Every entrepreneur has a dream of making something happen; maybe even making a difference, and just maybe “making it big.” Finding your way through the start-up maze requires managing a delicate balance between the vision of the ‘plan’ and realities of the ‘actual’. Keeping that balance requires being just as adept at undoing as doing.
When I left my secure university roles at Tufts and Harvard in psychology in 1981 to start Spectrum Interactive, a company that planned to commercialize computer-based learning and multi-media technology, most people scratched their heads. I had never taken a business course, they noted, and couldn’t understand a balance sheet. I never held a job other than Assistant Professor, and generally seemed risk averse. All true. Worse, they didn’t own computers and couldn’t imagine why anyone would want one.
Harry Lasker, also on the Harvard faculty was my co-conspirator and was to become my long-term business partner. Through his work on Sesame Street we were exposed to the concept of interactive television. Imagine: “Three of these things belong together, one of them is different. Can you tell me which one?” We had seen a demo of QUBE interactive cable in the late 70’s and then something very new — an Apple computer (itself a novelty) wired up through a black box to issue commands to another new device, a video cassette recorder. There it was, the communication power of television and the intelligence of the computer. We had glimpsed the possibility of a very different future – desktop learning – and electronic shopping. We now faced the entrepreneur’s first hurdle: Could we sufficiently describe that place and construct a map reliable enough to get others to join the journey?
We often hear about the vision thing and that’s key, but the real challenge for the entrepreneur is to model how, at what speed, with what threshold criteria met will customers actually commit and buy? Only if they do roughly as planned will the alternative future vision become both a reality and an opportunity for the entrepreneur. It may be okay, even desirable, to be in “too soon,” so long as you’re still there when the market grows.
Model building expertise is the differentiator. That doesn’t mean just the complexity of your linked spreadsheet, but the ability to make a necessarily unpredictable future predictable. Building a value creation roadmap you can rely on is everything. Hitting that plan means building the trust of those around you – investors, customers, employees, channel partners, even family members. For us, that meant understanding how our growing solution set would fit into a slowly changing corporate training niche within a rapidly evolving tech ecosystem.
We were fortunate to have the world’s best venture capital firms back our “map of the future.” Board meetings always had the same last refrain, “If money were no object, how fast could we grow?” But that’s the trap – money is always the object. If you use it wisely you get more than you need, which can then get you in trouble. It is sometimes reasonable to rationalize after the fact why this or that planned goal was not achieved despite the big, costly initiative. But when the stakes are big, your investors and your organization generally expect the entrepreneur to know before they do when it’s time to pull the plug and quickly put Plan B in place.
It was November 1985. We had just raised $7.5 million in what we knew would be the last up round of capital before we needed to be cash positive. The funds would launch the first big multimedia IT training library. Our plan was to go big – ramp up a marketing and sales organization. Get multiple products in production to follow on our first set of titles. Double our team, quickly hiring 100 people – and get them to give 150%. The plan: Burn $1 million per month for six months, close the big accounts in June when the trial program ended and then see the cash pour in. IBM and AT&T would be the bell-weather wins. They thought we had achieved a breakthrough.
After seeing our cash dwindle from $7.5 million to $2.5 million in April of 1986, and knowing we needed the big, hard orders in June when cash would be nearly exhausted, Russ Carson, the legendary private equity investor and the lead of our syndicate, asked me if the orders would land as planned. I started to explain that while things looked good, we needed more data from the beta customers to vet the sales forecasts from the new team. Russ patiently asked if we were sure we didn’t know. We knew. We might get the orders later, but not in June – and not in time to avoid a cash crisis in July. If more money was needed, we might get it, but at a huge cost.
We left the board meeting ashen faced and spent all night devising the expected cuts and how to communicate the news without casting a pall over the firm. It wasn’t that hard to reduce the burn because we were wasting so much on marketing, sales, and futures that had no impact on the 10 key customers whose money and endorsement was all we really needed. Somehow, we stretched the cash, got the orders three months late, but it was enough. Sales skyrocketed and we saw our company grow by 400% in 1987. Within a year, our key strategic partner made an unsolicited offer we could not refuse to acquire the company outright.
The entrepreneur’s second-biggest hurdle is nearly the inverse of the first. After selling the vision and the plan to just about anyone who will listen, the entrepreneur must clearly read the failure signals, and be ready to change course before he or she is guilty of practicing management by wishful thinking. It happens all the time, even (maybe especially) after extraordinary success. Think AOL, or Blackberry, or OS/2 or Betamax.
Successfully managing the dissonance between unwavering commitment to your vision and the plan, and accurately reading the business signals that forewarn trouble is the entrepreneur’s perpetual challenge. False negatives and false positives are coming at you in a steady stream. Overreacting and underreacting each have great costs. Retaining your effectiveness as a person, a spouse, a parent, a friend and a leader while managing this 24/7 obsession is one reason why the personal toll is so great on entrepreneurs and the people around them.
By the time Harry and I retired from Renaissance Worldwide, the second company we founded in 1991, we were running a publicly held firm with several thousand employees in offices around the world. We swore we would never do it again. However, the exhilaration from making it happen or even coming close is so powerful that we each came back for more.