What kind of innovator are you?

In Silicon Valley, I hear the “innovation” term tossed around left and right, almost as if being innovative was the key to success or a cure for common pickup line. In my mind, innovation has a more definitive and structured meaning that has developed from brinigng new products to market, striking business deals, and crafting patents.

For structural purposes, crafting patents has probably been the most helpful in formulating what innovation means to me and how I explain it. When crafting patents, there are a number of ‘tests’ I try to apply when determining if something is patentable:

• Is it new?
• Is it unique?
• Does it solve a problem?

The 4th test - can it be created by someone normally skilled in the art, is less important for this discussion. Also, to avoid the flame wars around the value of patents, this is not a discussion about patents, but my view on how patent development can provide a potential framework for looking at innovation.

Unfortunately, much of the innovation I hear about fills only #1 and #2 above. Too often, someone will claim a product or service is an innovation because it’s new or different. Yes, a product that auto-tunes any speech to a Rick Astley song might be innovative, but does it really matter? Similarly, a toaster that burns images of religious figures on bread could be called an innovation, but really, is it worth bragging about? These are indeed product innovations, but more for fun.

How would the above compare to a system that tracks eye focus and viewable angle of advertisements in online-games to create an awareness and exposure index for advertising value optimization? How about a contract term where non-payment for 30 days automatically triggers a system audit and daily compounding increased licensing fees until partial payment of >50% of past balances is made and cleared by the bank? These service and contract innovations have a distinct business undertone.

The first two wacky ideas above (one of which I know exists) are indeed innovative, but may not provide lasting or long term value. The next two examples are much more narrow and esoteric, but have implications for long-term advertising and/or licensing structures. This subtlety leads to my main point here - innovation as a term is widely used and abused and lacks distinct meaning.

So while I do think that auto-tuning to Rick Astley is a type of fun and cool innovation, I prefer the longer-term economic value of innovation of the advertising awareness and exposure index. Neither is right or wrong, both are innovations, but be mindful of the mindset of the listener when you discuss innovation. If you and your reader have different definitions of innovation, you could be speaking entirely different languages.

Disclaimer: The “advertising awareness and exposure index” comes from a patent I drafted that was abandoned in 2002 when resource was not available to put the invention into practice. Yes, I know, I kick myself with 20/20 hindsight that it might have been valuable.

Smarter Executive Hiring for Startups

Fellow executive Michael Stewart once told me that his ideal position was to be head of sales for 5 startups, pulling in 25%+ salary from each with a percentage of sales plus equity. I don’t know if he still feels that way, but his statement resonated with me on several levels as it made alot of sense.

While Michael and other executives I know definitely earn their salaries, those same salaries are hard to justify for small or growing startups. Startups are then faced with a dilemma - hire an expensive senior exec who brings the strategy, planning, and wisdom you likely need, or hire a cheaper, more junior exec with some of what you likely need, but fits in your budget. Of course, the real answer lies in what you need, but there’s the rub. Do startups really know what they need? Early stage startups are almost always defined by a market vision that a group of customers want a product or service. They have an idea or early prototype, and they’re trying to make sure the product fits their intended customer or they are working to really define the customer that will buy and use that product. Sure, field research of 5 to 20 people may have helped, but does that really scale into the enterprise, retail, or massively deployed Internet presence?

Change that around a bit. If you think you really needed a seasoned executive, but your marketing or sales staff budget was $12k/month, would you hire one senior executive at $12k/month? A seasoned mid-level exec at $10k/month with change left over, or one senior executive, at 25% for $4k, plus another mid-level marketer for $7k/month. You would probably need to provide an equity incentive as well, but that’s par for the startup game.

While a number of executives in Silicon Valley have the strategy and implementation skills and experience to plan and execute, it’s not uncommon to find senior executives who dismiss implementation as ‘work that marketing staff does.’ Hiring the seasoned mid-level exec might get the job done, but there’s almost certainly going to be gaps where he/she will lack the experience or skills. Going with a part-time senior exec and full-time mid-level marketer would provide both the experience and implementation skills with the best odds for success. 

Now the part-time senior executive model might only be a short-lived solution, as success could require more management time, more executive team integration, and additional implementers, but this is also the beauty of that approach. Success has pushed off the full salary load of the full-time exec until there has been some success allowing for a cost-effective and cost-justified conversion to full-time.

The problems of this model are not insignificant and will come from both the executive and the hiring company. The executive will naturally want to be paid contractor rates to guarantee the perceived value for his/her services and will likely require equity even in a part-time role.  The hiring company will likely require board approval for all VP level candidates, possibly dragging out a 3k or 4k/month hire into the same hiring process for a $15k/month salary load. If the benefits outweigh the risks or complications, both parties will come to a mutually agreeable solution.

From a progress-minded view of things, I have no problem seeing that it could work, where I, as one of these executives, could find a way to make it work. On the other hand, I would like feedback from others on ‘Should it be done?’ I look forward to your opinion.

Do You Suffer from Induced Success-a-phobia

Silicon valley is a great place to meet entrepreneurs who, at first glance, have good or even great ideas with serious potential. In many cases, however, I've seen entrepreneurs afflicted with something I call induced success-a-phobia (my term) - or induced fear of success.

It’s easy to get stuck and distracted by the wrong things. After all, there’s no shortage of service providers trying to sell startups their services, sometimes waving the FUD (fear, uncertainty, and doubt) card or sometimes dangling promises of funding or customers. Some of these consultants are really good, sensing an insecurity or chink in the entrepreneur’s armor, and finding a way to extract money from the entrepreneur for non-core issues. It might be legal docs, business plans services, detailed financial projections, patents, revenue models and forecasts, slick marketing plans, etc. While those administrative tasks should not be ignored, entrepreneurs need to really ask themselves if what the service provider is selling will help the business succeed. Without answering that question, it’s easy to get so buried in the administrative distractions that they never execute on their vision.

A friend pointed me at a young, 23 year old CEO, whose first two companies were not ground breaking or even high-tech, but this CEO had a vision and repeatedly executed, simply following through on what needed to get done. He created a business where there was none, recognizing the needs he could fill, then taking the steps to fill them. He did not appear to lose much time on raising money, either, mostly focusing on customers and sales. Both of the first two businesses did not sound like they were VC backable, but as an entrepreneur with a vision, he plowed ahead and executed anyway, seemingly oblivious that he was pursing tough businesses with few technical advantages on his side.

This CEO epitomizes the gumption that I often see missing here in the valley, regardless of age and experience. He saw a need and filled it, without an if, and, or but. He just went for it. He had an idea, figured out what needed to be done, then put the plan in motion. In his case, even flying to China to setup manufacturing, building a sales team, then aggressively building channel at Mac World. He did all that at 19. Of course, that’s a rare case, but compare that to what I often see entrepreneurs doing here in the valley. If they don’t get stuck in analysis paralysis by simply going to endless meetups and startup seminars, they come down with induced success-a-phobia.

While my advice may sound flippant, there’s a key concept where many would-be entrepreneurs should start - “Nothing great was ever built by worrying about why it can’t be done”. I sometimes use a sports analogy to lay it out in simple terms, and my apologies to the original idea owner: “You can never take a swing if you don’t step up to bat, and you can never hit a home run if you never swing the bat.” Know the key elements that matter in your business, and take the steps necessary to get where you want to go.