Author: Petar Petrov

The Breakthrough Company
Keith McFarland

ISBN-13: 978-0307352194
Both Good to Great and The Breakthrough Company are somewhat off topic for now: “book that helps people like me solve the real problems of moving beyond the entrepreneurial stage of development”, where ‘beyond the entrepreneurial stage ofdevelopment’ actually means sales over $250mln. Yet there’s some good stuff to take home.

Few randoms:

• “Our study makes one thing clear: Building a breakthrough company is less about choosing the right industry and more about acting on the opportunities already available in your existing business” He says that because the breakthrough examples they found where spread all around different industries, rather than being concentrated in the hottest areas of technology, energy, bio…
• “It’s not about where (or whether) you went to school.” Can I please please mention my school post AGAIN?
• “You don’t always need other people’s money…We were shocked by the fact that not one of nine [all of the nine prime examples of breakthrough success] breakthrough companies  was funded by venture capital in their start-up years.” Super surprising to me.
• How employees feel about working in a place is a significant driver of success…[those companies often had] Fortune magazine’s best places to work, hanging prominently on the wall”
• “While one might expect that entrepreneurs lead through their visionary ideas, the TAIS results show that entrepreneurs actually influence people through deep personal relationships. Entrepreneurs, in other words are successful because they build positive personal and emotional connections with people and groups, traits more commonly associated with sales people. These connections can become liability, however, if entrepreneurs lose their ability to make objective decisions about personnel they’ve become quite friendly with or with whom they’ve worked a long time.” Sooo interesting. Just building a castle in the sky doesn’t work anymore. You have to go back to the ground, and make all those people around you – employees, partners, spouses, investors – fly high and to YOUR castle. That’s when you can make it.
• “Don’t diversify before you own your existing market”

Betting:

• “Our research suggests that one thing that separates breakthrough company from the rest of the pack is a willingness to up the ante, to place bigger and bigger bets as the business grows – combined with the instincts to place the right bet at the right time.” BUT:
• “Entrepreneurs are born risk takers – this plays right to their strengths, right? Wrong. We were surprised to learn that entrepreneurial leaders, in fact, are often more risk averse than is popularly believed….There appears to be no significant correlation between risk tolerance and starting or running an entrepreneurial business…to most successful entrepreneurs, starting a business isn’t much of a risk at all”. It is true that it is more risky to be at a job, than to run your own business. You can get fired again and again and you can do nothing. This is HUGE risk, without any great return.
• Interesting fact: “Twenty venture capital companies rejected him before he eventually turned to family and friends [check the fishes section in this post] to borrow the money to get his new company started.” Talking about the founder of Intuit (Quicken Quickbooks)
• It seems that gambling and betting is not the same thing. Gambling seems to be more like i will put my money on red and luck decides, while betting is when you have some facts to consider, some rational, some strategy and calculations on possible outcomes.
• Breakthrough leaders seem to do exponential bets. “One + One + One = Six. That’s the math of the exponential bet, the art of linking bets together to build real advantages over your competitors”
• “While these companies may place additional bets to make sure they “win, even if they lose,” they don’t “hedge” through indecision; they pursue victory with all their might. Oooou, this is curious. ‘I bet on this product, that it will work. When it doesn’t, I fix it and I bet again.
• Instead of asking “How will we know when it is time to ‘take down’ the bet?”. You won’t – breakthrough companies ask questions BEFORE the bet.

OUTSIDE HELP – Scaffolding

• “While YPO [forum] and other peer networks can be important forms of organizational scaffolding, we found that breakthrough companies are also adept at using other forms of scaffolding, such as advisory board, boards of directors, and customer or dealer counsils, as well as investors, industry experts, consultants, and advisors. What sets the breakthrough companies apart, however, is not that they have these support structures […] but the optimal manner in which they learn from them.” This is tremendously important.
• “… entrepreneurial leaders tend to be great at figuring things out, and are supremely confident in their abilities to find the right answer. That’s great in a start-up environment, but as a business grows, leaders need to be willing to look outside their own four walls for people with the experience, connections, and perspective they may lack.”
• “1) Do you know anyone who heads up a marketing department at a company with revenues ofover $100 million and has experience in brand marketing?
  2) Why, are you trying to recruit someone?
  1) No, I wanted to find a mentor for my head marketing. She does a great job now, but she’ll need to keep expanding her skills if she’s going to lead marketing for us when we’re a half-a-billion-dollar company. I want to find someone who can help her prepare for the new responsibilities she’ll need to take on as our company grows”

INSIDE HELP – insultants (inside consultants)

• “They created companies where people are encouraged to question the fundamental assumptions of the business.”
• “If leaders don’t work hard to build an environment where it is okay to bring up potentially bad news, it will get buried. In the words of Polaris CEO Tom Tiller, “Good news rises and bad news sinks like a rock”

Don’t loose your sense of HUMOR!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

“…the companies that were imbued with a sense of humor tended to embrace new ideas and modes of thinking more readily than their more serious counterparts. This sense of humor also seemed to fuel an insultant-friendly atmosphere, as team members, in general, seemed less defensive and more proactive.”

Tough Times University

• He explained that EVERY one of those 9 companies run into a super hard situation, where they had to get out. He calls that ‘enrolling to Tough Times University’.
• “Anyone can run a company during tough times – it’s the good times that actually challenge leaders the most”.

Strategy

• “Spending three months crafting a strategy pretty much guarantees that it will be obsolete before the ink on the final report is dry.”
• “We need an approach that is light on theory and heavy on action”

What is the one thing that surprised you?!

How To Get Rich
by Felix Dennis

ISBN-10: 1591842050

Often times people avoid talking about money. Probably because:

• they feel more meaningful if other values are put forward
• they are afraid to share that they don’t have enough money
• they just can’t admit to themselves how important money is
• etc

Fact is however, money is important, and part of an entrepreneur’s life. This post is derived and remixed from the book of Felix Dennis and is all about MONEY!

What qualities do you need to have to become RICH?

• Determination!
• Confidence
• Tunnel vision
• Ability to delegate (make sure you delegate to a person, that is not a copy of yourself)
• Fear NOTHING. Here is quotation about it:

“Armies and governments fear men or women who know they are going to die soon; and they have good reason to. Such people have nothing to lose. They will commit any atrocity and take as many others with them as they can, if they are driven to it. YOU must now become that doomed man or woman. You are going to DIE. Nothing can alter that fact. It is immutable. Incomprehensible. Unfair. All those things.
But it sets you free, don’t you see? It sets you FREE.
What does anything matter if you are going to die? Nothing matters. Nothing at all. Get that through your terrified mind and you will wake up in the morning ready to rip the throat out of the first gazelle unfortunate enough to cross your path. Why would you rip its throat out? Because you CAN. Not for breakfast. Not for the ‘thrill of the chase’. But because you CAN.
If you want to be rich you must make a pact with yourself about fear of anything. you cannot banish fear, but you can face it down, stomp on it, crush it, bury it, padlock it into the deepest recesses of your heart and soul and leave it there to rot.”

Luck. I have talked before about luck here and here. Felix’s favourite quotes:

• Luck is preparation multiplied by opportunity. -Roman Philosopher
• The harder I practised, the luckier I got. -Gary Player, Golf champion
• Luck is a dividend of sweat. -Ray Kroc, McDonalds founder

Financing:

• Inherit it
• steal it
• win it
• marry it
• borrow it – (sharks) those maxed-out credit cards stories are heroic but stupid. Not the way to do it, interests are too high.
  
• earn it – (dolphins) VC’s have good money, but you have to be really careful. 1 sentence in the contract can make the difference between owning the business and not. Buy legal advice. It’s likely that you’ll make your first million with them, but you will make them many millions before that.
• earn it – (fishes) Fishes are all your friends and partners. This is THE BEST WAY to finance. Get a tiny loan from your aunt. Ask your dad to let you have an office in the other bedroom. Borrow a printer from your friend. Bring partners to do work. Motivate young people to work for portfolios, prove their qualities. etc. All those numerous little arrangements with little fishes can be managed to achieve absolutely realistically huge tasks. Don’t forget though that every fish has to get its share in the end – one way or another.

Staff, partnerships, and ownership:

• If you don’t need them for a specific reason, avoid partnerships. Differences in visions, differences in manners of operating, and all personal matters turn to be distracting for a focused entrepreneur set on making money.
• Most of the young people value opportunities and challenges more than money. Exploit that.
• Keep every single share and ownership to yourself. Be generous in salaries and bonuses, but keep ownership to yourself. 4 guys tried asked FD to give them 20% or they leave. He fired them on the spot. Later those 20% became £80,000,000
• Do not hire a replica of yourself to delegate to. Makes no sense to strengthen your strengths and not address weaknesses.
• Leave every now and then in total isolation. The teams that will be forced to work without you will learn quickly to take responsibility, cope with problems.
• Do quality work. Talent will come to you.

MISC:

• Diversify. If you have only one egg in the basket you will be highly unlikely to get rid of it, even if it is not going well and needs to be rid.
• Go where money is. “If you want to become rich, look carefully about you at the prevailing industries where wealth appears to be gravitating…Computer software, technology and dot com start-ups, cable and satellite television, property, environmental waste clean-up, alternative energy sources…Keep your eye on the ball if you wish to get rich. And do not forget which ball. It’s the one marked “The Money is Here”
• Dilusions. “When enough people share a short-lived delusion, vast sums of money can be acquired overnight. The ‘tulip mania’…a single tulip bulb was swapped for a …4 touns of beer, 1000 pounds of cheese, 2 tons of butter, …”
• Happiness. “Happiness? Do not make me laugh. The rich are not happy. I have yet to meet a single really rich happy man or woman – and I have met many rich people. The demands from others to share their wealth become so tiresome, and so insistent, they nearly always decide they must insulate themselves. Insulation breeds paranoia and arrogance. And loneliness. And rage that you have only so many years left to enjoy rolling in the sand you have piled up.
  The only people self-made rich can trust are those who knew them before they became wealthy. For many newly rich people, the world becomes a smaller, less generous and darker place. It sounds ridiculous, doesn’t it? Ridiculous and gloomy.”
• Whores. “To be serious for a moment, some of the smartest, nicest people I ever met in my life were whores…”
• Keep giving it away. “The faster you give it away, the more money will flow back to you. Not because of ‘karma’ or ‘universal cosmic forces’, but because you then spend less time defending it and more time making more of it.”
• Never loan it to a friend. “If you loan money to a friend, you will lose your friend as well as your money. Give them whatever you feel like giving. Then forget it. Ditto with relatives”
• Imagine. Close your eyes. Try to imagine you are 50 and you have all the money in the world. But time is running out. If you had the chance to go back in time, what would you have done differently? Now open your eyes, and do exactly that!

The Tipping Point
Malcolm Gladwell

ISBN-13: 978-0316010665

One of the best writings I have ever read. Incredible book by Malcolm Gladwell that sets a new high record on the number of Post-it Flags -> 61. This truly remarkable research outlines the mechanisms through which ideas propagate through society. Who are the key people, what are their characteristics, what are the characteristics of messages that succeed in spreading and what role does the environment play on the process.

Instead of giving a summary of the book, I am going to drop 3 breathtaking topics I encountered through this book, and I am going to let you buy and read the book to understand how they all connect:

THE CONNECTORS

• One of the most important type of people “with a particular and rare set of social gifts” for spreading an idea are the Connectors. When the 6 degrees of separation experiment was made, there was a side discovery – most of the letters went through the same people to reach the targets. “It means that a very small number of people are linked to everyone else in a few steps, and the rest of us are linked to the world through those special few.” What is interesting about those people is:
  • They value the weak tie, they send bday cards, they remember facts, write numbers
  • They know people from very different kinds of social circles and interests
  • They find something interesting in everyone they meet
• Did you know that roughly 56% of people find jobs through a personal connection, 18% through advertisement or agency and roughly 20% applied directly. Even more fascinating – most of those 56% happen through those weak ties that the connectors value so much, not through best friends.
• A gossip/news/message can cause an epidemics and tip to become extremely popular only when it reaches those Connectors, which then are able to spread it in bulk to other people and other Connectors.

THE POWER OF CONTEXT

• It turns out small changes in the environment can trigger huge behavioral changes, that we used believe were hard coded in the personality of a human. Behavior is function of social context.
• You don’t need to catch every criminal in New York City to stop crime in subway. History shows that all you have to do is clean the graffiti and stop the fare beating. This creates a friendlier atmosphere where people  are not predisposed to making a crime.
• This same theory is the reason why perfectly normal regular kids can become nasty guards if put into a simulated prison environment.
• Honesty isn’t a fundamental trait. It is considerably influenced by context. Kids that don’t usually cheat easily slip into cheating given a few simple incentives, and changes of environment. Kids tested number of times over period of time rarely give the same results in amount of cheating.
• So all of that means that you can tweak slightly the environment and cause people to behave in a different way.
• …and our brains are not good at calculating how powerful this concept of tweaking is.
• People work, live, interact best when they are in groups of 150. This way they have enough power to go through problems, and yet are personal and know each other’s skills  and abilities. It is an important environmental contextual characteristic.
• This is because people often create ‘joint memory’. The husband remembers some things, the wife others and thus when they get sync-ed over the years, all they have to know is who remembers what. This, on the other side, is one of the reasons why divorces are so painful – it is a bit like loosing part of yourself. Groups of 150 are still able to do efficient ‘joint memory’.
• Groups of 150 also have tremendous peer pressure, which is much more significant motivator than money. Companies should be run in teams of 150.

CIGARETS AND TIPPING POINT

• Preventing addiction:
  • People that smoke & are addicted to smoking are called smokers.
  • People that smoke (even up to a pack a day) but are NOT addicted are called chippers.
  • When kids (around 15) start smoking, it takes them 3 years to phase out from chippers to smokers.
  • The addiction is not achieved gradually, but rather at a tipping point, that is unique for each person, and is dependent on his genetic tolerance to nicotine.
  • Thus one way to prevent chippers to never become regular addicted smokers is to lower the nicotine in cigarettes so that even if they smoke a pack a day, they are not able to reach their nicotine addiction tipping point.
  • Breaking addiction:
    • Three brain chemicals known as neurotransmitters affect our happiness/depression state: serotonin, dopamine, and norepinephrine.
    • “Drugs like Zoloft and Prozac work because they prompt the brain to produce more serotonin: they compensate, in other words, for the deficit of serotonin that some depressed people suffer from. Nicotine appears to do exactly the same thing with the other two key neurotransmitters – dopamine and norepinephrine.”
    • Thus smokers in effect give themselves little shots of ‘happiness’ by smoking.
    • This is the key strategy – if you treat smokers for depression, you decrease their addiction to smoking and quitting becomes much less painful.
    • This was discovered by Glaxo Wellcome when they released anti-depressant Bupropion and people started reporting decreased desire to smoke. Today this medicine is marketed as Zyban to heavy smokers.

When I flip through the pages, jumping from bookmark to bookmark, I truly get lost in the sea of incredible discoveries of our simple, yet complex social behavior. I super highly recommend that you read this book, and also sit and think about how these concepts can be applied directly to achieve results in life.

Purple Cow
Seth Godin

ISBN: 1-59184-021-x

After reading The Dip which I thought was brilliant, my high expectations for the Purple Cow were not met. Nevertheless it had a number of really good points to make. Here is my selection:

1. Seth Godin defines 3 eras: Before Advertising (think tv ads), During Advertising, and After Advertising. Then points out an obvious observation- Before tv advertisement, if you wanted to know who’s got the best cucumbers on the market, you would ask friend and they will tell you. During Advertising, companies that had money advertised, you watched tv and new already who’s got the ‘best’ product, so you already knew what to buy and didn’t have to ask. Now though we are in the After Advertising era when there are billion of ads, billion of products, and we have much less time than before to choose. So what does work if TV ads are ineffective? Answer is: your product has to be brilliant and original, so that it makes people talk about it and recommend it to friends, so that this way it can market itself.
2. How is this done? Well you have to build the marketing in the product. Don’t make a product, and burden the marketing team to figure out creative ways to sell it. Mix the marketing and engineering team so that the product itself is creative. Sounds very truthful to me.
3. “While ideaviruses [super successful popular products] are occasionally the result of luck (consider Macarena), the vast majority of product success stories are engineered from the first day to be successful.”
4. There was an example how one bank has online banking that is used only by 10% of it’s customers. The bank was considering closing down online banking, until it figure out those 10% own 70% of the banks deposits! Always know who the real valuable customers are. Those leading customers will be the attractive force to the masses. If any ads should be created, they should be targeted to this core target group.
   
5. I have a strong opinion about how pointless it is to go to school. I’ve written before about it, and this quote fits my vision so well:
   

   The Cow is so rare because people are afraid.

   If you’re remarkable, it’s likely that some people won’t like you. That’s part of the definition of remarkable. Nobody gets unanimous praise – ever. The best the timid can hope for is to be unnoticed. Criticism comes to those who stand out.

   Where did you learn how to fail? If you’re like most Americans, you leanred in first grade. That’s when you started figuring out that the safe thing to do was to fit in. The safe thing to do was to color inside the lines, don’t ask too many questions in class, and whatever you do, be sure your homework assignment fits on the stupplied piece of card stock.

   We run our schools like factories. We line kids up in straight rows, put them in batches (called grades), and work very hard to make sure there are no defective parts. Nobody standing out, falling behind, running ahead, making ruckus.

   Playing it safe. Following the rules. Those seem like the best ways to avoid failure. And in school, they may very well be. Alas, these rules set a pattern for most people (like your boss?), and that pattern is awefully dangerous. These are the rules that ultimately lead to failure. [Seth Godin argues that in the age of After Advertising, you have to shine with originality, because being normal and safe, you will blend with others in the sea of normal prodcuts and you will die]

6. Another decent point was that packaging DOES matter. (uhm yeah, think Apple Inc packaging)
7. Easy simple ‘actionable’ advice – Can you make your product collectible, to raise interest?
8. And I will wrap up with another great quote about having good customer service,
   

   “Does the post office hire annoying people, or just train them to be that way?”