Trizle

On Inc. Magazine, BusinessWeek, and most other media outlets, we're constantly bombarded with Joe Schmoe tackling the IBMs and Googles of the business world. Somehow, entrepreneurs began to fancy that myth. They thought, like we once did, to succeed, they'll have to attack bigger companies. Who have deeper pockets. With bigger resources. With an established customer base.

Not the best strategy for startup businesses.

Entrepreneurs who narrow their focus toward competing against Goliath are doomed to fail. Rather, says Columbia's Amar Bhide, startups should focus on partnering instead of competing against large companies:

The common wisdom was wrong then, and it is wrong today. Large corporations and small start-ups are not mutually exclusive organizational forms. Rather, they exist symbiotically, each requiring and drawing on the unique capacities of the other. Yes, it is easy to point to examples of upstarts attacking incumbents, such as Compaq taking on IBM and Amazon.com targeting Barnes & Noble, but such battles are exceptions to the rule. Most start-ups pursue small, low-cost, and highly uncertain opportunities, while giants take calculated risks on large-scale initiatives. David and Goliath do not wage battle; they rely on each other.

Trizzy first started out as a computer hardware company. We wanted to build the greatest servers, and the greatest business-focused computers and workstations. Our target: Dell Computers. No, this didn't occur in the early 1990s when small companies had a legitimate shot at taking on Dell. This occured in late 2003.

To keep it short, we bombed.

We couldn't compete against Dell, HP, or even smaller giants like Alienware. They had too many resources, and too much of an established customer base to have them switch to our computers. Luckily we realized the reason why: startups just trying to establish their cashflow can't compete against the Goliaths of the world. Rather, startups need to find ways to work together with those large companies. As disruptive-innovation guru Clayton Christensen likes to teach, small companies can't compete against larger counterparts on product features. Instead, Christensen's studies show startups need to attack markets where the biggies aren't serving.

Using the Disruptive Innovation Approach

For our computer hardware business, that meant services. Bigger companies could provide the hardware, but couldn't service smaller businesses. They had headquarters around the country, but not around small cities. That's where we came in. Luckily, that kept us in business. And most fortunately,

that mindset of serving the under-served accelerated our business and cashflow

. If you think you can compete against the Fortune 500s, think twice about it. You might just, and probably will, make 10-fold if you'd complement their products.

It begins with trust. It begins with building relationships. Even if you're doing a cold call, you still have a few minutes to build that relationship. Throughout my career, I've noticed the best sales tactic isn't even that at all. It's not about looking inward, and focusing on how many orders you can achieve. It's about looking outward, and seeing how you, your products, or your services, can improve the life of the person you're talking to. Says University of Dallas's Saul W. Gellerman, who studied auto product salespeople:

As I watched, I detected an almost inverse relationship between the size of an order and the amount of effort sellers put into persuasion. Most large orders were obtained without a great deal of selling per se. Within minutes, customers who evidently respected and trusted these salespeople began placing orders, often following their recommendations. These customers seldom commented on prices. So it appeared that large orders were less the result of a seller's tactics during the call than of relationships built up during previous visits. On the other hand, when sellers pleaded for an order, fought for an order (praising product after product, or price after price), or listened patiently while the customers digressed at length about baseball, politics, the local economy, or anything but the seller's products -- the resulting orders were likely to be small. This outcome also suggested that customers discriminated among sellers and that established relationships determined a customer's willingness to do business with one (or a few) sellers out of many.

If you're a new at sales or struggling at it, switching your focus from inward to outward will dramatically improve your success.

What a concept! I remember Jim Collins in Built to Last comparing time-tellers to clock-builders. The story went like this: a genius once long ago could tell time by simply looking up at the sky. He developed such a keen sense to time that everyone around the villages, and from afar, flocked to him. On the other side of town, a man unknown to many was busy building a clock. He couldn't tell time by looking up to the sky if his life had depended on it. He wasn't a genius by any means, much less a genius like Case Study A above. But, Cast Study B built a clock that could tell time independent of him. That is, if he wasn't there, if he fell off a cliff one one day, those who had the watch would know the time precisely. That's unlike the genius above, who if he went missing, people 1000 years later wouldn't know the time. Innovation can be a great thing. But as we've always insisted, all product innovations become obsolete. How then will you compete? Build a clock, and don't be a genius. Build an organization that can exist beyond you, independent of you, that will produce a constant stream of innovations. Focus on your operations. How is your organization adapted to produce a constant stream of innovations? How simple is it to go from step A to step Z in your company's innovation cycle? How are you monitoring competitors and non-competitors, and adapting your innovations to it? Once you get in the mindset of building an innovation factory and not an innovation product, you'll be that much closer to building the next multi-Zillion dollar innovation. Word.

Says Innosight's Scott Anthony, "We believe that strategies based on disruptive innovations have the highest chances of creating growth. Generally speaking, these innovations offer lower performance along dimensions that incumbent firms consider critical. In exchange, they introduce benefits such as simplicity, convenience, ease of use, and low prices."

Most IT companies praise how productive you'll be by using their products. Truth is, it's false. And this is coming from us, an IT company. As we've mentioned often to our clients, you're not ready for technology until you can run your business without it. Technology must only be the accelerator to your success; it can never be a creator of it. Get your processes and fundamentals down first. Then, and only then, look to technology. Says Harvard's Business Review during the 90s tech boom:

U.S. businesses nearly doubled their rate of IT investment. The conclusion was irresistible: IT investments, at last, were paying off big. Not so fast. A recently released study by the McKinsey Global Institute examining the causes of the productivity boom in the late 1990s found only a murky relationship between IT and productivity growth. While IT did have a major impact on productivity in some sectors of the economy, it had virtually no effect in others, the report concluded, and it certainly wasn't the most important factor in the expansion.

If an IT company tells you how successful you can be with their products without first understanding your business, run.

I remember my first sales job years ago as a teenager, selling frangrances out of a bedtruck during a hot summer month. My first day on the job, and I was out on the frontline -- with absolutely no knowledge to go on. I had co-workers, but they were busy trying to please the boss by selling their own wares. Of course, I couldn't blame them. We all worked on commission, and that commission was solely dependent on how much we individually sold. Too bad that summer month didn't end too well for me. I earned $5 the entire summer, and that was from company charity. If you structure your company's compensation based solely on individual performance, take note: you may be causing more harm than good to your bottom line. Says Boston University's Marshall W. Van Alstyne:

We found, as predicted by economic theory, that the people rewarded for individual performance shared information least; the people rewarded for team performance shared more; and the people rewarded for company performance shared most.

He goes on to describe the influences of different compensation systems:

If compensation is linked to one's performance relative to others, then employees are likely to hoard information to both maximize their own performance and undermine (or, at least, not benefit) others. But if rewards are tied to firm performance, then individuals stand to gain most from activities -- like free knowledge sharing -- that benefit the company.

If you want a company that works together, make your compensation based on promoting teamwork.

A lot of us get so caught up in trying to do so many things at once, from crafting visions, to incorporating systems, to -- you name it; but we ask ourselves: are we doing too much? If you're like us, you are. I'm looking at our to-do (a.k.a. "to-learn") list, and there's a pile of items that are waiting to get done. Or at least, we'd like to get done. Having a to-do list is fine and dandy. But, as Jim Collins puts it, having a stop-doing list is equally important. This helps you to concentrate on what matters most, and rids you an array of distractions.

Clayton Christensen introduced the concept of disruptive innovation just less than 10 years ago. He described the process as rebelling against traditional innovation--you know, instead of "improving" on exisiting technology by adding features (for example, instead of 4 blades, 5 blades; instead of mp3 player, mp3 player + FM radio player), he said true innovation comes from providing a product with lower costs, simpler features, and targeting an underserved market. In practice, a 8-track player wasn't eclipsed by a 9-track player. Sony's WalkMan disrupted the technology, and introduced an entire new market by lowering costs and features. That product, then wasn't overthrown by a WalkMan + USB cable; the CD player disrupted it. Then, the mp3 player disrupted that. Now, Apple's iPod is the king of the hectic jungle of innovation. If you want ot build an innovation factory, don't focus on improving on existing technology. Somewhere, somebody is trying to disrupt your successful technologcal "breakthrough/" To combat it, disrupt your own technology. Make it obsolete. Of course, don't kill it off manually because that gives you some precious cashflow. Instead, let evolution take hold, and let it die naturally -- as your new disruptive innovator takes control of the market. When you do stop? Disrupting your products, systems, and processes is a never-ending cycle. Remember, all products--no matter how innovative--become obsolete.

How many times has your to-do list gone unfinished? If you're like most of us, most of your to-do items never see the light of day. If our to-do lists don't work, what does? If you read us, you know we love Jim Collins. One of our favorite insights include this gem on becoming a "to-learn" person instead of a "to-do" person:

Becoming a learning person certainly involves responding to every situation with learning in mind, as Walton did. But it involves more than that; it requires setting explicit learning objectives. Look at your personal list of long-term objectives mid-term objectives, and your current to-do list. How many items fall into the performance genre and how many fall into the learning genre? How many begin with the structure "My objective is to learn X," rather than "My objective is to accomplish Y"? Most people operate off of to-do lists. They're a useful mechanism for getting things done. A true learning person also has a "to-learn" list, and the items on that list carry at least as much weight in how one organizes his or her time as the to-do list.

When I started Trizzy, I knew I wanted to accomplish a lot. (A lot!) Yet, as I tried, I felt fatigued and deflated every time my tasks on the big ol' calendar went undone. It turned out I approached my tasks incorrectly. Instead of determining each week how many things I needed to accomplish, I should've saw the weeks as opportunities to learn new things. As Collins says, instead of a "to-do" list, we need to disrupt the method by transforming it into a "to-learn" list. Paradoxically, when I've done that, I've accomplished much more in the process. Try it for a week, and let us know how it works out for you. We can assure you your life will change dramatically.

Chances are your new college graduate has a bank of ideas you could use to improve your business. Unfortunately, most entrepreneurs don't tap these opportunities. When you give your new employees freedom to innovate, you'll receive surprising results. Says Andrew Hargadon and Robert I. Sutton,

Innovation can be bolstered anywhere if people are given opportunities and rewards for taking good ideas -- as long as no laws are broken -- from all sources inside or outside the company.

As a youth, I did frangrance sales for a small business, and had -- what I thought, anyway -- some great ideas to improve the business. Yet, thinking my boss wouldn't hear them, I held back my thoughts. Years later I'd learn the boss would've welcome those ideas. Now at Trizzy, when new hirees work with us, we make sure they know the company welcomes any and all of their ideas. We're in the process of systemizing the process. How so? One of the ways is by awarding those who chime in, and punishing those who don't. Just because we're open to broad innovation doesn't mean employees and contractors know they're able to dramatically contribute to the company. Hopefully, with systems in place, we won't have to confront those barriers to innovation again.