Go Home

Unleash Your Inner Company

Chapter 1

Passion & Perseverance

A Positive Feedback Loop

"It doesn't get easier. You get stronger."

In the first half of 2001, the dot-com bust, I would often wake up around 2 a.m. with sweat-soaked sheets sticking to my skin. CustomerSat’s second round of financing, long planned for that January, had refused to close (finalize) despite a flurry of meetings as we ran out of cash. Those nights I would get up, shower off the sweat, and try to get back to sleep. When my executive team and I finally grasped that the Series B round was not going to close, we huddled to decide what to do.

First, we cut our salaries, then several weeks later those of all our employees, by 10 percent; I cut my own salary and that of my CFO by 50 percent. Debating and agonizing over every individual, we laid off 40 percent of our workforce. In our all-hands meeting immediately after, as I explained to our remaining employees that this was the only way we could keep together and stay afloat, my composure collapsed and I broke down sobbing. Our employees stood stunned, sympathetic, and embarrassed.

After many consecutive quarters of profit and growth, our recurring revenues had dropped that first quarter of 2001 by a whopping 20 percent. Our first customers to stop paying were themselves dot-com companies, like highflier Webvan, who would file for bankruptcy in July 2001 just sixteen months after their initial public offering (IPO). Later, even Fortune 500 companies discontinued our online survey services or simply stopped paying. To help us get through, one of our Series A investors lent me $300,000—for but not to the company—meaning that I, the CEO and founder, would be personally liable for repaying the loan. The cash would last us ninety days. Later I would pay back the investor—to whom, despite the arrangement, I was deeply grateful—by mortgaging my townhouse in Menlo Park, California.

The next quarter our revenues fell again. To make payroll this time, we factored receivables, a costly maneuver, and cut salaries by an additional 10 percent. I reduced my salary to minimum wage, the legal limit. Our company moved into the second floor of our building and rented out the more attractive ground floor to another start-up. That company quit paying us rent after three months, came in late one weekend night, cleaned out their offices, and vanished without notice. The nightmare would not end.

After those fitful nights and drastic actions of the first half of 2001, we could finally see profitability ahead in the third quarter. Then, on September 11, terrorists viciously attacked US targets including the World Trade Center. Enveloped in smoke, dust, and debris, the twin 110-floor towers crumpled and collapsed. With much of the US northeast communications grid down, just accounting for all our employees took hours of emailing, phone calling, and pleading to know who had heard from whom. Our VP Sales Russ Haswell was marooned in London, unable to get back to the United States; our client invited him to stay at their home. The next day I was finally able to broadcast the message, “All CustomerSat team members are safe.” The US West Coast escaped the full brunt of the horror, but even in Silicon Valley, every company I knew had customers or suppliers who lost employees or family members in the attacks. Our client Akamai Technologies lost its brilliant cofounder Danny Lewin on American Airlines flight 11. Our salespeople were calling insurance and other firms in the World Trade Center; tragically, their phones just rang and rang. After the dot-com bust, September 11 was the final blow for many start-ups.

We broke even in the third quarter, a milestone and quiet relief. A very small profit followed in the fourth. The going stayed tough through all of 2002 and the first half of 2003, during which time we didn’t hire a single new employee. But we made it through. CustomerSat stayed profitable and grew nearly every quarter until the company was acquired in March 2008. Only a fraction of Internet companies survived; even fewer went on to successful exits. Why did CustomerSat do so when others did not?

Unleash Your Inner Company distills three decades of real-world lessons I have learned about entrepreneurship. During that time I have founded, grown, and sold two online software companies; cofounded a third; invested in a dozen privately held companies, several of which have had successful initial public offerings (IPOs—also known as “going public”); started and run consultancies in strategic marketing and entrepreneurship; and mentored hundreds of entrepreneurs on five continents. My mission today and for the past five years is to help aspiring entrepreneurs achieve the freedom, independence, and ability to do what they love through entrepreneurship. This book is part of that mission.

Unleash Your Inner Company offers unique guidance and perspective for anyone who wants to start and grow a business, for example:

• Entrepreneurs are not interchangeable like batteries or light bulbs; the best opportunity for you is unique to you.

• You have many more resources than you likely realize to start a company and make it successful.

• Positive feedback loops pervade multiple aspects of your start-up and life; find them and ride them.

• Psychology is an essential part of strategy.

• Any business, no matter how modest, can be evolved and scaled into a large business, if desired.

This book provides a proven, step-by-step process: (1) Identify/develop your passions, (2) Generate/refine customer needs in those areas, (3) Generate possible solutions to those needs, (4) Inventory your resources, (4a) Generate additional needs suggested by your resources, (5) Match needs with resources, (6) Acquire/develop additional resources, (7) Determine your advantages, (8) Match needs with advantages to select the best fit, (9) Launch, and (10) Scale up. This ten-step process, explained in greater detail in chapter 2 figure 2.4 and the flowchart in figure 2.5, guides you in finding and creating the best start-up for you, whether you choose mobile apps, construction, robotics, hairdressing, management consulting, gourmet food, enterprise software, or any other field.

In Unleash Your Inner Company, you first discover the essential roles of passion and perseverance and how to develop them. You see how to identify dozens of unsatisfied customer needs among your passions, develop solutions and build the advantages as required to satisfy those needs, and determine which needs you can satisfy most successfully. It doesn’t matter whether you have a product or service in mind or not; here we start with customer needs, which precede products and services. By following the steps in this book, you vastly improve the likelihood of your start-up’s success.

This is the only book you need to start the right business for you. Unleash Your Inner Company shows you how you can take your future into your own hands, follow your passions, and spend the rest of your life contributing to the world in the way you love best.

Why did CustomerSat survive and thrive while others did not? More generally, why do some companies do so while others do not? I don’t believe we were smarter than any other company execs. We did act very quickly to minimize damage to our company. But if I had to choose a single factor, I believe that underneath it all we cared more deeply about our business: about every customer, the coolness of our products and technology, each of our employees, and each other. Among our team members who went through the dot-com meltdown together, there was very little turnover—very strong employee loyalty—for many years. And we did not give up as quickly as others did. In my view, it was this combination of passion and perseverance that got us through.

We hear much more today about passion, which sounds easy and fun, than perseverance, which sounds hard. Your passions are what you care most deeply about, have the highest expectations for, have powerful and compelling feelings about, or that give your life meaning. They may include your job, team, company, family, sports, school, hobbies, communities, faith, travel, investing, gaming, gadgets, or virtually any other subject or activity. Perseverance is persistence in purpose, ideas, or tasks in the face of obstacles or discouragement. Passion (an attitude) and persistence (a behavior) usually go together. But you can have one without the other: passion can be fleeting; perseverance can be uninspired. Without passion, perseverance is drudgery; with it, working long hours becomes effortless. Successful founders and teams have both. Various terms have been applied to the combination of passion and perseverance: flourishing, grit, and the term that to me best captures how time flies and organizations click when the two qualities come together: flow.

You and your start-up need passion and perseverance for several reasons. With passion and perseverance, the following are true:

• You are more likely to be first to reach or discover the limits of what is currently possible or convenient in your chosen field. This means you can recognize customer needs before others do. Passion and perseverance thus help you get your new venture off the ground.

• You’re able to break through or find ways around obstacles. Layoffs, salary reductions, factoring receivables, and moving to downsized, more modest offices are hard and humbling actions to take. Passion and perseverance empower you to do whatever it takes for your venture to survive and grow.

• You’re in it for the long haul and don’t plan to quit. Ventures usually take longer than expected to reach their goals; the short term can turn into the long term very quickly. I ended up running CustomerSat for over a decade. Perseverance keeps you going for as long as it takes; passion makes the journey as important to you as the destination.

• You stay motivated. Perseverance and passion are contagious and motivate those around you, including coworkers, customers, suppliers, and partners.

• Your strengths and advantages are amplified.

Creating Positive Feedback Loops

Passion and perseverance reinforce each other. Practicing the piano, designing circuits, or rock climbing until you are so good that you grow to love that activity are examples of perseverance driving passion. At the same time, your passion makes you want to spend time on that activity, driving you to ever greater proficiency and outstanding performance, further building your passion . . . and so on.

Similarly, being so deeply engaged by activities such as woodworking, cooking, or sailing that you become unaware of the passage of time demonstrates passion driving perseverance. As you spend more time in the activity, you refine your skills and deepen your knowledge, again further building your passion.

This reinforcement creates a positive feedback loop, just one of many you will seek or create in your new venture. Positive feedback makes magic happen. Whenever you see results or performance that is far above the norm—in sports, the arts, crafts, science, innovation, business, investing, or any other realm—positive feedback is working its magic.

Think of passion and perseverance as the north-south and east-west axes of a mountain. If you only move along one of these, your climbing options will be limited and difficult; reaching the top may be impossible. In contrast, if you can move along either axis, in any direction, you are much more likely to find a route that gets you to the top. Passion and perseverance together give you that flexibility and keep you going indefinitely. They positively reinforce each other.

Any number of initial motivations can get this positive feedback started: looking good in front of your peers; being an expert, named the leader, or the unnamed but de facto leader; achieving some specific milestone; winning her heart; providing for your family; making your first million; proving someone wrong; revenge; or surviving. Some of these motivations are more sustainable than others and some have undesirable side effects, but any or all of them can help you get started. I started both of my companies after being fired from previous companies—my first time was in high school while working for my hometown newspaper—and proving my former employers wrong was surely part of what motivated me. But if what drives you is not or does not fairly quickly become doing good—solving problems, addressing customer needs, or in some other way making the world a better place—it won’t inspire others or be sustainable, in my experience.

If you are not passionate about your new venture, its chances of success are slim. Even with passion, starting a successful venture is hard. But it is achievable and you can do it. Yes, you. This book shows you how.

You Can Become Passionate

Your passions harbor your best opportunities for new ventures. For example, I’ve been a math geek since junior high school and both of the companies I started involved analyzing data. The list below offers a few such possible passions:

People: Family, friends, coworkers, teammates, teachers/coaches, club members, neighbors, children, teens, and seniors
Activities: Working, studying, reading, cooking, sports, fashion, gardening, hobbies, shopping, and travel
Things: Home, food/health, electronics, home appliances, mobile devices, the Internet, sporting goods, vehicles, tools, money, and pets
Media: Books, news, photos, maps, games, social networks, video, animation, and virtual reality
Arts: Music, film, dance, theatre, painting, sculpture, literature, design, ceramics, and criticism
The sciences: Research, analysis, discovery, math, physics, chemistry, life sciences, environmental sciences, astronomy, and cosmology
Engineering fields: Civil, mechanical, electrical, computer science, materials, transportation, architecture, biotech, space, and nuclear
Business disciplines: Marketing, sales, manufacturing, purchasing, distribution, strategy, and communication

One or more of your passions may be listed, but please don’t think yours have to be among these. Recently I became deeply interested in Africa after reading Dark Star Safari (Houghton Mifflin, 2003), Paul Theroux’s detailed account of his overland trip from Cairo to Cape Town. The vivid picture of African life and landscape painted by Theroux has hooked me on visiting the continent. That could be the start of a new passion for me.

If nothing comes to you, that’s okay. You can become passionate about something. In that case, the exercises at the end of this chapter under “If your passion is not well defined” are for you. Warning: they require perseverance. After a few hours of exploration and practice, you will have advanced a fair distance in a field of your choice. In a few weeks, you will have learned a great deal about it; in a few months, you will have become an expert. The more you learn and master the topic or activity, the more it engages you. Over time, the process becomes more like play than work. When it takes on a life of its own, so that you are drawn to it, it has become a passion—and a strong candidate in which to start your new venture.

Unpopular is Good

If your current field or the field you become passionate about isn’t very popular, so much the better: you will have less competition. Few of the more than 100,000 health and fitness apps for the iPhone will survive. Conversely, I can’t think of anything less sexy than Municipal Sewer & Water. That trade magazine is full of articles on automated flow control, remote monitoring, real-time alerts, hydraulic modeling, hydroxyl radical fogging (controls odors), and ultraviolet disinfection. The entrepreneurs applying these techniques and technologies in water and sewerage are doing good: improving water quality, sanitation, and public safety, while reducing manual labor costs and taxes. So don’t let what is merely popular blind you from other opportunities.

“Learning in Depth” is a secondary school teaching technique that assigns each first grader an everyday topic—such as apples, ants, water, dinosaurs, bridges, dust, or railroads—to study on their own, through grammar school and beyond. If the topic is apples, for example, the child may learn about varieties, agriculture, recipes, and genetics; make field trips to apple orchards; and bake apple pies. Very soon the students know more about the subject than their teachers do. By junior high school, each student is a real expert on the subject. Interestingly, the children become deeply passionate about their topics even if they don’t get to choose them.

I don’t suggest that you choose a field at random or ask someone to assign one to you. But realize that the more you learn about and practice something, the more engaging it becomes and the more passionate you will become about it. As Cal Newport, author of So Good They Can’t Ignore You (Business Plus, 2012), says, “Don’t follow your passions. Let them follow you.”

He did it with all his heart and prospered. – Second Chronicles 31:21

Good Question!

Q: My passions are not very business-oriented. They include long hot baths, kittens, and comic books. What should I do?

A: First, make certain that these passions provide the challenge, goal, and feedback that can sustain you as your life’s work over the long term. Purely sensory pleasures typically lack one or more of these.

But if you believe they can sustain you, know that all passions, even sensory ones, contain an infinite number of opportunities. We see how to identify and create these later. For your three passions, for example, the following might be some opportunities:

• Waterproof, floating cases for mobile phones and tablets so people can read, text their friends, or listen to music while enjoying long hot baths.
• Kittens have different dietary requirements and preferences from full-grown cats and are near-universal symbols of cuteness and cuddliness. What new pet foods, toys, or other products might kittens need? Could the right diet or genetic therapy enable kittens to stay small, cute, and cuddly longer?
• The hugely popular and commercially successful tradeshow Comic-Con showcases comic books, science fiction/fantasy, and video games. It annually attracts over 130,000 attendees.

At this early stage of creating your business, consider several of your passions, if you have them. One will offer you better opportunities than others and it is hard to know which one it will be in advance. We’ll also see that your path will be easier if what you do is not merely better, but different from what others are doing. So start thinking about how your approach to baths, kittens, comic books, and other topics can be unique.

Q: My passion is helping the poor, the handicapped, and victims of abuse. These seem more likely to be nonprofit than for-profit ventures. What do you suggest?

A: The principles and techniques in this book apply either way. Two points:

• To best sustain any activity long term, whether nonprofit or for-profit, make it self-funding. Even nonprofits can earn income from operations and investments, as long as that income is used to further the mission of the nonprofit. By becoming self-funding, you won’t have to rely indefinitely on funds from donors, whose interests and priorities can change. You will also be able to spend more time and resources helping the people and causes you care about, less on fund-raising.

• Whether your venture is nonprofit or for-profit, rather than give handouts to those in need, help them become self-sufficient. This, too, is the most sustainable long term. Food and other supplies intended for the poor in low-income countries often end up in the hands of military strongmen or dictators. Despots keep the aid for themselves and their cronies or use it to further manipulate and oppress the poor. Dumping food and supplies in low-income cities and villages can put local farmers and entrepreneurs out of business, as vividly shown in the documentary Poverty Inc. Finally, aid given indefinitely reduces incentives for people to develop skills and income streams that lead to self-sufficiency. Instead, ask how can you help them grow their own food or earn enough to afford to live on their own. Making people self-sufficient will help your own venture sustain itself because the support you provide them will have a finite duration, rather than indefinite; put less strain on your resources; and let you help more people.

The Grameen Bank in Bangladesh makes small loans to the very poor. (The name Grameen is not a surname but comes from the Bengali word gram which means “rural” or “village.”) The bank helps people improve their lives and escape poverty through financing; new ways to generate income; and information about health, crops, and finances. This bank has done more sustained good around the world than aid programs many times its size. It is a for-profit that can serve as a role model for other for-profits and nonprofits alike.

Q: Should I rely on reports from leading market analysis and consulting firms—for example, McKinsey, Gartner Group, Boston Consulting Group, Forrester, Booz Allen, and Yankee Group—to choose an area or market in which to start a new business?

A: No. These firms address their clients’ and analysts’ interests, not what you are passionate about. Even if an area happens to coincide with your passions, the analysts typically use current and historical sales or production figures to project the sizes and growth rates of markets. Such historical extrapolations can help established companies justify their investment in or entry into those markets. But the opportunities you seek are specific, if not unique, to you; may result from innovations that are only now coming to market; and may have no history. In short, you and the analysts have different objectives. You will most likely recognize new opportunities that are right for you before they do.

Q: What about just being passionate about making money?

A: Be cautious about this. Steve Jobs at Apple and Bill Hewlett and Dave Packard at HP were passionate about building great products and great companies. Management teams whose primary motives were to make money succeeded them. Those companies lost their way.

The executives who acquired one of the companies I invested in cared more about creating an asset they could flip (sell) for financial gain than about building a great organization or serving customer needs. Employees quickly recognize such an attitude even if executives try to hide it. Their single-minded focus on short-term gain undermined employees’ long-term commitments and dedication to customers that often extended far beyond normal working hours. The result was lost employee commitment, compromised customer relationships, and excessive turnover. Not only was value not created; it was destroyed. The parent firm ultimately sold the company at a loss.

In my experience, passion for making money alone fails to inspire people to design, build, and sell great products and services that drive growth. To accomplish that, you need passion to solve problems, address customer needs, and make the world a better place.