Often, I have read business plans where the entrepreneur states that there is no competition for his particular venture’s product or service.  If I am judging a business plan competition (there’s that word again), I automatically downgrade a couple of points.  If, I am a mentor to said entrepreneur, that begins a longer conversation about the business.

My friend Jeff, the marketing strategist, likes companies to develop “Only” statements.  As in, the widget is the only product that will wash your floors and leave your mouth minty fresh.  I’m kidding, but Jeff is serious.  In marketingland, it is critical to explain why your product is the only way to get things done.  But from the other side of the fence, we understand that while we are the “only” X, our prospective customers also get to decide what is important to them and there are others out there who have something to say about their products.

Let’s face it, there is always competition. A few examples…

What about Microsoft, back when it was a tiny company?  There is the oft told tale of how Gary Kildall, founder of Digital Research was a strong competitor to Bill Gates’ early efforts at Microsoft and lost out on the original IBM PC operating system contract because he wasn’t willing to sign the IBM non-disclosure documents. Had Gary Kildall signed the contracts, no one would have heard of Bill Gates or Microsoft.  Instead of Windows, we might be using GEM.

But, really, when Henry Ford started making cars, he had no competition. Not so fast.  Henry Ford had lots of competition.  Besides the other automakers who were building cars on a custom basis, there was always the horse and buggy.  People did not really need the automobile.  Remember that “do nothing” is always a competitor in the minds of your potential customers.  What Henry Ford did was change a manufacturing process for a product that had already been in the market.

OK, then, how about Segway.  Dean Kaman built a product that no one had ever thought of.  It was an entirely new product and how could there be any competition?  Ah, but the competition was there, it was just disguised.  Let’s see, people could walk (buy nothing), purchase a bike, hybrid car, roller blades, scooters.  It depends on how they were looking at the problem. In actuality, the competition was what led to a less than successful introduction for the Segway and why they are still looked upon as curiosities, rather than a mainstream transportation choice for consumers.

I believe that you have to be honest with yourself when you look at your business.  There is always competition and you have to be ready to confront it.  Don’t forget about “Do Nothing” as a competitor. Look at alternative uses of other products and how your product may be viewed in the marketplace.  In fact, if you can honestly say that there is no competition for your product, I would question the value that the marketplace has for your product.

So, if we can agree that in order for you to be successful, there will be competition, then how can we develop strategies that will further your business idea?

First, we need to realize that competition is good.  In a way, competition validates the marketplace.  If others are selling into the consumer base, then we know that the consumers are able to purchase to solve their needs.  This gives you an idea that people may also buy your products, if they are marketed, produced and delivered with care.

Second, competition will force you to raise the level of your game.  You have to understand the marketplace and react to it on a regular basis.  This will hone your product offerings to be as good as they can be.

The one thing that I would emphasize to companies facing direct competition is, don’t play the other guy’s game.  Change the game and make him play by a new set of rules, if at all possible. Going back to the Henry Ford story, this is his true genius.  He was able to change his manufacturing process to lower the cost of the first mass produced automobile.  The consumer really didn’t much care that it was mass produced, but suddenly the price for an automobile was not a stumbling block and Ford was able to literally change the world.

For you, look for ways to change the game as well. Maybe there is something that you can bring to the table that doesn’t cost you much, but the other guy hasn’t cottoned on to.  Put your emphasis here.  Go to your customers and let them know about that extra special feature and try to get it written into specs.  Understand what is important to your purchasers.  Is it value, couture, large portions, safety from lawsuits?  Whatever it is, if you can provide it and your competitor cannot, you have a better than even chance of (sports metaphor coming…) landing the big one.

But, if you are successful, be aware that the circle has a way of coming back.  Look at Microsoft and Google today.  It’s all part of the game of business.  Real entrepreneurs don’t shy away from the competition, they look for ways to compete on the playing field.

The usual definition of entrepreneurship usually has some connection with risk.  That is, an entrepreneur is someone who is willing to assume the responsibility, risk and rewards of starting and operating a business.

Getting an idea is not difficult. In fact, most of the skills necessary to start a business are relatively easy to obtain.  The difficult task is to finish.  Let me explain.  Many of the entrepreneurs that I have met have a reasonable business idea.  They can put together some sort of business plan; some go with the mini 10 page report, others produce a tome of over 100 pages. They can put together a demo or a prototype.  Then they lose their nerve.  They review their research, they add just another modification to the web demo, they send out another survey.  This is the point when they need to drive forward.  As Steve Jobs says, Real artists ship.

I believe that real entrepreneurs ship.  By shipping (or opening the website or performing the sales calls or signing the partnership agreements), the entrepreneur will gain knowledge about what the market really wants. She can make the changes to the offering to appeal to the customer. She can invite customers to be part of an inner circle and tie them closer to her company.  And, possibly, even record some early revenue.

Lose the fear. There are few downsides to shipping earlier.  Make sure that what you ship, you can be proud of, but don’t obsess over every aspect.  Remember that Windows was unusable (but a good demonstration of future technologies) for the first several releases.  It wasn’t until Windows 3.1 that Microsoft had a solid winner.

Yes, it is good to start businesses.  But the risk inherent in an entrepreneurial company is multiplied if you don’t ship your product.  You risk increased competition.  You risk wasting critical capital by waiting.  You risk your potential customers finding alternatives.  You risk losing employees to other more exciting projects.  The way to reduce the risk is to deliver a product to the marketplace and continue to respond to the market by reacting quickly to new information.

Shipping product is a virtue.  Get it out there and find out whether you actually have something that the market demands.

Music expresses that which cannot be said and on which it is impossible to be silent. ~Victor Hugo

As a non-musician, it always seemed to me to be a little strange.  How can music express that which cannot be said? I enjoy music and my kids have introduced me to new stuff that I never would have heard without their help.  But, really, expressing things?

Then I saw this video showcasing Bobby McFerrin (of Don’t Worry, Be Happy fame) and how music is innate within all of us, everywhere.  To me this showed how we all have the basic music sense within us. It is astonishing how quickly the audience “gets it”.  Most of the audience members would not consider themselves musicians at any level, could not tell you what note they were singing, yet they were able to use these unknown skills to generate lovely music, under the direction of a “real” musician.

So now, of course, the question is what other types of knowledge are innate at least at the basic level? What else can we do that we don’t know that we can do?  I don’t have the answers, but I am interested in the discussion.

It makes a lot of sense.  Clearly, mentors have a lot to give to their charges.  Last week at the Launch Depaul new venture competition, all three of the for-profit teams have dedicated mentors through the Coleman Entrepreneurship Center Blueprint program. But not as clearly, mentors are usually really good at a couple of business topics and relatively weaker on others. As an entrepreneur who is looking to recruit a mentor, it is a good idea to perform a serious self evaluation to understand what your true needs are and what you hope to have the mentor accomplish.  In many cases, it makes sense to work with several mentors to cover the spectrum of issues that the business owner has uncovered through the analysis.  A good mentor will know his or her strengths and where they can provide the most support, but they will also know of other potential mentors who can cover other areas and be a good fit for the corporate culture.

Currently I am working on a project with another mentor, where a portion of the need is in my wheelhouse, finance and operations.  But the other mentor that I am working with is a whiz with technology, planning, HR and legal.  The entrepreneur understands sales and marketing, so we are fairly close to covering the ongoing needs of the company to enable serious growth.

As a business owner engaging a mentor or mentorship team, it is critical that you all agree on the structure for the support.  In the cases where I was just a mentor on call when someone had an issue, the result was less satisfying for both parties than when the mentoring was clearly defined.  That is not to say that you cannot deviate from the plan, however it is incumbent on all partners to understand what needs to be done and to adhere to a process to manage plan changes.

Both parties get so much out of a mentoring relationship, when it is managed as a true business relationship.

• It used to be that only the newspapers had the printing press.  Therefore they owned the news manufacturing (reporting) and distribution (printing and delivering) of the news.  The advertisers were looking to get to the subscribers and this was the only way to do so on a local basis.
• Journalists were proud of their independence and their political slants.  They were proud of the investigative reporting and in-depth stories that were difficult to tell in other formats.  People wanted and were willing to pay for the news.  Because this was the way that the stories were told, people did not even look outside the news box for other alternatives.  Publishers made fortunes — ever been to San Simeon, home of William Randolph Hearst?
• First to take some of the local advertising dollar from the newspaper was local cable tv and radio. Now the options of advertisers become a little more open. You could focus your advertisement more closely geographically, ethnically, demographically and politically, in ways that you could not with newspapers.
• Then the internet was born.  The internet changed all of the rules. Craigslist was the first to take on a profitable piece of newspaper turf, classified advertising.  Then CareerBuilder and Monster.com took on the employment section.  Coupons became available on-line. Blogs on every conceivable (and some not conceivable) topics were started by people with a passion. There was more variety, because more people were adding to the mix. And all of it (well, most of it anyway) was free.  The newspapers had nothing to counter these new offerings.
• So, the papers tried to find alternative ways to bring in revenue and lower costs.  They reduced foreign bureaus and they furloughed editors and reporters. The big guys started to syndicate their reporting to smaller papers in hopes of getting some revenue boost.  Now, the same NY Times story was being reprinted in the Orlando Sun or the Topeka Capital-Journal. The big papers put in paywalls, where a consumer would have to pay a subscription fee to view their content, but since folks in Topeka or Orlando already saw the content and it was available free, people had an easy way to Google their way to the same content that was behind the paywall.
• Then Google came up with Google News and culled news sources from around the globe and presented the news to viewers for free.  Newspapers no longer had any loyalty from their readers when you could read multiple articles from different viewpoints on the same topic with only a click. Of course, the newspapers blamed Google for taking away their business, but in reality, they had not changed their business model in over 100 years and had not kept up with the changes in their customer base. And their old consumers were loving the new world with more choice and more information, in a more usable format.

Folks like Jeff Jarvis think about the news world all of the time and are trying to figure out what the next big thing is. He is running a project at City University of New York’s Graduate School of Journalism that explores new business models for news. But not all of the good ideas come out of New York.

Here in Chicago, a couple of friends of mine, Jeff Leitner and Jim Jacoby at Manifest Digital have been working on what could be a game changer for the news business — or rather, the vacuum created by failing news businesses. Jeff and Jim are teaming up with another Chicago company to produce something they call a private label news service.

In short, they create legitimate news outlets for their clients — professional reporters, professional editors, straight news.  Watch this — it’s a minute and a half and pretty damn entertaining.

The point of this is that one of the things that newspapers have always provided is a third party objective view of a story.  The best news stories are not a press release sent out by companies, but real stories reported by real reporters. For example, the US Chamber of Commerce was interested in delivering news about the state attorneys general, so they created Legal News Line. Real news on a regular basis reported by credentialed journalists through their own news portal, but also delivered to places like Google News.

I’m not sure that I believe that this is the future of news, but it is darn interesting.

Some examples:

• I Would Only Fund an Entrepreneur with High Integrity
• Running More Effective Board Meetings at Startups
• What Makes an Entrepreneur? Cojones (7/11)
• The Fallacy of Channels: Startups Beware
• App is Crap (why Apple is bad for your health)

Reminders: Do you sometimes send an email request out to someone and then forget about the fact that you are expecting something in return?  Then a deadline passes and you say, “Where in the heck is that response from so and so?”.  There is a simple new tool out there for free that will help you.  It is called FollowUpThen.  To use it is simple. Just add an email address in the form xdays@followupthen.com to your cc: or bcc: list and the site will send a nicely formatted email after that time period has passed.  If you add it to the cc: list, then if the recipient doesn’t reply all with the answer to your request, FollowUpThen will send both you and the recipient the reminder email.  If you add it to the bcc: list, the reminder will be sent only to the originator of the email.  The xdays can be any number of days, weeks, months, years or hours. The tool seems to me to be an elegant solution to a common problem.

Legal Aid: If there is one thing in this world that I love is a business success story.  There are a lot of things that make me crazy, but one of them is lawyers who go the extra mile to make tons of money at someone else’s expense, damn the particular merits of a case.  The latest Chicago entrepreneurial success story is Groupon. If you have never heard about them, they create a deal a day for each city that they are in (now up to well over 50 cities).  If a minimum number of people sign up for the deal, it is a go.  The deals are usually pretty great — normally 50% or more off of some service.  Each day you get this little present in your email box describing the deal — a manicure, massage, dinner, auto show tickets or Cubs rooftop box are just some examples.  I have used their service and absolutely love it.  Its free to sign up and just choose each day whether a specific deal will work for you.  Their customer service policies are unbelievable. If you have a problem, normally they will just refund your purchase price, but they have been known to work with their vendors to make alternative dates available or accept expired certificates.  Nothing but good things.

So, what’s the problem?  Well, a local law firm just filed a class action lawsuit claiming that Groupon systematically deceives their customers. Best retort I have seen in a while — Groupon is declaring a class action lawsuit against itself.  Let them know if and how you were deceived and they will make it right.  If only there were some procedural way to have a law firm punished, if found to be bringing frivolous  lawsuits.  This one certainly sounds frivolous to me.

As time moved on, economists and psychologists started to research whether the Homo Economicus was real or a fallacy.  Scholars like Amos Tversky, Daniel Kahneman, Ian Ayres, Dan Ariely and Richard Thaler ran scientific experiments to see if people really did act rationally when it came to economic decisions.  What they all found, in various ways, was that we are not rational at all when it comes to buying, negotiating, selling, responding to advertisements and even going to the movies. In fact, to steal the title from Dan Ariely’s most famous book, we are Predictably Irrational.

I have recently completed reading the book Priceless: The Myth of Fair Value (and How to Take Advantage of It) by William Poundstone. I had read a number of Poundstone’s books before. He wrote books on secrets and puzzlers like How Would You Move Mount Fuji?, but I wasn’t prepared for the level of detail and research that he had completed to write this book.
The book is structured into 53 chapters. Each chapter takes a specific pricing case and talks about the specifics of the deal. There is also a description of a scientific experiment that describes the psychology of the participants. I had read about a lot of the experiments before, but this book allowed you to tie the results of the experiment with the results of a pricing decision in a very real way.

Poundstone opens the book by retelling of the McDonald’s hot coffee lawsuit, where the attorney for the plaintiff in the case employed a simple scheme to raise the amount of the jury award — he simply asked for an astronomical award from the jury.  This raised the anchoring point for the jury so that while they awarded much less than the asked for judgment, they awarded much higher than any rational person would have considered the case to be worth.  Anchoring also works in the grocery aisle.  Not too long ago, the standard size for ice cream was a half-gallon.  Consumers had in their minds what they normally paid for a half-gallon of ice cream.  Manufacturers wanted to raise prices (their costs had increased) but were concerned that if they raised prices, people would notice and either change brands or even more worrisome, consider alternative dessert items.  So, now if you go into the grocery store, most ice cream is sold in 1.5 or 1.75 quart sizes (a reduction of 12-25%), but the pricing is kept in the same familiar range.  The average consumer doesn’t realize that they are getting less for the same price and the market share of ice cream as a portion of the dessert market is safe. Anchoring at its best.

One of the experiments that gets a lot of play in the book is the ultimatum game.  In this game, one person is given $10 and is told that they can give any part of the $10 to another player.  If the other player agrees, then the deal is done.  If the other player does not agree, neither party receives any money.  This simple game uncovers a lot of different outcomes.  Men perform differently from women, Type A’s perform differently from Type B’s, Liberals perform differently from Conservatives, sober people perform differently from those more tipsy.  Is the proposer most rational when he proposes $1 to be given to others while keeping $9 for himself?  Is the receiver rational when rejecting a deal that would make them $1 richer in order to punish the unfairness of the proposer?  The best example in the book of the ultimatum game in real life is the story of Jack Welch’s divorce negotiation.  While we normally think of Neutron Jack as a most savvy businessman, it was fun to read the story how of his former wife turned the tables on him using the precepts of the ultimatum game.

Each of the chapters talks about ways that we as consumers are manipulated to paying more or selling for less than our mythical ancestor Homo Economicus would have been expected to.  This is certainly important to consumers, because a savvy consumer who is aware of the psychological tricks can make smarter purchasing decisions.  As business people, it is helpful to understand how to price your products and services in order to reduce price resistance.

This book was a pretty easy book to get through with enough concrete examples to catch your attention. In the 1-5 star rating category, I would give this book a solid 4 star rating.

Knowledge: Steve Schwartz wrote a post on the 3 types of knowledge. While the language is not always appropriate for elementary school, he does explain clearly how these 3 types contribute to our general sense of ourselves.

Advice: Micah writes about giving advice. This one is going to be hard for me to do (given the name of this blog) as I love to give advice almost as much as Micah does, but if he can find a better way, I can try.