You don't need an MBA to start a business, but you do need to get a few things right if you want to succeed. Whether you're opening a restaurant, starting a tech venture, or producing a Hollywood film, the fundamentals are the same. You need a product that meets market needs (see BW Online, 05/04/2006, "Countdown to Product Launch, Part I"), a business model that works (see BW Online, 05/12/2006, "Countdown to Product Launch, Part II"), and a management team that can execute with precision (see BW Online, 05/19/2006, "Countdown to Product Launch, Part III").
In this article, the last of my four-part series, I talk about preparing for future challenges and positioning yourself to take advantage of lucky breaks. The fact is, you could handle the first three essentials mentioned above flawlessly, and still fail. Or do nearly everything wrong and still hit the jackpot. Life makes its own plans and you don't always have control over your own destiny. What you can do to increase your odds for success is to prepare for the likely obstacles.
When you think of industry moguls like Bill Gates, Steve Jobs, and Larry Ellison, it's easy
READ THE TIP SHEET >to focus only on their successes. Read the corporate history on Oracle's (ORCL) Web site, and you won't even get a hint that anything ever went wrong. Yet even this great company was on the verge of bankruptcy in 1990. A series of financial and strategic missteps led the company to downsizing, restatement of earnings, and lawsuits. And Apple Computer (AAPL), which has always excelled in innovation, suffered record-low stock prices and crippling financial losses through the 1990's.
THINKING FAST. One of the few technology companies with a seemingly smooth ride to success is Microsoft (MSFT). Yet ask any Microsoft executive and he'll tell you how hard they had to work to achieve this.
Vijay Vashee, who was employee No. 27 at Microsoft, and today is an active angel investor and sits on several boards, says there were many close calls -- such as when Microsoft released its first business application, a spreadsheet called Multiplan. Microsoft's business model was based on selling through PC manufacturers. When Lotus released its Lotus 123 product through a retail channel in 1983, it caused Microsoft sales to drop by 80%. Microsoft had to rethink its product strategy and rapidly build its retail channel to survive. Today, Microsoft is the dominant player in the applications market.
In every venture with which I have been involved it has been a struggle to succeed and I have had to learn to deal with failure (see BW Online, 8/10/2005, "When Life Hands you Lemons"). So have nearly all the entrepreneurs I know.
CHANGE YOUR LUCK. It's the same in the entertainment world, as I learned from Hollywood stars like Jason Lewis and Rosario Dawson, Bollywood stars like Feroz Khan and Sanjay Suri, and beauty queens like Celina Jaitley and Diana Hayden. In their candid moments, they talk about how they constantly struggle to reinvent themselves and stay in the limelight (see BW Online, 8/10/2004, "My Entertaining Education in Movieland"). Good acting skills are critical, but success is often based on luck and getting the right break.
It's great to be lucky and have good timing. But what can you do to increase your odds of success? Here's a checklist I developed after launching two startups and mentoring dozens of entrepreneurs:
1. Be prepared for problems. You can't predict everything that will go wrong, but you can put mechanisms in place to react. It's like having fire extinguishers ready in your home. You must set aside the financial reserves, plan for product failures, customer problems, personnel turnover. You should have contingency plans, clear HR policies, and well-trained customer support representatives, for example.
2. Build the loyalty of your team. Your most important assets are your employees. You must invest in building their morale and loyalty. I've always found that by being there for your staff when they need you, they will be there for the business when things go wrong. You'll be surprised at how your employees remember even the small things you do for them.
When my second startup went through a difficult period, most employees took salary cuts and some continued to show up for work even after they were laid off. They believed in our mission, but also talked about the Christmas gifts that my wife purchased for their children, the extra time off they had to deal with family emergencies, and how much the company had cared for them. We turned the company around and achieved record revenues with their help.
3. Build the loyalty of your customers. There are always issues with product shipments, requests for enhancements, and times when your customers need extra support. You may be surprised to find that you can achieve higher overall satisfaction and loyalty with customers who have had problems which were satisfactorily resolved than with customers who had no problems. Invest in making your customers successful, and you'll find that they are there for you when you need them.
4. Keep a close eye on your market. Microsoft learned during its early days to watch the market very carefully and adapt to it. They knew they had to pick the right segment of the market and focus on it. As they saw the market evolving toward the IBM PC in the early 1980s they bet everything on it with their Windows product, which first hit the market in November 1985.
One of the best ways of watching your market is to analyze every customer loss as well as every win. If customers aren't buying from you, you have to understand why. What did they buy? What were their alternatives? What do they expect to buy in the future? Understand why you were selected if you did get the business.
5. Be prepared to change your strategy and evolve your business model. One of the reasons Microsoft didn't suffer the financial disasters of Oracle and Apple was that they were able to adapt their business models to new market realities in time. As I wrote in the second part of this series, you need to constantly adapt your business model and strategy as you gain experience and as the market changes (see BW Online, 05/12/2006, "Countdown to Product Launch, Part II").
6. Persevere. There are going to be times when it looks like everything is falling apart. You simply have to persevere. It takes hard work and determination to succeed in any field. It is very hard to deal with sales losses, product delays, staff turnover, customer complaints, and internal squabbles. But that's what entrepreneurship is about. If it were easy, everyone would be doing it.
7. Know when to beat a strategic retreat. One of the instincts you have to develop is to know when to cut your losses with products, strategy, employees, and even customers. Sometimes you should admit defeat and learn from your failures (see BW Online, 8/10/2005, "When Life hands you Lemons").
I often compare building a business to playing a video game. As soon as you complete each level successfully, you're suddenly trying to survive the next one. You need varying sets of skills and each level gets progressively harder. And as the stakes get bigger, the bad guys also get badder. But with a bit of luck, you'll make it through all phases of your launch and be in the enviable position of deciding whether to jump to the next level or cash out and start a brand new game.
Wadhwa, the founder of two software companies, is an executive-in-residence/adjunct professor at Duke University. He is also the co-founder of TiE Carolinas, a networking and mentoring group.