Coming up with business ideas -4

Whenever we've found home base in our minds, it dawns on us that there's a fourth way to come up with business ideas. It no longer makes sense to us to struggle with the first three ways I've already explored: (1, 2, 3). We can be far more imaginative and visionary than falling for those survival, conquest or service issues. We see how to be in business that is clear of fear and filled with peace of mind.

This four approach includes the other three as market segments. A total solution works for every level of play and space that others come from into this enterprise. It allows for customers and employees to be coming from lower levels of play like a commissioner of a professional sport that nurtures everyone touched by the sport. So many get served directly and indirectly by this approach, it seems like a win/win/win to most. They look upon this enterprise with enlightened self-interest that contributes to its success for selfish and altruistic reasons.

This fourth approach get built on paradoxes. It routinely poses the challenge of doing both. Customers seem like external employees who do some of the work for the enterprise. Employees seem like internal customers who serve the actual customers in the same ways they get treated themselves. Top-down exercise of authority gets balanced with bottom-up feedback, suggestions, insights and and learning. So many facets of the enterprise seem like balancing acts:

• planning and execution of those plans
• pursuing changes and stability
• teamwork and individual accomplishments
• extrinsic rewards and self motivation
• handling environmental turbulence and internal issues
• increasing efficiency and redundancies
• increasing revenue and reputation

This approach cannot be modeled on pro forma spreadsheets. It's not accurately captured by objective data and projections. It's rife with intangibles, virtuous cycles and side effects. It resembles the complexity of thriving ecosystems which are extremely interdependent. This approach realizes many emergent outcomes that cannot be caused directly or replicated consistently. This kind of enterprise happens unpredictably and invites the participants to play along without fear or fuss. It works great with an ongoing peace of mind that looks upon life as an unfolding mystery.

Coming up with business ideas -3

When we're in pursuit of vastly superior product and services, we're unconsciously exalting ourselves. The market will eventually humble us with its indifference, abuses and successes of some overrated/inferior competition. These setbacks prepare us for a third approach to coming up with business ideas. It's time to attune to our customers when they are not shopping, but rather valuing what they have already purchased. If we could get into the customers' heads, we might find:

1. they see the marketplace and rival offerings differently with different frames of reference (beauty is in the eye of the beholder)
2. they feel apprehensive about their ability to make a good decision amidst so much sales hype (establishing a need for consumer advocacy)
3. they have changed their minds about what they really wanted after buying what they assumed they needed (defining a migration path to explore with them)
4. they endured several bad experiences with prior purchases which taint their outlook toward this expenditure (calling for added comfort and safety)
5. they use what they've bought differently than we designed for or promoted when we sold it (as if they bought our tools for their own varied uses)
6. they value the relationship with us more than the actual purchase (wanting to trust us, to respect us and to rely on us to return the favor)
7. they live in contexts which pose different problems and define different needs than our own (providing opportunities to address the fit in to their situations)
8. they interact with their social gathering known for spewing opinions about questionable purchases (posing a need for allies in the fight for acceptance)
9. they experience difficulties with owning, transporting, storing, maintaining and/or repairing what they've bought (creating opportunities for service after the sale)
10. they have a lot to learn to make more and better use of their existing inventory of purchases (valuing genuine assistance more than sales persistence)

When we discover these kinds of issues troubling the minds of our customers, we're set up to make a better difference. We can change from selling added services to being of service to them. We can abandon our own power trip and find ways to empower our customers. We can learn from buyers who teach us how to better serve them, rather than doing all the selling ourselves. We can show how well we know our customers by addressing their concerns, working with their applications and helping put their minds at ease. We can do more to nurture the relationships with buyers rather than exclusively refine the products and value-added services. Being in business changes from the enduring the daily grind to an ongoing mystery with fascinating discoveries, revelations and new questions.

You may have noticed with approach to coming up with business ideas is a lot more complex than either prior approach. Each customer appears unique. One size no longer fits all. There's so much more besides the product and services to customize. The work involved can be overwhelming. This approach can feel like too big a sacrifice or a martyrdom trip. When it becomes an obvious lose/win deal after so much success with attuning to the customers, it's time for the fourth approach to coming up with business ideas.

Coming up with business ideas -2

Coming up with business ideas for merely making money quickly turns into a slippery slope I explored in the first installment. Everyone competing by lowering prices ends up at the bottom of the pack. We can get turned around and climb upward by coming up with ideas for superior products and services. The better our offerings, the more we can charge for them. The customers in this better space believe they get what they pay for and that it pays for them to pay more for something. They feel like winners who succeed by shopping for the best features and benefits on the market. They demand the best and reward the providers who can meet their expectations consistently.

To come up with ideas for superior products and services, we need to get to a better place than thinking about making money. We need to explore how to upgrade the product, improve the design and enhance the features. We want our offering to look better, feel better and function better than every other offering. We can use our competition to fuel those ambitions. We're figuring how we can beat their products and services when they get compared to ours by customers or consumer advocates. To deliver higher quality consistently, our business idea must include a production system. We'll need to set up factory-like procedures, mechanisms and delivery systems. We'll aim to eliminate mistakes and make routines much more efficient as if our business can become a fine tuned machine.

When we're thinking this way, we're in a place where a winner takes all and winning occurs at others' expense. We're a match to customers who think this way and like what they see in us as their mirror. In this space, we assume we're superior to all those losers who shop for bargains in their space of lack and insecurities. We're unaware of our power supply because we've got plenty of power to burn. We like the atmosphere of dealing with powerful customers who know what they want and demand the best above the rest.

It costs a lot more to run a business in this space. Customers don't already know they need what we're offering. They don't realize what we're do is superior to what they're already buying and bragging about. They have a lot to learn and are not exactly ready to listen. Most of the extra money we can charge for the superior goods and services gets spent on sales and advertising expenses to educate potential customers about our superiority. We have to push our products into a market that is preoccupied with seemingly inferior goods and services. We may also spend more on better supplies or on keeping more inventory on hand. It's very possible to make even less profit in the high end of the market with all these added expenses.

When we're in this space of succeeding, we're quick to dismiss any feedback that we're selfish, greedy, pushy or overpowering. It appears our critics are envious losers who want what we've got. We cannot connect the dots between this space of succeeding and our growing dissatisfaction and burnout. We may end up wondering if we're not cut out for succeeding in business or for coming up with a viable idea. We've become ready to find yet another space for coming up with business ideas.

Coming up with business ideas -1

When our last job, project or start-up is nearly over, we may need some good ideas for a new business venture. In this next series of blog posts, I'll explore this challenge from an unusual perspective: where we coming from and what comes to mind in those spaces.

In this first section, we'll explore the how difficult it is to come up with good business ideas when we need money. We may be thinking we need to make more money than before or to make lots of money in a hurry. We usually don't realize it, but we're coming from a place of lack when we've got revenue, income and profitability on our minds. We're assuming we would not bother with another business if we were already rolling in dough. We going to the trouble because we're in need of a bigger bankroll. We're in a space where very few ideas come to mind for launching a new business, and the few that do aren't good.

When customers realize we're in business for the money, they know to shop for bargains. They assume they could pay too much and look for the cheapest provider. They don't care much about features, quality or long term investments. They want to save money now as if they're following our example of being money-minded. They're more concerned with how much they saved right now than how much they missed out on by paying too little. These customers seem easy to please so long as we can save them some money.

We're in big trouble when we rely on offering lower prices to satisfy the customers. Rival enterprises can come along and beat our price if they run a bigger operation with economies of scale. They may also sell below their own costs if they've been able to milk a cash cow in another market which gave them the cash reserves to spend on this price war. Competing on price amounts to a failed negotiation where no nuanced value was established in the minds of the customers. We'll be struggling for survival against incredible odds on the brink of going out of business.

When we're in the space that's attractive to bargain hunters, our power supply is pitiful. We're lacking in the courage, creativity and confidence we need to succeed. We're feeling needy, insecure and apprehensive about getting exploited. We don't have what it takes to put down our foot or to define what's fair game on our own terms. We're poised to placate customers to excess and offer discounts we cannot afford. We're assuming we have to make a big sacrifice to get any business because we're not worthy of increasing success, respect and quality customers. We're coming from a place of perpetual lack.

The kinds of customers we'll attract in this space will appear to us like a bunch of losers who have nothing to lose by treating us like losers too. They will think of themselves as needy for a special price. We'll lose out on making the money we sought by offering better bargains and cheaper prices than the competition. Those customers cannot win in their worlds either. They barely show up on their power supply meters while wallowing in perpetual lack as well.

It doesn't have to be this way. We can come from other spaces where better business ideas to come to mind as naturally as those bad ideas come to mind in this space of lack and survival. In the next post, I'll explore the space of quality products that command premium prices.

A process for growing a new venture

The process for growing a new venture is not something I could have written off the top of my head prior to now. It has emerged from writing about pitfalls in planning a new venture over the past two weeks. I had to trust my process for exploring one pitfall a day to get inspired about creative strategies to avoid that pitfall. Once that series of blog posts was completed, I was capable of revisiting the issue from the opposite perspective of steps toward creating a success. I realized a better order to put these strategies in that follows a logical progression from a new idea to a venture operating one year out. I filled in more details where the strategies now seemed vague on the previous series of post. Here's the sequence of explorations to follow that has evolved by writing and refining:

What's our idea?

When we're planning a new venture, we need a new idea that will sell. A good place to begin includes:

• Starting with a user's pain, problematic situation or frustrated attempts to make progress. 
• Making a difference in the lives of other people who don't know they need an invention. 
• Serving users' abilities to get more out of what they are already buying. 
• Focusing on what good it does for those who do the buying.

When we get off to a bad start, we can fall for doing the wrong thing correctly.

What difference does it make?

Once we have an idea that will sell, we need to determine that's it's a good enough idea to get attention and to get favored over other ideas. When we consider the difference our idea makes, we can explore:

• Making a big enough difference to get noticed and to stand out from the crowd 
• Making a useful difference that will get valued and talked about by lots of varied users 
• Making an accessible difference that others can take advantage of without overcoming huge obstacles 
• Making an immediate difference that does not require lots of patience and trust to experience a payoff quickly 
• Making a long term difference that rewards deeper commitments and investments for buying into the difference 
• Making a range of differences to satisfy a variety of situations, expectations or limitations 
• Making predictable differences so the invention seems trustworthy, reliable and consistent to users

If we skip this step, we can inadvertently end up making the same difference as other ventures

What about copycat competitors?

With an idea that makes a big difference, we need to consider the possibility that our idea will get copied by other ventures. We can defy imitators by:

• Serving lots of different use cases that call for a variety of responses, functionalities and custom services. 
• Seeing that the idea works within an entire range of variations in traffic loads, weather, or other "environmental turbulence". 
• Accommodating lots of different, open-source combinations, mash-ups and pairings with our initial idea  
• Designing a "total solution" that appears we have "thought of everything" and "considered every angle".

If our venture's product/service mix remains too simplified, we may be assuming we have no imitators at our own peril.

How will it get better over time?

With so many issues to resolve for a successful venture, it can become an obsession that loses sight of the long range evolution of the enterprise. We can launch the venture with our sights on a continual stream of sustaining innovations by:

• Brainstorming a list of all possible improvements and prioritize the items to identify the next two upgrades to work on next. 
• Working enough iterations with the possible enhancements to identify difficult tradeoffs or forks in the development path where customers can provide valuable input. 
• Crowdsourcing suggestions for future upgrades and let the "most often submitted" and/or the "highest ranked submittals" establish which get implemented. 
• Creating part or full time positions to rapidly prototype new features, functionality and use cases to extend the life of the project.

If we get too caught up in refining everything for the launch of the start-up, we will fall for drop kicking our innovation.

Where will the customers come from?

When we're considering where the customers will come from, it's better to not steal them from incumbents who may retaliate. We can create new customers off the radar of sleeping giants by:

• Inventing new ideas to serve the non-consumers who can say the new offer is "better than nothing" which what they're getting so far. 
• Coming up with something simpler or easier to use for those consumers who feel over-served by too many features, too much sophistication and increasingly complex functionality in the incumbents' product/service mix. 
• Moving down market to offer new solutions to the customers current problems which are less expensive to purchase, less costly to maintain or cheaper to operate.  
• Remixing the strategy canvas so the new idea is playing by different rules and changing the quality standards which can be met as "good enough for starters".

If our new venture is so high profile that it steals customers away from rivals, we may suffer the consequences of provoking the incumbents to retaliate

How will adjustments get made in the original plan?
Once we've zeroed in on the idea, the difference it makes, the defeat of imitators and a safe source of customers, we commit to a trajectory. It may be a long shot, but we won't know until we "run it up the flag pole and see if anyone salutes it". Our chances of success are greatly improved if we continue to make midcourse corrections. We can learn what adjustments to make by:

• Listening to those who are close to the customers as if they are the fingertips that can feel what's going on outside the enterprise. 
• Asking oneself and others "what's missing?", "what's not working?" and "what's in need for more refinement?" 
• Learning from what happens to get better or different results by changing methods, processes and strategies. 
• Theorize the underlying reasons for surprising successes, approval ratings and growth.

If we stick to our guns in order to never veer off course, we are likely to end up too smart to succeed.

How will surges of growth get funded?
When a venture takes off, two different aspects get bigger in a hurry: revenue and expenses. If expenses get bigger faster, the venture will run short on cash to fund the next expansion of capacity. We can keep revenue and expenses growing together by:

• Limiting the funding of growth to retained earnings instead of debt. 
• Slowing the initial growth rate while building the infrastructure for exponential growth later. 
• Withholding a cash reserve for unforeseen expenditures in spite of it slowing expansion. 
• Maintaining exclusive or close knit ownership to control decisions about expansion and expenses.

 If we grow too fast or too soon, we will fall for underestimating the cost of growth.

How will prices get set?

When sales exceed our expectations, we begin to wonder how greedy we can get and what price the market will bear. We can find that optimum price for each paying client by:

• Developing a range of alternatives that offer different amounts of value at different prices so the customer can choose for themselves. 
• Helping the customer compare our prices to competitors with opposing considerations like "getting what you pay for" vs. "not getting more when you pay more". 
• Explaining the amount of work and expense that goes into the offering which deserves a fair price in return -- that customers can decide for themselves. 
• Factoring in the customers' ability to pay with a sliding scale of prices adjusted for different economic conditions.

If we try to get the price right by making stabs at it on our own, we apt to fall for undercharging the customer.

How will it survive the end of the honeymoon phase?
When the successful sales leads to press coverage and buzz in the marketplace, it's time to build a loyal following that will endure "after the thrill is gone" for what was the "next new thing". The long term commitment from customers can be cultivated by:

• Consciously dismissing the hype as seductive, misleading and distracting from appealing to the pragmatic early majority who want proof of specific features and benefits.
•  Cultivating relationships with early adopters as if they can provide feedback to develop the next upgrades and forewarn you of potential negative reactions to the current version.
•  Putting the ball back in the laps of the fans who are final arbiters of why they like it, want it and see uses for it - whenever we get asked to extoll the virtues of our "next new thing",
•  Giving a heads up to reporters about the long term development plan that could evolve into other stories for them to work with us on in the future.

If the bubble of enthusiasm seduces us into false confidence about the long term success of our venture, we're likely to fall for flaming out before catching fire.

How will the setbacks get handled?

Once sales begin to lag and instill fear of success slipping away, the enterprise needs to be better managed than ever. The team can endure the setbacks better when we:

• Regard employees as internal customers who will serve the real customers in turn -- as well as they are served, respected, listened to and supported. 
• Consider employees to be equally entrepreneurial, using the employment experience to advance their careers and refine their abilities to create value. 
• Show employees the respect of trusting their own judgement in defining their job description and appraising their performance with the help of their peers and internal customers. 
• Creating an internal marketplace for new ideas, process revisions, strategy refinements, and cost savings - where the best get rewarded and each gets acknowledged.

 If we allow our fears to dictate our reactions to the setbacks, we will turn up the heat and create jobs from hell for every member of our team.

Drop kicking our innovation

It's human nature to get ensnared in the perils of perfectionism when developing any new project or venture. There always seems to be room for more improvements if we give it a little more time. It's never seems realistic to say "good enough" and go with what we've got at that point. It becomes a major struggle to release version 1.0. We fear getting criticized for imperfections that we already know need more work. We postpone the inevitable reactions of envy, contempt, rivalry and dismissal by continuing to make our good idea better and better.

We fall into the last of the ten pitfalls I've explored here when we escape our perfectionistic tendencies. We drop kick our innovation and and let the market run with it. We give up on refining the project for many years to come. We introduce our innovation with no upgrade path in the works. We flip flop from relentless refinement to abandoning the improvement process out of frustration. We have no plans to grow enhancements slowly with insights realized from users and their varied uses. We assume we're no longer in possession of our innovation's process of evolving and maturing.

Here are some ways to run with the ball for many more generations:

• Brainstorm a list of all possible improvements and prioritize the items to identify the next two upgrades to work on next.
• Work enough iterations with the possible enhancements to identify difficult tradeoffs or forks in the development path where customers can provide valuable input.
• Crowdsource suggestions for future upgrades and let the "most often submitted" and/or the "highest ranked submittals" establish which get implemented.
• Create part or full time positions to rapidly prototype new features, functionality and use cases to extend the life of the project.

When product development becomes an ongoing process, the sustainability of the enterprise improves. The longevity of relationships with customers becomes more likely.  The market values the obvious commitment of the enterprise to find better ways to serve the customers and create valuable experiences for them.

Too smart to succeed

A new idea, project or venture usually seems like a long shot at first. It cannot be a sure thing without copying what already exists, stepping on the toes of giants or getting a "ho-hum" response from the market. Being innovative involves taking risks, exploring new territory and venturing into unproven possibilities. It's not for the tentative, fainted hearted or overly-cautious. Succeeding with a new venture calls for turning up one's determination and fortifying one's resolve.

We're headed for a pitfall when we lock into an unwavering trajectory toward our long shot at success. We've become too smart to succeed. Our conviction has become conceited and selfish. Our optimism appears arrogant and pig headed. Our determination seems insensitive and unresponsive.  We're making the wrong impression on others and failing to correct our trajectory in the process.

Success also calls for midcourse corrections. The trajectory needs to waver off the initial course. There's much to be learned in the process of launching a venture from the early reactions to it. The customers, rivals and industry analysts can all teach lessons and suggest upgrades. Changes in the context can call for adjustments or revisions. New developments may require new solutions. There will be many occasions of throwing out the bath water while taking care not to discard the baby. 

Here are a few strategies for ensuring the long shot trajectory gets revised insightfully:

1. Listen to those who are close to the customers as if they are the fingertips that can feel what's going on outside the enterprise.
2. Ask oneself and others "what's missing?", "what's not working?" and "what's in need for more refinement?"
3. Learn from what happens to get better or different results by changing methods, processes and strategies.
4. Theorize the underlying reasons for surprising successes, approval ratings and growth. 

Each of these transforms the long shot trajectory into a learning organization. The enterprise is continually in a process of discovering, exploring and coming to new realizations. The conventional emphasis on delivering reliably and consistently gets counterbalanced by seeking out the unforeseen and unsettling evidence. The way to success combines being very smart with being "not too smart" to continue learning.

Creating jobs from hell

Lots of us, including myself, have started businesses to get out of "jobs from hell". We assume we can work for ourselves better than working for someone who has "perfected the art of mismanagement". We believe we understand ourselves better than we will ever get understood by another. We also think we are far more insightful into the customers, their unmet needs and their unanswered complaints. We launch an enterprise with a value proposition that we've designed to be exceptional and far more responsive than the employer's package deal we've left behind. 

We fall into another pitfall when customers are not buying what we're selling. For unknown reasons, our superior value proposition has become a tough sell. The customers appear to need a lot of convincing, educating and enticing to get them to say "yes". We morph the sales responsibilities into a pressure cooker that sales leads find repulsive and sales people dread each day of work. We have fallen into the pitfall of creating jobs from hell. We believe the sales effort has to be pushy and insistent in spite of evidence that customers are full of excuses and giving sales the runaround. We're convinced the solution lies in "trying harder to make sales" since there is no obvious alternative for trying smarter or backing off to succeed. 

When sales responsibilities resemble jobs from hell, so do most other jobs in the fledgling enterprise. The nightmare of mismanagement we sought to escape by launching a startup haunts us still. Sales support becomes non existent. Quality assurance, cost controls and productivity fall apart. Employees fail to take responsibility for problems or initiative to prevent problems from occurring. There is a noticeable lack of cooperation, coordination, communication and commitment. Relationships have turned adversarial, distant and manipulative. A groundswell of backbiting, gossip mongering and office politics rears its ugly head. The problems with sales are merely the symptoms of much more pervasive, dysfunctional systems.

This pitfall can be avoided by using management approaches that:

• Regard employees as internal customers who will serve the real customers in turn -- as well as they are served, respected, listened to and supported.
• Consider employees to be equally entrepreneurial, using the employment experience to advance their careers and refine their abilities to create value.
• Show employees the respect of trusting their own judgement in defining their job description and appraising their performance with the help of their peers and internal customers.
• Creating an internal marketplace for new ideas, process revisions, strategy refinements, and cost savings - where the best get rewarded and each gets acknowledged.

Each of these sends an unmistakable message to each employee of understanding, validation and gratitude for their contribution. Each employee gets under the impression they can make a difference and get recognition for their initiatives. Each gets much more value out of the working for and working together with others than in jobs where they simply "do their job".

Flaming out before catching fire

Hollywood has found they need to score big on the opening weekend of a new film. Slowly building an audience over several weekends underperforms "bursting out of the starting gate". The promoters of new movies have mastered the art of generating buzz. They care much more about how high the buzz goes at first than how long it lasts in the coming weeks. They fuel this fire with paid advertising, guest appearances on TV talk shows and reviews by entertainment news reporters. 

Hollywood's strategy can be applied to any perishable good or service with a short window of opportunity to make sales. For any enterprise "in it for the long haul", this skyrocket to fame and glory is the road to yet another pitfall: flaming out before catching fire. The enterprise passes up slowly building a following of loyal customers, repeat purchases and long term relationships. It opts for generating a furry of press coverage. It appeals to early adopters as the next new thing without any clear use, benefit or outcome offered. It's extremely fashionable like the latest "it" boy, girl or thing. The hype is very seductive. It looks like the startup is going to scale until the flameout comes along. Suddenly the future looks like the end of hype cycle or the chasm between the early adopters and the early majority. 

Once again there are several strategies to avoid this pitfall:

1. Consciously dismiss the hype as seductive, misleading and distracting from appealing to the pragmatic early majority who want proof of specific features and benefits.
2. Cultivate relationships with early adopters as if they can provide feedback to develop the next upgrades and forewarn you of potential negative reactions to the current version.
3. When asked to extoll the virtues of your "next new thing", put the ball back in the laps of the fans who are final arbiters of why they like it, want it and see uses for it.
4. Give a heads up to reporters about the long term development plan that could evolve into other stories for them to work with you on in the future.

Each of these strategies ground the flighty excursions of early adopters with long term relationships. They present a humble, grateful and unassuming face to the public. They turn off the desperate approval seeking of insecure product introductions. They turn on intentional collaborations with fans and reporters to improve on the initial launch. 

Provoking the incumbents to retaliate

When we've developed a great idea, project or venture, we need some people to use it, buy it and tell their friends about it. If our idea is nothing like anything they've seen before, we don't have to tear them away from what they're currently using. However, it will take a lot of explaining, demonstrations and selling to get the concept conveyed as useful, valuable and easy to adopt. 

It may seem easier to stick to ideas the customers already know what it is, how to use it and where to apply it. That usually puts us very near a pitfall of provoking the incumbents to retaliate. Our idea competes directly with giants in the market space. We've invaded their turf and threatened to steal some of their customers. Our success could easily decrease their revenue, market share and profitability. We look an enemy on their radar that they will want to shoot out of the water before we make any further progress. 

There are several strategies to steer clear of this perilous pitfall:

• Invent new ideas to serve the non-consumers who can say your offer is "better than nothing" which what they're getting so far.
• Come up with something simpler or easier to use for those consumers who feel over-served by too many features, too much sophistication and increasingly complex functionality in the incumbents' product/service mix.
• Move down market to offer new solutions to the customers current problems which are less expensive to purchase, less costly to maintain or cheaper to operate. 
• Remix the strategy canvas so your idea is playing by different rules and changing the quality standards which you can meet as "good enough for starters". 

Each of these approaches let "sleeping dogs lie still". The incumbents will not get upset or aroused by innovations that pose no immediate threat. Considerable momentum and customer loyalty can get built up initially while remaining off their radar. 

Undercharging the customer

Whenever we're deciding what to charge for our new product or service, it's easier to get the price wrong than right. When we dwell on how much work we've put into our innovative offering, we're inclined to charge more than the market will bear. We try to amortize our initial investment on too short a schedule. We flip-flop from a slow development process to a "get rich quick" scheme. Our minds have fallen into an "I - it" mode that dehumanizes the paying customer while we do the wrong thing correctly. We let our greed lead us away from our better judgement. We assume those who can afford our high price are our preferred clientele and those who cannot are unworthy.

When we're cautious about going into excessive greed, we fall for under-charging the customer. Our minds are functioning in an "I - Thou" mode that humanizes the customer with our empathy, compassion and perceptions of common interests. We feel their pain from previous rip-offs and anticipate their apprehensions about getting their money's worth from this added expense.

There are several ways to avoid this pitfall without going to the opposite extreme of overcharging the customer:

1. Developing a range of alternatives that offer different amounts of value at different prices so the customer can choose for themselves.
2. Helping the customer compare your prices to competitors with opposing considerations like "getting what you pay for" vs. "not getting more when you pay more".
3. Explaining the amount of work and expense that goes into the offering which deserves a fair price in return -- that customers can decide for themselves.
4. Factoring in the customers' "ability to pay" with a sliding scale of prices adjusted for different economic conditions.

In each case, we avoid setting a firm price and hoping we get it right on our own. We create a transparent process which customers find useful for trusting us more than before. Rather than prices becoming a sticking point or source of misunderstanding, the process of finding a price together deepens the basis for future collaborations.

Underestimating the cost of growth

There are two ways to finance the costs of growing a business: retained earnings and increased debt. I play these two different approaches a few times a year in my Railroad Tycoon 3 game. When I play the scenario that prevents me from borrowing any money, the growth of my empire is very slow and incremental at first but eventually expands with multiplier effects. I've found that debt-free scenario has tempered my tendency toward runaway borrowing in the scenarios that allow it. I borrow more slowly and judiciously now. Expanding a business on retained earnings is called "solid growth". The enterprise does not get "ahead of itself" or "too big for its britches". The revenue, and the capacity to serve the revenue providers, grow together. 

It's very tempting to fall into the pitfall of underestimating the cost of growth. The mistake then requires borrowing heavily, committing future revenue to debt service. It sets up needing to give up some ownership to get cash infusions from investors. The bigger the enterprise becomes, the deeper the hole it digs for itself. Rather than climb out of debt with surges of new revenue, it sinks too lower into obligations. This is one of the big reasons the vast majority of startups fail in the first few years. 

The way around this pitfall is to start out strapped for cash and grow only from retained earnings. The growth is slow and solid. The delightful jumps in revenue can fund a little expansion or deepened reserves. The occasional shortfalls in expected revenue can be weathered without a cash crisis or flurry of desperate borrowing. There are no short sighted and selfish investors, lenders or creditors demanding faster growth to protect their interests. The decision making about expansion can be calm and clear headed. 

Assuming we have no imitators

Once we've fallen in love with our idea for a new project or venture, we're usually scared to death that someone will steal our idea. We wish everyone would sign a non-disclosure agreement before we reveal any of our ingenious plans. We want no one to find out about it while also hoping the idea will take the world by storm. If we entertain these fears for long, we incapacitate our mental resources. Creative thinking is cancelled until further notice. We can conceive of acts of desperation and little else.

To avoid this state of mind, we fall into the pitfall of assuming we have no imitators. No one will copy our idea or surpass the improvements we're making. We imagine that we are so far ahead of others and superior to their approaches -- that they could not catch up to us or catch on to what we're doing. We're usually in for a big surprise when we become this arrogant in our estimation of others' capabilities, motivations and determination.

When we discover that someone has actually imitated our approach or stolen our idea, we typically become devastated. We perceive a certain danger, obvious threat and established enemy. There's no way to argue with those facts or change what has already happened. It's only a "valuable opportunity" or a "useful lesson" if we're kidding ourselves. What we presume to be "facing reality" fills our minds with panic, anxiety and nightmare scenarios.

We actually "face reality" when realize that ideas can be copied, but ecologies cannot be cloned. Imitators can only replicate simple facets of complex systems. Many portable MP3 players imitated Apple's iPod -- but none copied the deals with the music industry, the online iTunes store or the digital rights management encoding in downloaded files. If all we're offering is something that can be copied, it's a mere package, trinket or commodity. The value proposition is flawed. The benefits realized by users is superficial and easily substituted. 

The threat of imitators is an opportunity to grow our own complex ecology. The offer needs to serve lots of different use cases. The situations where our idea works need to include a range of variations. The kinds of combinations, mash-ups and pairings with our initial idea need to boggle our minds. The newcomer to our "total solution" will awed by how we "thought of everything" and "considered every angle". The value proposition has evolved into a robust and potentially viral complex ecology. 

Making the same difference

When we've got a great idea for a new project or venture, we're aiming to make a difference in the world. It has already made a difference to us to have a new idea to develop further. We're typically excited, energized and optimistic to have escaped our mundane world old ideas. We naturally assume the effects the new idea has on our outlook and mood will effect many others the same way.

Most inventors fail to steer clear of the pitfall of making the same difference as other innovations. They fail to take stock of what else is being done, changed and refined. They assume their idea is so new and clever it has no rivals. They may even be afraid to study the market and assess their competition due to the negative impact on their own outlook and mood. This anti-pattern is comprised of over-optimism at all cost with a perilous lack of humility and realism.

Whenever we want to make a difference, it's not enough to simply be different. There's the question of:

1. making a big enough difference to get noticed and to stand out from the crowd
2. making a useful difference that will get valued and talked about by lots of varied users
3. making an accessible difference that others can take advantage of without overcoming huge obstacles
4. making an immediate difference that does not require lots of patience and trust to experience a payoff quickly
5. making a long term difference that rewards deeper commitments and investments for buying into the difference
6. making a range of differences to satisfy a variety of situations, expectations or limitations
7. making predictable differences so the invention seems trustworthy, reliable and consistent to users

These seven criteria for making a difference can be satisfied many different ways which avoid the pitfall of making the same difference. The combinations of these attributes can create a significant difference that could be called a "game changer", "revolutionary breakthrough" or a "disruptive innovation". The combinations can also create an incremental difference that could be called an "upgrade to version 2.0", "added features and functionality" or a "sustaining innovation". In either case, the combinations avoid the pitfall of making the same difference as every other new entrant and incumbent provider. 

Doing the wrong thing correctly

When we're creating something new, we have a lot on our minds. It can be as small as a new web page or as comprehensive as launching a new start-up. Our minds naturally fixate on solving the immediate problems. There's a lot to consider to avoid making mistakes, looking bad and failing to perform as promised. We become obsessed with "doing the thing right" while hoping we've chosen to "do the right thing" with the particular new thing we're creating. 

Most inventors fall into a pitfall of doing the wrong thing correctly. They end up serving themselves accurately instead of serving the customers functionally. They rely on the features and specs, not the use cases and other purposes the thing can enhance. The invention becomes a good idea in itself that took lots of work to make it right. It becomes "the inventor's baby" that is adored, clung to and admired without question. The new thing comes across to others as too new to accept, too strange to comprehend, too difficult to use or too complicated to think through how to apply it.

We get seduced by this pitfall, in part, due to the way our minds function. When we're being productive, we take others for granted. We close our minds to distractions and focus on the task at hand. We cannot relate to others, consider their feelings, empathize with their situations or tune into their outlooks. We function in an "I - it" mode of  dehumanizing and de-contextualizing others. This enables us to get the job done and solve the obvious problems. But we lose sight of making sense to others from their own frames of reference. Our invention shows up in their worlds as nothing they'd want to buy, use or look into further.

Entrepreneurs utilize several heuristics to successfully avoid this pitfall. Here's a few of them:

• Don't start with an idea, start with a user's pain, problematic situation or frustrated attempts to make progress.
• Don't make an invention, make a difference in the lives of other people who don't know they need an invention.
• Don't deliver something for customers to buy, serve their ability to get more out of what they buy.
• Don't dwell on what is getting bought, focus on what good it does for those who do the buying.

When we get trapped by this pitfall, the value of our inventions are extrinsic. It's in the item and presumed to be the same for everyone who buys it. When we steer clear of this pitfall, the value is intrinsic. It's in the eye of the beholders, in the strength of the rapport with their outlooks and in the trust established with them. We practice an "I - thou" mode of humanizing and contextualizing others. We get where others are coming from and meet them there. We discover ways to give them what they are looking for. We ease their pain, solve some of their problems and facilitate their own process of making progress. We appear to be on their side or in their corner. They feel understood by where we appear to be coming from. The invention now looks very useful, valuable and alluring to their outlooks. We've done the right thing correctly.

Pitfalls in planning a new venture

I'm currently writing a business plan to give an affordable second chance to college dropouts. As I develop the details of the plan, I am also critiquing it. There are many ways for a business plan to be inadequate, ineffective or simply flawed. I intend to write up these pitfalls over the next two weeks, to clarify my own thinking about them and make sure I hold my evolving business plan to these standards. I hope you'll find them useful in any new ventures or projects you're considering.

Here are the design pitfalls I have in mind and will explore here:

1. Inventing a new product/service that buyers see no use for that's worth the trouble of adjusting to it - see Doing the Wrong Thing Correctly
2. Lacking feature/benefit differentiation that makes the new business compare unfavorably to established enterprises with more experience and customers - see Making the Same Difference
3. Assuming the rivals won't copy or surpass every improvement which then results in getting ambushed by the imitators - see Assuming we have no imitators
4. Over-estimating increasing revenue and under-estimating soaring costs which yield shortages of cash and loss of ownership control - see Underestimating the cost of growth
5. Pricing the offer beyond what the market will pay or so low it fails to cover costs which makes customers wary of being manipulated - see Undercharging the customer
6. Attacking incumbent positions that provoke their retaliatory strikes and wars of attrition to quickly eliminate the start-up from the market space - see Provoking the incumbents to retaliate
7. Getting a bubble of press coverage that quickly fades without generating customer loyalty and  a steady stream of repeat business - see Flaming out before catching fire
8. Resorting to pressure sales tactics which results in seller reluctance, buyer remorse and negative reputations - see Creating jobs from hell
9. Locking into a long shot trajectory that fails to make adjustments to hit the moving target and steer clear of unforeseen obstacles - see Too smart to succeed
10. Introducing a single innovation with no upgrade path which has the effect of destroying the long term sustainability - see Drop kicking our innovation

After writing up all these pitfalls, I took the opposite approach of developing a framework of success strategies - see A process of growing a new venture.

Getting a degree and an education

The two times I've been a college student, I walked away with a degree AND an education. Both my B.Arch. and M.B.A. programs gave me opportunities to instruct others and prove to myself that the best way to learn something is to teach it to another. Both degree programs involved working together with peers on projects with lots of meetings outside of class time. I learned as much from fellow students as from the formal instructors. Because there was so much action and interaction involved in the learning processes, I got a clearer sense of my own aptitudes, passions and values. I discovered how much I differed and how much I had in common with others I found compatible with me, interesting to me and understanding of me. 

Since then, I taught college courses for a dozen years. I did my best to ensure that the students enrolled in my courses got lots of takeaway value from my instructional designs. I could not, in good conscience, merely cover the material, test students on the assigned reading, or give lectures that were as boring to give as to receive. But I saw the results of other classes they endured and heard some of their horror stories. Many students were getting a degree without getting an education. The only thing they would have to show for their 4+ years of academic credits was their diploma and transcript -- all credential with no credibility! 

I suspect the increasing number of college dropouts is partly the result of this failure to provide an education. It becomes evident to enrolled students that they are getting no value beyond the piece of paper at the end of the line. It no longer appears worth the phenomenal expense, long term debt and anxiety while attending college. I believe many of those dropouts who dropped out to minimize the rip-off still desire a real education. If they cannot get both a degree and an education, they will settle for a useful, customized and experiential education.

This morning I notified the Penn/Milken contest administrators of my intention to submit an executive summary and business plan to "provide an affordable second chance to the growing number of college dropouts". I have in mind a social learning system that will provide a very valuable and enduring education without the credentials they've already lost hope of attaining. I will argue this is a far better bargain than those college graduates who walk away with the reverse result: the diploma without an education.