I am back at this since so much water has flown under the bridge that it deserves to be put on record some where.

I have struck out on my own about 9 months back with a business focused on consumer products in personal care industry. As is usally the case, activities have been slower than expected and we expect to hit the stores early May.

As I am working on the various dimensions of the startup, legal, business development, sales, quality, logisitics, marketing, I realize two qualities that are absolutely needed to succeed at this entrepreneurship business:

1. “T” shaped workstyle. Let me explain. When you are responsible for decisions across a bunch of decisions and everything is critical or important for the future success of business, it is imposiible to shut out eveyrthing else for long stretches. What is required is some kind of deep diving into each topic, getting a good grasp on the dynamics of the topic and then surfacing for air to get an overall view of how this fits into the bigger picture. This is important becuase legal or marketing decisions cannot be made with a superficial analysis; but on the other hand things happen parallely; while I am busy negotiating with a partner, my producer in looking towards me for a decision on the payment terms, shipping route etc. In order to make a real contribution, I have to do a deepdive, understand the consequences of the decison and make a decison (or decide to wait for more info) and surface back up to do another deep dive into a different topic. On a given day I find myself doing this at least into 5-10 different areas. The complexity only multiplies if you are also working multiple countries and time zones.
2. Ability to Prioritize. Effectively. If I have to choose one capability that can set apart a great entrepreneur from a mediocre one, it would be this one. Currently, when we are ready to launch the brand and are putting together the marketing plan, you can see the ideas bubbling up intensely. Most of the ideas are great, cost effective, powerful and absolutely in line with the brand ethos. But given this is a startup, we cannot invest resources into every one of the idea. I have to choose one or two related ideas that I can tie together as a coherent whole and leave the rest out for now. By itself, this is not such a critical capability. But as an entrepreneur and startup, I am constantly faced with the thought of consequences. I am always plagued by “what if”? For me the consequence of a bad decision could be failure and disaster. Unlike an established company, I will not have the luxury to fail and recover more than a single blunder. This in turn makes it very, very important to do the right things first rather than later.

Of course, these quealities are essential for someone working in a large corporation. However, it is the stakes involved that make these capabilities much more critical for a startup founder.

I have always maintained that Euro zone is condemned to the Hindu rate of growth unless some fundamental reform happens both at societal and governmental level.A lot of relieved sighs could be heard when it looked as if EU will be growing faster than any other economy in the world. Especially from US. After being the engine of global economy for the past 6-8 years, it does get a bit tiresome to be called up for duty time and again; even more so when the country is not appreciated abroad. However, I would not break open the champagne bottles if I were US.

All the promising signs that EU economy shows are just fluff with very little stuff inside. The fundamental problems which are the root cause for EU’s decline, while the rest of the world (excepting that perennial underachiever Africa) seem to be speeding ahead, remain unsolved. Worse, there is no light visible at the end of this tunnel. Of course with ECB bent upon raising rates, it is almost a shoo in that the growth rate will slow down.

The recent article in Economist (sub required), raises this cautionary flag.

There are three short-term reasons to expect slightly choppier waters in the euro zone. The easiest one to exaggerate is the slowdown in America, where growth tumbled to (an annualized) 2.5% in the second quarter and where consumers will surely be less willing to snap up German plastics and French perfumes. In fact, the euro area’s growth increasingly seems to be being pushed along by its own consumers’ spending rather than exports. The zone as a whole depends on exports much less than its individual countries do: the 43% of Germany’s exports going to other members of the club count as domestic demand at the level of the euro area. And America is less important as an export market for the zone than you might expect. Britain counts for more; so, combined, do other European Union countries. And when it comes to recent additions to exports—which is what really matters for growth—China is buying an ever bigger share. On the other hand, a slowing America is plainly no help to Europe’s exporters.

The second reason to expect a slowdown is that some euro-area countries, notably Germany and Italy, are due to tighten their budgets. That their public finances need repairing is not disputable; the timing and style of the repairs is, especially in Germany. Just when German consumers seem to have recovered their confidence, after years of low wage-growth and worries about jobs and pensions, the government wants to raise value-added tax by three percentage points next January. Paradoxically, this may boost growth in the second half of this year, as spending is brought forward to beat the tax increase. But it will surely hold the economy down at the start of 2007.

Third, the European Central Bank (ECB) is providing less of a following wind than it did. It started raising interest rates last December and is expected to keep doing so at least until the end of this year. So far, there is little sign that these rate increases are holding the euro zone back, but eventually they will have an effect. And the second-quarter spurt makes further rises in interest rates more likely.

The key structural issues of unemployment, labor laws, healthcare remain unsolved. The key social problems of low enterprise formation, stigma of failure, stigma of success remain unresolved. Unless some deep and committed reform happens in these areas, I fear EU will continue to become marginal.

tags: EU+Economies

My last post here was a soft rebuttal of Mr. Evslin’s assertion that entrepreneurs are born and cannot be made. As I said in that post, I never believed that we can arrive at a scientific definition of entrepreneurship. In other words, it is not possible to define the nature of entrepreneurship so completely that we can build a predictive model using that definition.

For me this is readily intuitive for the reason that entrepreneurship is an exclusively human enterprise. Just as we cannot design/build a society without any violent tendencies because of human factor, it is not possible to build a completely accurate predictive model of human behavior. Such an attempt is completely at odds with the concept of “free will” and anyone who brought up a kid knows that free will is as real as gravity! One of the best explorations of this is Isaac Asimov’s Hari Seldon. Hari Seldon is the lead character of the Foundation series and is credited with developing a branch of mathematics called psychohistory.

Using the law of mass action, it can predict the future, but only on a large scale; it is useless for anything smaller than a planet or an empire. Using these techniques, Seldon foresees the fall of the Galactic Empire, which encompasses the entire Milky Way, and a dark age lasting thirty thousand years before a second great empire arises. To shorten the period of barbarism, he decides to create the Foundation, a small secluded haven of technology on the planet Terminus, to preserve knowledge of the physical sciences after the collapse. If done properly, only a thousand years would be required before the next empire is established.

Sometime back today, I was reading an article in HBS Working Knowledge about Sir Ernest Shackleton. To quickly recap, Sir Ernest was the leader of an expedition in 1914 to cross Antarctica. When his ship Endurance becomes hopelessly trapped in pack ice, he redefines his mission to survival instead of crossing the continent. Struggling over the next 2 years, he succeeds in bringing every single person in his 27 member crew back home. A measure of his success is reflected in the fact that 8 members of the Endurance crew signed up for his next expedition to Antarctica.

There’s a definition of entrepreneurship that HBS’s Howard Stevenson pioneered. Many of us have used it at the school. It is, “Entrepreneurship is the relentless pursuit of opportunity without regard to resources currently controlled.” That’s a great definition, and it was true of Shackleton when his objective was to walk across Antarctica.

He had to pursue opportunity. He had no money. His reputation suffered some when the South Pole was discovered in 1911 and that was no longer “a company to found.” There was no longer a continent to conquer. He suffered somewhat when Robert Falcon Scott died on a horrendous journey back from the South Pole in 1912. He realized that Scott would be lionized. And, indeed, Scott became a martyr, a great hero for English history.

This meant that Shackleton was perceived to be out of the loop when he started to raise money. And as the winds of what would become World War I started whipping across Europe, people were less interested in polar exploration. So it was under less than ideal circumstances that Shackleton had to marshal resources: He had to find men, money, a ship, dogs. He had to find someone to help them learn to ski. He had to figure out how to do all this—how to make his dream real, how to bring it out of the ether.

When we teach students about the entrepreneurial journey—which can apply to a manager at a small company or in a large, established organization—we say that entrepreneurs are made, not born, and that entrepreneurship is a way of managing, not necessarily a way of being as a person. Any of us can be an entrepreneur.

I was fascinated with how completely Shackleton’s enterprise had to change once the ship was frozen in the ice. That happens in all kinds of businesses. Anyone who has tried to start a business or manage an existing one knows that you often have to change horses midstream several times if the thing is going to succeed. And those can be big midstream horses—from a new product, to a new CEO, a new set of investors, or a whole new set of customers.

The will of Shackleton or the will of an entrepreneur is present in all of us. The question is not if we can be one; the question is how deeply can we draw from that wellspring of courage, resourcefulness and conviction.

tags: entrepreneurs

Tom Evslin, author of an amazing blog and an all round admirable man had a weird post yesterday. It is some kind of a pop quiz which tells you at the end of it if you are an entrepreneur. The idiotic thing is if you take the quiz then you are not an entrepreneur since, according to Mr. Evslin, if you have time to read lists, you are not fit to be one.

Boy, but that is a good test.

He also brings up that old shibboleth of “entrepreneurs are born, not made” I think someone should take this particular myth outside and put it to rest once for all. I can think of a bunch of people who had no interest in starting up a business, but ended up doing one because they could not find a better way to achieve their goals. Narayana Murthy certainly does not fit this mold; neither does Ashok Soota. In fact none of the people who have created big businesses in India or China in last 15-20 years have neither the genes nor the environment to deliberately choose an entrepreneurial option. On the other hand, I would say starting a business in India or Asia is still an act of insanity since there is so much social stigma attached to failure in addition to a total absence of financial safety net.

Panasonic did a study in UK about what makes people begin a business. I find their conclusions totally intuitive and inline with what I am going through currently:

The main conclusion that surprised Panasonic was how little planning went into the process. “About 54% of UK businesses start without any business planning at all, so they’re often described as accidental entrepreneurs,” he says. “Something forces a change in their life, normally it would appear to be in their 30s, prompting them from doing what they’re doing to being an entrepreneur.” These prompts can be redundancy, a geographical move, anything. “We found the spark that makes that happen doesn’t necessarily leap from, ‘I’m going to do this’ to, ‘I’m going to make a plan’.”

I believe that like majority of human activities, entrepreneurship cannot be canned or categorized or predicted. There are just too many variables that play a complex role in determining if someone can and will begin a business on their own.

There is a huge ruckus going on in the echo chamber called blogosphere about link love and how tough it is for a new/obscure blogger to get recognition. As I read the main protagonists of this latest slugfest, I keep thinking of Macbeth:

Life’s but a walking shadow; a poor player,
That struts and frets his hour upon the stage,
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.
- Macbeth, Act V, Scene 5

I started reading TechCrunch last summer, when it just started out. If I remember right, there were only some 60 odd posts by Mr. Arrington then. I remember plugging TechCrunch enthusiastically because the passion and interest of Mr. Arrington leaped off the posts. But then, the whole Web2.0 was a new, new thing back then (hard to believe this was only 12 months back…ahh the arrow of time, especially in Internet) and it was worth getting passionate about. Ruby on Rails (as a non-techie, I have no idea what this means) was relatively new, Ajax was still a brand of C-P and men were men. The startups were blazing new trails and no wonder Mr. Arrington got excited. Hell, I used to be all agog sitting many thousands of miles away from the epicenter! At some point, because of all this attention that Mr. Arrington poured on the area, a lot of startups reached out to him and made him the messiah of Web 2.0. All well deserved. At some point however, it started to sour. I don’t quite remember the time, but sometime early this year, I no longer cared much if I visited TechCrunch every day. It appeared to me that the sheer quantity of startups had somehow buried the high quality businesses. TechCrunch started to get more and more in-crowded. Most of the reviews and coverage seemed to be targeted at a very specific group of people: tech, based in California and heavily involved in the Web 2.0 sector. Most of the companies covered just do not sound interesting to me (someone who lives thousands of miles from Silicon Valley, literally as well as figuratively). That’s when I thought Mr. Arrington had created a monster in TechCrunch. The blog (now it is more like an institution) has become a voracious machine that demanded more and more attention, news and support. The parties became bigger and bigger and the passion was gone. Mr. Arrington no longer sounds excited and delighted while sharing news about a startup. I see him distracted by sideshows, injured egos and trifles these days. It is something like a messiah who fought to spread his message, succeeded big time, achieved his goal and then finds out he still has another 100 years to live with nothing to fight for. Nothing significant that is.

Mr. Arrington caught the tiger of success by the tail. Now he has to ride it for all its worth.

The second protagonist of this serialized vendetta is Mr. Nick Carr. I love to read him. He is the best contrarian writer the technology sector has seen for many years. Sitting outside the industry, I believe technology/silicon valley needs some one like him. When he shouted “IT Doesn’t Matter” it was the same as the boy shouting the emperor has no clothes. I also remember thinking that most of the reactions in both the cases were near identical. As the devil’s advocate and court jester (used in the best possible way), Mr. Carr is awesome. He is original, provocative (I don’t recall anyone critically examining Wikipedia until he burst onto the blogging scene) and has a nasty sense of humor.

He is absolutely right that it is very tough to get recognition in the blogosphere. It should be. I definitely don’t want to be deluged by thousands of blogs all of which are popular, famous and worth my attention. Just as 9 out of 10 new businesses fail, 9 out of 10 blogs should sink into obscurity. There is no conspiracy here; the system is not gamed. The system is intrinsically biased. We have to deal with it or take our toys and go home.

Nick Carr is doing his job very well; but I am sad to see Mike Arrington slowing down. One can only hope that Mr, Arrington realizes there is a new skeptic in the chamber, who needs to be answered with passion and precision. Mr, Arrington needs Mr. Carr.The messiah and the skeptic. One needs the other. That is why, I get the feeling this is more like professional wrestling than fists of fury. And that is why, I was reminded of that quote from Macbeth.

Someone shared this with me. Some are old and some new. Like all funny things, there is more than an iota of truth in this.

Essential vocabulary additions for the workplace (and elsewhere)!!!

1. BLAMESTORMING : Sitting around in a group, discussing why a deadline
was missed or a project failed, and who was responsible.

2 . SEAGULL MANAGER : A manager, who flies in, makes a lot of noise,
craps on everything, and then leaves.

3 ASSMOSIS : The process by which some people seem to absorb success and
advancement by kissing up to the boss rather than working hard.

4. SALMON DAY : The experience of spending an entire day swimming
upstream only to get screwed and die in the end.

5. CUBE FARM : An office filled with cubicles

6. PRAIRIE DOGGING : When someone yells or drops something loudly in a
cube farm, and people’s heads pop up over the walls to see what’s going
on.

7. MOUSE POTATO : The on-line, wired generation’s answer to the couch
potato.

8. SITCOMs : Single Income, Two Children, Oppressive Mortgage. What
Yuppies get into when they have children and one of them stops working
to stay home with the kids.

9. STRESS PUPPY : A person who seems to thrive on being stressed out and
whiny.

10. SWIPEOUT : An ATM or credit card that has been rendered useless
because magnetic strip is worn away from extensive use.

11. XEROX SUBSIDY : Euphemism for swiping free photocopies from one’s
workplace.

12 . IRRITAINMENT : Entertainment and media spectacles that are annoying
but you find yourself unable to stop watching them. The J-Lo and Ben
wedding (or not) was a prime example – Michael Jackson, another…

13. PERCUSSIVE MAINTENANCE : The fine art of whacking the crap out of an
electronic device to get it to work again.

14. ADMINISPHERE : The rarefied organizational layers beginning just
above the rank and file. Decisions that fall from the adminisphere are often
profoundly inappropriate or irrelevant to the problems they were
designed to solve.

15. 404 : Someone who’s clueless. From the World Wide Web error Message
“404 Not Found,” meaning that the requested site could not be located.

16. GENERICA : Features of the American landscape that are exactly the
same no matter where one is, such as fast food joints, strip malls, and
subdivisions.

17. OHNOSECOND : That minuscule fraction of time in which you realize
that you’ve just made a BIG mistake. (Like after hitting send on an
email by mistake)

18. WOOFS : Well-Off Older Folks.

19. CROP DUSTING : Surreptitiously passing gas while passing through a
Cube Farm.

As I look at the landscape of the articles on entrepreneurs, this question always props up. Where do they get their ideas from? The usual wisdom is that every successful entrepreneur has 3 elements in abundance: know what, know-how and know-who. Then you read about Jeremy Moon, who started Icebreaker in 1995 (today has about 100 people and 50 million in revenues) when he was 25 and just graduated from school. Obviously, he does not have a huge amount of talent in any of the 3 dimensions.

For me, this question had a far more profound question hidden underneath. How does one succeed in starting a business? There seems to be an unspoken belief (almost faith) that the right idea is the primary factor in explaining the success of a business. So, if we can understand how a successful entrepreneur generated his/her idea, maybe we can get our hands around this hard problem of succeeding on our own.

I beg to differ here. I think the secret sauce is far more complex than just having the right/better/unique idea. In fact, I think a successful entrepreneur needs to have 3 things in spades to succeed:

• A mindset that can generate ideas at will. Usually, this means that the person needs to be multi-disciplinary in interests, friends and career moves. Generating ideas at will means the person looks at ordinary encounters with the eyes of a problem solver and imagines how he/she would go about creating a business that solves the specific problem.
• Determination. Paul Graham wrote an excellent essay on this. To quote,

I now have enough experience with startups to be able to say what the most important quality is in a startup founder, and it’s not what you might think. The most important quality in a startup founder is determination. Not intelligence– determination.

• Visible passion. When you begin the journey, you will be all alone, walking down the road. If you would like the business to reach its objective, you need to create a team of partners, followers and believers. For every one of them, this commitment begins with their interaction with you. If they see you determined to walk that road, passionate and energetic about the journey and the destination, then sooner or later, they will start walking with you.

So, no, having the greatest idea is not the huge deal about a successful entrepreneur. It is the other 2 traits, which require enormous will and confidence that need to be probed deeper.

After thinking about it for the past 3 years, I have taken the plunge and launched a business. Currently we are in a quiet phase and I cannot talk too much about it for the next few weeks. But as events crystallize, I will repurpose First Cut to reflect and test my ideas, opinions, operational challenges as I work to launch a new idea in outsourcing and democratizing key trends in consumer products.

Stay tuned…

Russell Beattie has the best analysis I have seen so far about Microsoft’s big announcement today.

Key takeaway? Don’t count Microsoft out yet.

This is about why first cuts are more important than final cuts. Perfection is a never ending journey; if I want to achieve results, I must finish what I begin. For only at the finsh line will the winners stand out. First Cut is all about action. It is not about thinking (though, in order to make that first cut, one should measure carefully).

Make it fast. Make it count. After running my company for 2 years now, I realize that actions are the final arbiters between success and failure. I agree that some thinking has to go into the actions, and the more rigor you bring to your thought, the easier it will be to execute.
I was talking to someone on the phone about our business today and he asked why is it we are going deeper and deeper into Eastern Europe while West Europe is so rich and developed. I would have loved to say that it is all becuase of this grand, visionary plan I had in mind when I took over 2 years back. The fact is, I opposed and fought any investments into Eastern Europe for a long time; the only thing I can take credit for is that I encouraged seeding all over Europe to see what will emerge where. As it turned out, the seeds we planted in eastern Europe started to bloom quickly and then it was a no-brainer to divert resources into that geography.
So much for strategy as an exercise in ratiocination!
We understood that we do not have enough information to do a data driven analysis, we do not have enough time to collect the data or spend a few weeks thinking this through. So we did what any average bricoleur does…improvise and diversify. We made our First Cuts fast and in diverse places. Luckily enough, our first cuts were deep enough for us to begin harvesting now.

As I kept running this phrase in my head, I realized that this is probably what I want to communicate as well as keep with me for a long time; the significance and power of the “first cut”.

Hence, the change in title.