full of fighting spirit, heads-down, close to the customer, focused on delivering excellence day-to-day. These aren’t the kind of people that put together a slide deck to shop around for funding or put their toe in the water and dabble with a company idea. This is the team that gets together and starts building something to solve a problem, often testing it with their first customer. They dive head first into the pond and hope it is deep enough. Soon there is a second customer, or a second order, and the thing just starts to roll. Fantastic. And it keeps on rolling.

Here’s the challenge. It all worked so well in the beginning; the leadership team wants to keep doing the same thing. But the Darwinian fact of life is “evolve or die”.  Doing the same thing usually works for a while. But, if they are seriously doing reality checks, it will be clear it is working less and less well. Perhaps that first customer is still 80% of revenue. Or there isn’t enough cash to get past the day-to-day requirements. And the ability to ride out shocks like the recent one approaches zero.

The fundamentals are there. What’s missing is the recognition that doing the same thing in the same way and expecting a different outcome meets Einstein’s definition of insanity.

Scrappy tech companies, like personal savers, need to pay themselves first – they need to save a percent of cash and mindshare to think about where and who they are in their business ecosystem, and to plot out where they want to be a few steps out. And then they need to apply that same scrappy creativity that got them started to increasing their ecosystem footprint and their chance of evolving to the next level in the game.

“Hire product managers when you want to sell to someone who is not just like you” – hard earned experience by NetApp’s David Hitz. I’ve worked with many tech companies that, sadly for their customers and for their business, don’t want to invest in marketing and product management isn’t even on their radar.

Product Managers keep the product development process focused on the KISS principle. Product Managers tell engineers and programmers things like “we don’t need that one button to do 100 things just because it can”. They keep “The Design of Everyday Things” in mind. They are the wardens of Alan Cooper’s Asylum, in charge of keeping all users sane (and happy) when using your products.

For product management to be effective, you have to give it some teeth. When I first joined Intel, Andy Grove was CEO and Intel was essentially a one product company with Andy as Product Manager. Everybody marched to Andy’s beat. I described it at the time as an ant hill, and I meant it as a compliment. That’s what I call teeth because the company followed the product.

Don’t defang product management by muddling it up with marketing. Product management needs to be “the hub of many other activities around the product“, not just promotion. As the company and product line grows, effective product managers need to own the product P&L

Product Management gets you well on your way to product excellence. But you also need to rethink the development process.  “6 degrees of separation between developers and end-users is 3 too many. It’s hard to keep users happy with that disconnect” (via @dhague ). @jamet123 even counted the steps and sure enough, 6 degrees of separation:
1.Users tell an analyst what they want
2.The analyst writes a requirement document or a high-level specification
3.A technical design gets developed
4.Code gets written to implement this design
5.Testing finds flaws and issues and these get resolved
6.The user gets to try and use the resulting application

There are a whole lot smarter technology options out there now to build or rebuild your systems. Business rules breaks the language barrier between the business and IT. SaaS and web platforms allow for rapid iterations. Think about what’s right and smart for your business, hire those product managers and snuggle up much closer to your customer.

Sarah Lacy asks an excellent question in her recent Tech Crunch post, Is Execution More Important Than Vision? She walks us through a couple fun “pioneers have arrows in their backs” stories where pioneers like Napster didn’t see the rewards of the iTunes who came after the trail was blazed.  She concludes that Silicon Valley is a place where, with some exceptional exceptions like Twitter, execution trumps vision.

Three cheers for Sarah, because execution does trump just about everything.  But vision isn’t an either/or thing. True, vision is sometimes an insight into a completely new idea or new market. But mostly, and more importantly, vision is where you want to take your company and what you believe in.  It’s the fuel for
the execution engine. If you can’t see where you want to go, if you don’t know who you are, you will just drive your bus around in circles.

So, is execution more important than vision? Vision is necessary, but not sufficient. Think big, then be great at execution.

I am a fairly recent twitterer and to my surprise, I find it compelling. I seem to find more interesting and relevant links from Twitter than from my RSS feeds, even though I have hundreds more of those. What is it about Twitter? This puzzled me.

Then yesterday I read this great blog post that made many good points. It linked to an even better video also making tons of good points. I wanted to tweet about them and as I was thinking about what to say in my tweet, I realized that I was going through the mental process of what authors Chip Heath and Dan Heath of Made to Stick call finding the lead.  If I wanted to pique interest in twitter-land, enough to inspire others to click on an obscure tiny url, I had to do exactly what Made to Stick advocates – relentlessly prioritize and find the core message.

In this respect, twitter is a case of back to the future. Heath and Heath recall the early days of the telegraph. Civil War reporters borrowing military telegraphs might be bumped at any moment so they sent the most important information first.  Like these reporters, I have to put the most important information first when I tweet. That’s the lead, my lead. I have 140 characters to get my message across, minus the tiny url and any # code. Talk about relentless prioritization!

What makes Twitter even more interesting is that my lead won’t be the same as yours for the same news or blog post. Instead of the same copy being replicated across many sites, the bane of internet content, my lead and your lead add to the conversation.

The Heaths also remind us of what James Carville famously said during the Clinton ‘92 campaign. “If you say three things, you don’t say anything”. The blog post that inspired this blog post made many great points yet just one day later I don’t recall what the core message of that author was. Twitter, on the other hand, says “this is the one thing I want to say”. And now you have said something.

The same lesson applies to building your company.  What is the most important thing you want to say about who you are? Your company’s lead is its touchstone. As I talked about in “I’d Fly Costco”, your touchstone shapes your decisions and drives loyalty and trust. It’s what Heath and Heath brilliantly captured in their illustration of the Army’s Commander’s Intent, the “crisp plain-talk statement that appears at the top of every order, specifying the plan’s goal, the desired end-state of an operation.”  Detailed plans blow up when confronted with reality. Knowing the goal doesn’t.

Twitter works when you find your lead. So will your company.

You start your new company, full of energy and momentum. Your team is aligned under the banner of simple yet powerful values. You company is agile, takes risks, innovates and solves problems as they arrive. Then you grow the next notch, implement a budget and planning process, and wait, do I hear those entrepreneurial wheels grinding to a halt?

In an earlier blog post “Strategy, Startups and the Elephant” I talked about the challenges of living the “entrepreneurial execution” dream even for entrepreneurs. There is no free lunch. This entrepreneurial magic doesn’t just arrive and embed itself. It takes an awareness of what drives this culture. The values and the supporting processes have to be there to keep it going. Processes that kill it have to be avoided like the plague. There is a reason why many companies don’t succeed in building a high performing execution culture. Companies by habit implement a traditional command and control budgeting and planning process, and by definition these processes drive command and control behaviors. Command and control is not what you want.

Try instead what Jeremy Hope, Director of the Beyond Budgeting Round Table (BBRT), calls “adapt and endure”. Isn’t that what we are doing at the start, anyway, adapting and enduring? If we do it well, we get to the next level in the game. So keep doing it! Don’t get talked into implementing annual budgets, annual resource allocations, fixed targets and the inevitable actual-budget-variance reporting. Jeremy perceptively calls the traditional budgeting and planning process “a highly political management game often unhinged from reality”. Management is continuous, and shouldn’t start and stop based on accounting deadlines.

Jeremy Hope illustrates his point with a business version of The Tortoise and The Hare fable. Hares set wildly aggressive targets and incentives that they “control” through detailed and rigid budget processes. These targets provoke lots of internal negotiations that quickly have less and less to do with external realities. Tortoises “keep their eye on the path ahead and continuously improve performance. Their aim is to adapt to changing conditions, beat their peers.” And we all know the end of this story. The Tortoise wins.

You can build into your company the ability to adapt and endure by avoiding the command and control trap of traditional budgeting. Key to building in entrepreneurial execution is the rolling forecast. As Jeremy said at the recent BBRT conference “Don’t roll it up, leave it where it is!”

Remember the lessons of The Knowing-Doing Gap. Doing something, even just one time, establishes precedent that will too often override thinking. So make sure you choose wisely when growing your company.   Don’t mindlessly adopt company practices and processes that distance you from reality. Think through the consequences and choose those processes that fit your goals. Choose to stay entrepreneurial.