When I Start a Business How Do I Pay People Without Money?

Business Incubator and Activator Series 1.1

Last year my son and I pondered launching a consulting business together.  As always, startup capital and which of us would get paid as partners (and how) were on the table.  He had left his day job and I had not.  So that was question was easy!  

At the time, we were working as consultants with John Gavigan and 43 North, the wildly successful Buffalo, NY incubator and activator at the heart of the Buffalo business renaissance.  In new ventures, a common question by the entrepreneur is: "I really need a partner for startup capital, but we have not gone to revenue yet.  Got any ideas?"  As a matter of fact, yes, I do.

I can’t pay them…

Who says you need to? You can get people to work with/for you by providing many different forms of compensation besides monetary. Sounds far fetched and I really doubted this at first, my initial impressions was that people would only work with you if they have a deep stake and feel like they’re part of the founding team. WRONG.

Here are some alternative ways of compensating people who can help you build your startup:

• Equity – yes, you can give equity without making someone a co-founder. Just make sure it’s vested.
• Revenue sharing – and agreement to split the equity generated from a specific project/product. You can add clauses that limit duration and determine the portion of the split.
• Strategic partnership – working alongside partners to provide them value with your product/service in exchange for them helping you build it up.

For help getting past constraints and roadblocks as you build your business, email me anytime!  --Kevin 

Five Challenges of a Family Business

In 1977, my father ventured out on his own as an entrepreneur to start our family printing business, Port of Printing.  As the oldest son of a business-owning father, I experienced organizational dynamics I would only learn to put terms to many years later as a graduate student in an MBA program.  

My being the oldest son in a family business set the course of my career.  The small to medium-size family owned business (SMB) is where I have spent most of my life in both middle and now senior management roles.  

For those new to the SMB world, Gartner Group defines SMBs as follows: Small businesses are usually defined as organizations with fewer than 100 employees; midsize enterprises are those organizations with 100 to 999 employees. The second most popular attribute used to define the SMB market is annual revenue: small business is usually defined as organizations with less than $50 million in annual revenue; midsize enterprise is defined as organizations that make more than $50 million, but less than $1 billion in annual revenue.
 
Recently, I have had the privilege of working with a great family in creating and executing a continuity plan as the family has become older and decided to have its first non-family key executives.  

Here are five challenges of working in family a business:

 1.  Family politics: Many family businesses operate like a gang or The Mafia.  As family members, we need to focus on building a strong family as the core of the business. As non-family members, you will never be part of the family (even when owners like to say you are), so never take sides when family members discuss family issues. 

2.   Change: Growth of business means learning how to deal with honoring the past while creatively destroying it in order to keep competitors from destroying you first. 

3.  Communication is at the heart of leadership: The flow of information between management, owners, and board is critical to decision-making, change, and growth.  This is the essence of governance and leadership.  When there is "back channel" communication (i.e., triangulation), gossip about family members, and negative judgments without direct conversation, family tensions will be high and dissension present. 

4.   Culture: As a big fan of Dr. John Ward's work on family business, I find his definition of family business culture both accurate and academically precise: "Culture is the result of what a particular group of people think and share together as being most important to them (values) and as a result, their shared basic beliefs influence the ways they interact with each other and with the world around them."

 5.  Anxiety: Learning to handle uncertainty with maturity can either make or break morale, engagement, and productivity in a business. Consultants are great tools for processing anxiety to prevent blame, scapegoating, triangulation, and Groupthink from taking over. 

These top five issues in family businesses also apply to larger corporations.  Innovation and entrepreneurial success flow from how well we navigate these management waters.  I am looking forward to taking a deeper dive into these and other topics in coming months.  See you there. 

Creativity, Design, and Innovation

Creativity is an inborn capacity for thinking differently than most, seeing differently, and making connections and perceiving relationships others miss. But most importantly, it is the ability to then extrapolate contextually useful ways of employing that data: 

to create something that meets a specific challenge.

 (Andy Rutledge)

Flying back from a baking conference in Florida, I was once again (as I am most days) thinking out what is next in our strategy for growing our sales revenues in a competitive and mature industry.  As I watched my son work a puzzle on his iPad I was thinking how developing new business ideas is like a puzzle or chess game.

Creativity, design, and innovation are always my big three drivers of growth. My son and I joke that our creative genes are regarded by some people as unconventional.  Exactly! 

Creativity is essentially the development of an idea.

Design is the creation of a plan or convention for the construction of an object or a system.  Design moves obstacles to the creative idea using new conventions or plans.  This is why I laugh when people say we are unconventional.  If we did what everyone else does we would get results equal to, or more likely, less than what others get.

Innovation is turning ideas into value.  Creative people such as artists often die poor because they never learned or desired to monetize their creativity. 

As I was flying home thinking about the market trends presented at the American Bakers Association, I was thinking about the future needs, opportunities, and trends emerging in the tastes of American consumers.  For years we have been building a creativity, design, and innovation culture.  In future blogs I will share some of our learning.

Andy Rutledge quote from Wendren Setzer at The Wren Design 

Innovation Engineering

Dr. W Edwards Deming was the American Statistician credited with helping rebuild Japan after World War II. The founder of Toyota said, “Dr. Deming is the core of our management.”   The Japanese credit Dr. Deming with teaching them in the 1950s to “work smarter not harder” and become the first producers of continually improving cars and electronics.

Today I am reading about the Eureka Ranch, and Doug Hall's "Innovation Engineering."  Good stuff. Watch this video while available! 

Why Age Matters With Innovation

Ken Bates, Chair of the Department of Business at Houghton College in Upstate New York, sent me an interesting New York Times article that I share with you below.  It sparked my thinking about age, work, and innovation. 

Business is definitely a competition, and one advantage younger participants often try to leverage is the benefit of having fewer hours logged on the clock of life.  Younger workers are perceived as more flexible, lower cost, more future potential, more energetic, and so forth.  Older workers are caricatured as set in their ways, slowing down, resistant to change, and lacking fresh ideas. As a middle age executive level manager, I look at those behind and ahead seeing great value in both cohorts.

Our organization is comprised of people of various ages.  Each age segment adds value to our organization and in turn, we value all our workers on the basis of their contribution. 

We have employees in their 60s and 70s who are harder and smarter workers and in better physical shape than some of our younger team members.  Our older employees are often coming up with our better ideas.

On our team, we have a 20 something recent biz school grad Operations Manager with a great analytical and operational mind who developed our lean manufacturing plan.  He co-manages with a Production Manager almost 60.  As a 40 something I lead the team and our innovation initiatives. 
While our younger team members add great value, they also carry liabilities. 

The major downsides of a younger workforce I see are as follows.  1.) Lack of experience leading to errors (and added costs), 2.) An entitlement attitude (a millennial generation issue of trophy kids and helicopter parents), and 3.) A lesser work ethic on average than those older.  Our older team members do trend toward being too conservative when it comes to risk for growth, yet also do bring most of our product innovation to the table. 

As the following article and study point out, innovation production is simply not being produced as much by younger innovators as older innovators due to the reasons presented below.  This is indeed true in our organization as well.  

• Why Innovators Get Better With Age (NY Times)
• Age and Great Invention (Kellogg School, Northwestern University)
  
  
  
  
  

Thank you What's New Readers!

Thank you to all who read this blog!  Here are our top 10 countries!!!  If we get this wrong--please keep reading anyways!!!

Entry
United States	Thank you!
China	谢谢！
Ukraine	Спасибі!
Germany	Danke!
South Africa	Dankie!
Egypt	شكرا لك!
United Kingdom	Thank you!
Japan	ありがとうございました！
India	शुक्रिया!
Portugal	Obrigado!

The 21st Century Innovator

As many of you who read this blog know, I work as a CFO and General Manager in a manufacturing company in the food industry.  I am a passionate advocate for small and medium-sized business manufacturing in the USA.  A common think tank conclusion these days is in order for  America to remain economically strong, we must manufacture physical products.  This blog is devoted to how this just might happen. 


One night last summer I was paging through Flipboard on my iPad, and came across an article in The Journal "Forget B-School, D-School Is Hot."  As an MBA and B-School person, I was intrigued.  Design School? 

Confession--I enjoy spending time with my wife watching reality show "Project Runway."  While no fashionista,  I have come to appreciate The New School  and the power of design, but replacing my cherished MBA? Skeptical.  

Enter Stanford University.  As I explored the website, my innovation wheels started spinning quickly.  I signed up for the free Virtual Crash Course in design thinking.  Now let me backup. 

I have an entrepreneurial passion, and am married to a true MAKER.  Many of my innovation ideas grow legs from my wife who is part DIY like her dad, and part inventor and crafter.

In 2005, we started an e-commerce store together after reading about the long tail effect.  After immersing myself in Stanford's crash course in design, and reading a new book by the author who introduced us to "The Long Tail," we began building a 21st century innovator toolbox starting with Trimble SketchUp.  To all of you "Dreamers" to borrow from Apple, I invite you to be on the lead edge of what could be America's new industrial revolution. 

One of the greatest innovation opportunities to help small businesses thrive and bring manufacturing back home today is what is being called "The Maker Movement." 

The internet and personal computer ended the mass media monopoply on advertising and journalism and opened up global e-commerce, the digital payment industry, the blogosphere, open education and so much more.  Now, we may very well be on the cusp of a desktop manufacturing revolution. 

The maker movement is one of the most exciting movements going on today.  Chris Anderson, author of "Makers: The New Industrial Revolution" defines what the maker movement is:

1. The web generation meets the real world. It is all of these community and collaboration and innovation models of the web but applied to physical things.  

2.  Access to manufacturing, access to factories and mass production, is now also increasingly easy.

3.  One of the things that characterizes the web generation is the instinct to do things in public, the instinct to share, the instinct to collaborate with people who you don't know, the instinct to apply [invention creation and production] to physical things ... that need to be produced and sold. [It] is an innovation model that traditional manufacturing typically doesn't have.

By now, I have hopefully teased you into checking out the crash course and reading about the book on Amazon.  Now, to tie this blog together.  I think B-School and D-School are getting married.  As these two powerful American forces work together, I can see the entrepreneurial DNA of America giving birth to a new American creativity, then a global movement of micro-manufacturing. 

A factory in the cloud, crowd funding, Kickstarter, Quirky, Autodesk123D, TinkerCad, Sketchup, 3D printing and scanning, massive open online education--these are great times to be alive!  Stop looking back at the Great Recession, and look ahead to the New Industrial Revolution!


Come back soon for our review on the tools in our 21st century workshop! 

Osterwalder's Business Model Innovation Canvas, Steve Blank

I have been using Osterwalder's business canvas and Steve Blank's customer development approach within an intrepreneurship effort.  Check out this video, and some of the other cool stuff below. 

Boom San Agustin over at Our Knowledge Asia says:

An entrepreneur is someone who, through his or her skills and passion, creates a business and is willing to take full accountability for its success or failure. An intrapreneur, on the other hand, is someone who utilizes his or her skill, passion and innovation to manage or create something useful for someone else’s business... with entrepreneurial zest.

So, whether you are an e-preneur or i-preneur--let's do the stuff!

• Let me introduce you to Steve Blank at UC Berkeley. (Udacity)
• StartUp Success Slideshow (Slideshare)
• Alexander and Steve together (below)

Online Education--Do It!

 The authors of Marginal Revolution, one of the economics blogs I read, pioneered a new open education venture sponsored by their employer's Mercatus Center at George Mason University.   I enrolled in the course not only because I am an economics junkie who is interested in development economics as part of a current project in Uganda I am working on, but also because I am an innovation blogger.  I am learning and enjoying not only the teaching, but watching the project develop as a participant. 

I have been a fan of accredited online university learning for many years, and am following online edcuational innovation leaders such as iTunes U, Khan Academy, Udacity, Coursera, and edX.  So I have jumped in to experience the wave of innovation myself. 

Online education is a leading force in creative destruction globally.  Over the past two years, I have learned through the lectures of massive open online courses presented by Yale University, MIT, Harvard, Liberty, RTS, Berkeley, and others.   MRU is the first of the open courses I have taken to offer some level of quizzes (they are very simple), mid-term and final exams, and a certificate of completion. 

The podcasts are short; designed for life in our fast paced world.  I listen while driving as well as on my iPod at home.  Each short two to five minute segment is packed with information and links to supplemental articles and data.  The Development Economics course topics are great for those involved in international business, diplomats, residents of developing countries, and economics junkies in general. 

On the downside, the somewhat dull monotone style of the presenter's scripted reading is a minor distraction.  Since this is the dismal science I suppose it is fitting.

According to a recent article in The Economist, Clayton Christensen, a Harvard Business School professor and author of “The Innovative University” predicts “wholesale bankruptcies” over the next decade among standard universities.   Mr Christensen predicts that most universities below the upper tier will have to integrate a “second, virtual university” into the standard one. Good online classes would reduce the need for costly campus facilities and free teachers’ time for individual tutoring.  

As a CFO and lifelong learner, I am riding the wave of innovation as an early adopter.  Over the Christmas break, I am taking a Udacity class on business startups and refresher course in statistics as we are working on new strategy and a lean initiative where I work.  Coursera also has some offerings later this winter on innovation, and I am considering an introduction to computer science from Harvard via edX.  

I challenge all of you who have been out of college for more than a few years to update your skills by experiencing one of these innovative opportunities.  It keeps your brain active and will keep you competitive as your degree value decays. 

If you never had the opportunity to go to college, now you can!  Open course education will give you an advantage over others in the marketplace who also do not have a degree, or those who have an earned degree but are terrible at what they do.

If you are an educator or administrator in one of America's colleges and universities--remember Kodak.  The innovator's dilemma is real.  As a resident local to where Kodak was once a giant, help us redeem the demise and bankruptcy of Kodak by learning the lessons of its failure.  Take a course by the leaders of innovation, and decide whether online education is for real or not by firsthand experience. 

Let your creativity run, write down your ideas, learn, and grow!

Merry Christmas,

Kevin

Entrepreneuring Father, Son

I grew up the oldest son of an entrepreneur.  My dad left his secure job with Service Systems (now part of Sedexo), and started his own small business when I was 12 years old.  His venture capital of $50,000 came from a friend and businessman who owned a paper company.  My father started a commercial printing business, and after several years of 12-14 hour days, our family business employed over 15 people serving a list of prestigious corporate clients.  

After my father sold his business 10 years after starting the venture, some of our employees ventured out and started a similar business having learned the printing trade in that shop we called Port Of Printing in suburban Buffalo, New York.  My father, mostly unbeknownst to him, transmitted an entrepreneurial spirit to all he worked with. 

My dad taught me strategy, sales, and operations.  My mother and later a bookkeeper taught me accounting.  By the time I was 18, I was leading people, overseeing operations on the overnight shift, and learning how debits and credits and green sheets became financial statements. 

Recently, I have been reflecting on my own life strategy--how did I get here, and where am I going.  I have founded two non-profits, and at present manage a medium-size hybrid non-profit/for-profit entity.  I am contemplating yet another entrepreneurial venture with my own son.  The power of my father looms ever larger as I am working alongside two of my sons.

Despite stresses that often made the sparks fly between us at "the shop," my father taught me how to have a vision and risk everything to pursue a dream.  He taught me the work ethic that I have, in turn, passed down to my children.  My love for business, innovation, building organizations, and pursuing an MBA all came from him. So did the tendency to work too hard and enjoy life too little. 

Why did he go the route of entrepreneurship?  I often think about that at the beginning of February each year when I remember the day my dad died.  The articles below reminded me of my father.  So today, I share them with you. 
 

• Nature or Nurture: Decoding the DNA of An Entrprepreneur (Ernst and Young)
• The Founder's Dilemmas (Kauffman Foundation)
• Strategic Planning: Not Just for Big Business (Small Business Notes)