Nesheim Online

BUZZ MARKETING: Learn it well to build a great startup

 

Buzz Marketing = "Capturing attention of consumers and the media to the point where talking about your brand becomes entertaining, fascinating, and newsworthy."

I saw that definition yesterday in a presentation of a business plan from a student team in my class at Cornell University. They understand a powerful element in building your startup's unfair advantage. When you get it, you'll be far ahead of your competition.

Young people think advertising is how to announce your startup and spread the word about your cool new product. But that is not how things work in the real world. Advertising is used to reinforce a brand of a product that has already become branded. It is expensive because there is so much waste to advertising. New brands are build with public relations. Advertising reminds people of the brand you have already built.

Serial entrepreneurs use "PR" instead of advertising to spread the news. More specifically, they are masters of buzz marketing. That is what gets people around the globe emailing, blogging and text messaging about their cool new startup product. China or Chile, U.S. or United Emirates, they all are part of buzzing about new products. It is global. It is now.

The old PR methods are aimed at getting reporters to write stories and reviews about the new startup product. That takes time (magazines prepare stories three months in advance) and money (to pay a PR firm for its staff to call reporters and promote your startup product).

The new PR focuses on stimulating bloggers to start stories about your new product and spread the word of mouth over the internet. That is low cost and very fast.

When picking a PR firm, interview candidates carefully about buzzing. Influencing the new world of bloggers is a new art. Few PR professionals are yet experts at it. So interview bloggers to ask which PR people get it and understand how to talk to bloggers. When choosing, get your PR firm candidates to show you examples of their successes with influencing bloggers. It is difficult to do, and few PR staffers yet do it well. It is a work in progress to learn the ins and outs of the strange new world of internet media communications.

Be innovative. Especially about what you do with events to get attention. Event marketing has proven to be very productive for startup buzz marketing. Events can be one time internet contests or raffles (give away an Audi TT and you will get a lot of attention and a long list of interested end users. The cost of a car is less than one month of advertising.). Or consider sponsoring a charitable golf tournament for handicapped athletes (just supply your employees as weekend volunteers). There is no shortage of stimulating ideas to pursue.

Be worth talking about, excitedly. You must stimulate the "Wow!" factor in people. They have to immediately get what you are communicating and be eager to instantly tell their friends about it. This morning I emailed news about gentle robotic surgery to a friend facing brutal open heart surgery. Word passing is triggered by emotional stimulation. Even about industrial machinery. Yesterday I had graduate students speaking excitedly about moving dirt on farms to get rich. You must find out what in your cool product will turn on your targeted bloggers so word starts to spread quickly. If bloggers are bored, you'll not get far with your new product. It takes a lot more than "twenty percent less energy required" to get the end user excited.

Use real substance in your product offering to stimulate bloggers. Avoid trying to be provocative just to get attention about your boring product. Your boring may be able to be changed to stimulating if you apply a bit of creativity. Here is one example: shift from talking about the reliability of your manufacturing machine and instead move to talking about how it will not set the customer's factory on fire. That triggers emotions and the buzz starts.

BOTTOM LINE: Getting buzz marketing working is central to your marketing communications program. Key to buzzing are bloggers. This is the era of bloggers. They start passing the word along the internet. Find a PR firm to assist you creatively plan and execute so word of mouth is stimulated and goes to work for you. It is a lot more effective and less expensive than advertising. Serial entrepreneurs can do this in their sleep. It is second nature to them. They know its power and devote serious, innovative and determined time to doing it with excellence. When you can, you'll be far ahead of your competition as you build your unfair advantage.

FOR STARTUP CEOs ONLY: Jump on opportunities, wisely

What a week this has already been! Filled with amazing surprises that remind me how special ("different") a job the CEO has in a startup. It is not classical corporate MBA territory.

Here is one thing that popped out to me: this is no job for people who plan on executing their carefully prepared plan and being rewarded for that.

Why? Because too many things happen suddenly. The unpredictable happens. The lucrative "blue bird" lands on your window without notice. The great news was not in your plan. And the terrible surprise smashes your precious plan.

Here are a couple of real examples that I am close to:

• Customer 3 tells his friends and soon you realize you are swamped with hungry customer candidates. But you don't have the sales people to respond. The CEO jumped and the VP Biz Dev got the green light to scramble (code for spend more time hiring and less time selling). Soon four outstanding sales people joined the new enterprise. The orders began to accelerate far beyond plan projections. So did the burn rate and the need for the B round to be closed much earlier.

• Slow Giant Customer finally says it is ready for an order (of very large size) but tells you they want a custom version and are interested in buying a large portion of your company. The CEO jumped and soon the core team emerged from days of intense work with a plan. The custom code would be the basis for the architecture of the next generation product. That would save two years of time to market.

• Competitor ABC launches a game that is wildly successful overnight in China. The CEO of the competing startup sees this as a huge validation of the target market and has his core team hop on planes to accelerate entry into China. Cash burn plans are scrapped for a new one that calls for a much earlier B round (and faster growth in revenue).

• Public Corporation Competitor Z sues the CEO's startup over a doubtful matter, intending to delay the startup's sales progress and confuse customers. The CEO rallies the board and core team who work out a fresh plan to leverage the energy of the legal efforts into even more sales.

None of those significant events were in any business plan.

All of them open huge doors of lucrative opportunity.

To take advantage of big opportunities calls for cool calm in the face of emotional shock and intense competitive fire. Courage and boldness are high on the list of what the CEO and board and core team must exhibit. And a great deal of wisdom is called for, especially from the board of directors.

These are not times for rage and anger, or testosterone highs.  Those chemicals make a  mess out of your brain, clouding its ability to make clever moves and clear decisions.

BOTTOM LINE: Some say "execution is everything" in a startup. Responding to the unforeseen is a big  part of that. This is a game of risk maximization, not risk reduction. Focus of tiny resources on the most lucrative target is how to win, to become the next gorilla. Shifting the focus is very risky, but oftn very necessary. Even if it means abandoning a huge part of your carefully prepared plan and jumping to exploit the unexpected opportunity. When you understand this, you'll add a rock solid element to building your unfair advantage.

MARCH TO IPO (Part of a series): What interview questions do you ask?

Today this question came from an entrepreneur in India who is on a hot streak with a rapidly growing startup:

"I'm a regular reader of your blog and your insights has helped me tremendously. Here is one more thing I want to ask you:

1. How do I go about interviewing candidates for positions like VP/CXO for Mktg, finance, sales etc.?
2. What questions will help me assess them right?
We have a recruiter firm to shortlist profiles, but they aren't involved in the actual interview process. I involve my key employees and investors for assessing them and then compare notes to get a 360 degree feedback to get better perspective.
Still, I believe there is scope to improve the process. Your feedback will help me make a better team."

Okay, here is how I'll respond to his email: Put yourself in this situation. Since yesterday's blog, you have decided to focus on getting the best people you can find. You may be pre-seed or as in this case, you are suddenly hot and need that missing core team of aces to help you convert from small to world-class. And you have run out of able friends and colleagues for candidates. Next come the strangers (resumes emailed by other strangers, the harried recruiters). What do you ask the candidates to be more likely you are getting the people you want. the ones now represented by their resumes and references?

Here is what I suggest:

1. Use the Search feature on my blog to look up "interview". You will find several suggestions. One popular set of interview tips is from a classic posted on 2006 October 24.
2. Trust your intuition more than resumes and references. You are the expert on the chemistry in your company. You understand how people will fit your company's working culture. You know what kind of person you need for your special business.
3. Ask sensitive and personal questions. You are going to become very intimate with your employees over the next half decade. Get to know their inner secrets before you hire them. "What makes you mad?" "What kind of person irritates you?" and then "Why?" Listen well and you'll learn a lot about the person. This is especially important to do with Asian startups.
4. Ask about their coping with failures. Your startup is a child that will get into trouble. Expect a few scrapped knees. But you want vice presidents who can keep the child from getting into serious trouble. Hire people that know how to keep the child from heading off to play on a dangerous highway.
5. Discuss issues rather than grill a person. Open sharing of ideas about how to solve real problems gives both you and the candidate a chance to be real people discussing important business issues. The goal is not to see who is stronger. Rather, you want to observe how the person thinks. This is relaxing to the candidate and more likely to open up the strong skills of the person for you to observe. And the candidate is more likely to admit shortcomings.
6. Ask "What do you think you can do to help me succeed?" That is an open ended question that is less threatening and offers the chance for the person to be creative during the interview. You will often be surprised at what you hear. I have. And I often get some great ideas as a bonus.
7. Ask yourself "When I am traveling, is this a person whom I can trust to be wise running the business while I am away?" The CEO does not run the business. There is too much for that person to do (constant communicating with investors, raising fresh capital, and endless interviewing and hiring all take 40% of the CEOs time away from managing the startup). The VPs have to be able to operate with very little guidance day to day. Look for such people. They are gems. Keep thinking about how this person would work with you out of touch and that person and others like that in the office. Then you can pick wisely.
8. Be prepared to answer your own question. Able candidates will expect you to respond to any question you ask them. Don't be surprised when the ask you to. Be ready. It's fun to do.

BOTTOM LINE: Get your interview questions ready. Practice them on a friend. Get so good that you can ask your favorite key questions anywhere, anytime, of any candidate. I've seen people interviewed on elevators in hotels, while waiting for an airplane and during soccer matches. Your quick questions lead to discovery of outstanding people who were later hired. As CEO, you'll be interviewing the rest of your life. Become a  master, a black belt, of interviewing. Then you'll add the most powerful element to building your unfair advantage: Great people. I wish you The Best!

MARCH TO IPO (Part of a series): Finding GREAT people is Task Number 1

"Where do I find the people I need for my startup? How do I attract them to work for my new enterprise?"

Here are some tips from serial entrepreneurs I respect:

• Finding people will take 20% of your time as CEO for the rest of your startup life. Every day you will be recruiting. It will become as natural to you as brushing your teeth. It will be as important to you as breathing (without it, your startup will die).
• Start early -- years early. Great startup CEOs line up their core team and key techies many years before doing the startup. Yes, I said years, not months. That is how they decide that the people are great people. They know they will work well together on the job.
• Get the people before the money. Read yesterday's blog and think about it. Great investors invest in people, not ideas. Just ask them if you do not believe me.
• People you know are better than strangers. It would be foolish and dangerous to leave your children with a baby sitter you did not know. Your startup is also precious. Serial entrepreneurs do not turn their new enterprises over to be managed by strangers.
• Ability is more important than friendship. You may have to fire the person. That's how to lose friends. Better to focus on the ability of a person than a relationship. Don't pick them for religious reasons, or because they love one brand of computer over another, or because they saved your life once. They have to deliver results. Chose ability.
• "A people hire B people hire C people". That adage was cited recently in a private dinner for serial entrepreneurs that I was moderating. Time brings compromise. It is inevitable. Fight it. Keep the average as high as you can as long as you can.
• Do not compromise on quality. Serial entrepreneurs always tell me "I have learned bitter lessons about compromising on people: in a word, don't. Ever." Enough said. It is hard to do because you desperately need to fill the open position.

So where do you find the missing people? Here is the pattern that I see working in successful startups:

1. Start with people you know well because you have worked with them before.This is the quickest way to get going with quality people.
2. Fan out from your core team, get the entire company recruiting. You hired A people so get them to find more A people. Serial entrepreneur E.C. built an entire company that way, without a penny of venture capital. Amazing. But it works.
3. Birds of feather produce flocks of startup people. For instance, your university alumni organization. And small groups of people at work who like to talk quietly about startups. Forums about new enterprises attract startup people you can meet. Find out where they hang out and go there. Become one of them.
4. Recruit a great HR person, even if part-time. The HR stands for Heavy Recruiter. Able and eager to find the missing great people. That's the payoff for a true HR person in an early stage startup. Soon it will become a full time position because you'll be doubling the number of your employees each year.
5. Choose your recruiters carefully. Once you have cash, you'll grow fast and soon need to user recruiters. Pick them wisely. Serial entrepreneurs choose recruiters like they choose people, after interviewing them in depth.
6. Be patient with your company recruiting. The chances are low of you finding great people arriving in your Job email box. But it will happen. So read them all. I'll never forget John Morgridge CEO of Cisco sitting reading resumes the day I came into his office to interview him. Every resume is valuable. The haystack has some great gems hidden in it. It's your job to find them.
7. Your unfair advantage is the honey that attracts the bees. The great story that attracts the great people is about your unfair advantage. Prepare it well. Then have fun telling it. Over and over and over and over.

BOTTOM LINE: Great startups are built with great recruiting by the CEO and core team. It is a skill you've got to have. Learn it at work so when you are ready for your startup, you can be an outstanding recruiter. Plan recruiting weekly at your startup. Discuss recruiting daily. Make it a way of life for every employee. Get an army of great people recruiting for you. Your startup will then be built with great people. Leave the rest for your competition. When you can do this, you'll be well on your way to building your unfair competitive advantage.

MARCH TO IPO (Part of a series): What comes first? Money or people?

"John, I have a great idea for a startup. Should I next go get some angel money and get started? Or should I find the management team first?

That is a great question. It is central to the success of building a startup. Here is what I have learned:

• People are more important than money. People do the work and without them, money is idle.
• People attract the money -- not the reverse. If you find people who will not join you without the money in the bank, they are the wrong people to join you to do your startup.
• Money invests in people -- not ideas. People have the idea. They give life to the idea. Money wants to invest in great people with ideas, not ideas missing great people.
• Ideas need both people and money to grow. Plan with your people when to get the money, how much, from whom, when. Like watering a garden, you need to be wise, neither over or under watering, choosing the right times to pour on the water and other times to refrain.

So think about a triangle with three elements connected: People + Idea + Money.

Then think about the sequence to connect them: (1) One person gets an idea => (2) The idea attracts the core management team => (3) The people attract the money. This is described in detail in "The 14 Steps to IPO" in my book, High Tech Start Up.

What is hard about this for solo engineers is the attraction of the people. Engineers think they can take a great idea to venture capital investors, get the money and hire a recruiter to get the management. But that is not how to create a world-class new enterprise.

Next time I'll address questions about how to find great people for your core management team.

BOTTOM LINE: Start with finding the people. It is worth the extra time it takes. Wise entrepreneurs work for years to create a core team. After that they go after good ideas for the core team to use to form a great startup. When you understand the power of that principle, you'll be well on your way to forming your unfair competitive advantage.

HOW TO WORK WITH YOUR VCs: Treat them as members of the family

What an amazing past 14 days I have had with startups! Wow!

• Launch of public beta (Nurien.com )in Seoul, Korea for an amazing game startup
• Completion of documents to raise $25 million B round for a hot stealth mode new enterprise
• Attack on startup that is taking away market share from a stogy old-thinking public corporation
• Startup gets surprised and sued about disputed patents by corporation with a lot more cash
• Angel declines to invest at last minute in a struggling startup
• Board members dispute compensation of first-time founders
• CEO struggles with board meeting documentation and processing
• Discovery of VCs investing in competitors narrows list of candidates for future financing
• Hot marquee customers suddenly sign up

All those are events that impact your board of directors. You are on it and are expected to lead it.

Q: "So how do you manage your business when those things happen? "
A: "I suggest you treat them as part of the family."

Here is what I mean about how to work with your board when big news arrives:

• Keep them informed = no surprises.
• Communicate the bad news immediately = do not hesitate
• Celebrate the good news = uplifting moments are precious and energizing
• One bad day is not the end = most days are not terrible
• Ask for advice  = all at once, not 1:1, keep everyone part of the dialogs
• Conference calls work great = do them quickly, keep them short, as soon as discussion is needed
• Remember your lawyer = keep the legal people in the loop, listening in as much as possible
• Keep information to a minimum = if you need to talk a lot, schedule a conference call
• Expect it, this is normal = it is going to happen, all of it

BOTTOM LINE: Your board of  directors is not your authoritarian parents. Treat them as family members, not dictating bosses. Family help you, so get their help. They can do more when you give them time to think. Include them whenever you wonder if you should, they'll tell you thank you and keep rooting for you. When you learn to do this, it will show how wise you are and add a large element to building your unfair advantage.

NAME IT OR LOSE IT: What is "It"? and What are you aiminng to dominate?

"What have you invented?"

"What is this new market category you are aiming to dominate?"

Those are two of the biggest questions startup CEOs will be asked. You have to be able to answer them on the spot. Your responses are central to the formation of your unfair competitive advantage. Without them, you are like a cork in the proverbial startup ocean, rudderless, moving at the will of the waves, tossed to and fro.

Here is a fine example to get your thinking going:

After Edison invented the cylindrical talking playback device, others produced alternatives, some on disks. The public called all of them “talking machines.” All were expensive and unreliable players until Johnson invented a solution for Berliner’s wobbly rotating disk. They decided to call it a “phonograph”. The company they formed was Victor Talking Machine Co. They named their player the Victrola which became hugely popular. It’s icon was the fox terrier dog sitting with its head cocked to one side, listening to a phonograph. Johnson pioneered the mass production of entertainment. He transformed entertainment from events performed live for limited-sized audiences into today’s vast, multimedia industry. [From Investors Business Daily,  2008 March 4].

You need a similar story. The thing you have invented needs a name. The market segment you are competing in needs a name. Both have to be part of your exciting story about your quest to transform a vast market.

BOTTOM LINE: Try inserting your name for Johnson's and then substitute your company name and so on. Keep crafting until you get a story that works for your company. When you do, you'll be way ahead of your competitors and well on your way to becoming the leader and gorilla of a new market category. Like Amazon, Google and [put your company name here]. It is central to forming your unfair advantage.