Navigating Tomorrow: Empowering companies through Futures Thinking for strategic success

Navigating Tomorrow: Empowering companies through Futures Thinking for strategic success

 

Humankind has always  wanted to know what will happen in the future. From the rulers of ancient Rome to CEO’s of current companies, all of them have been looking to predict the future, in order to secure their empire or their business. Thankfully, nowadays we have reliable tools to allow us to chart a course through the uncharted waters of the future.

Ancient cultures sought to unravel the mysteries of the future through a diverse array of practices rooted in spirituality, observation, and symbolism. From the casting of lots and interpreting celestial movements in astrology to divining messages in dreams and deciphering the flight of birds in augury, these civilizations blended religious beliefs with practical methodologies to predict the unknown. As those methods didn’t really work as advertised, business leaders and facilitators have turned to Futures Thinking, which provides a structure for thinking how the world could change, and the implications of that for our plans. Futures Thinking can help us to analyse the past and anticipate future trends, and uncover hidden biases and assumptions to enable us to think about the future more creatively.

FUTURES WHAT?

There doesn’t seem to be one universally agreed upon definition of “Futures Thinking”, but in general it’s seen as a strategic and anticipatory approach to understanding and preparing for the future. It involves exploring potential scenarios, trends, and uncertainties to make informed decisions about the future … in the present. It is a multidisciplinary field that draws on insights from various sources, including technology, sociology, economics, and environmental studies, to analyze possible future outcomes. You may have also heard it mentioned under other terms such as foresight, futurism, futurology, anticipation studies, etc.

By examining emerging these patterns, forecasting trends, and considering alternative futures, individuals and organizations can develop more resilient strategies and adapt to changing circumstances. Futures thinking encourages a proactive mindset, fostering the ability to navigate complexities and uncertainties in an ever-evolving VUCA world.

A STEP BY STEP PROCESS

In practice, Futures Thinking sessions will yield a series of scenarios, which are meant to illustrate multiple options for what the future might be without defining an exact prediction. We can then design product concepts for any one of these future scenarios, meaning that the end-point of the Futures Thinking process can be seen as the starting point for a Design Thinking process — one can feed into the other. It is important to realise that Futures Thinking doesn’t tell you what WILL, happen, but what COULD happen.

In a more structured way, a Futures Thinking workshop will try to answer these questions:

  • What will occur in my industry in the next 5, 10 or 20 years?
  • What are the most important emerging trends and issues?
  • What actions, strategies and policies will influence my desirable outcomes?

A Futures Thinking sessions generally takes place in 4 steps:

  • Step 1 is “asking the Question”: starting with the right question is key. How far do you want to think (hint, it should be somewhere between 5 and 15 years for real futures thinking)
  • Step 2 is “Scanning the World”: what are the drivers that will shape how the question will be answered. In this stage, it is all about gathering the relevant information.
  • Step 3 is “Mapping the possibilities”: there is no one future, so in a workshop, we need to find out what the possible outcomes are – is the future better or worse than what you expect?
  • Step 4 is “Asking the next question”: how would you answer the original question in each of the futures?
  • A 5th step is to start asking follow-up questions. Now, it’s time to address questions such as: What actions and strategies can lead to the best-case or at least an acceptable future? What obstacles are keeping you from taking the necessary steps?What are competitors doing?

(source https://www.synario.com/futures-thinking-and-scenario-planning/)

From this, we will start to formulate strategies and try to lay out a concrete plan. What choices and changes do we need to make to get to an acceptable future? What policies and actions do we need leaders and stakeholders to agree to and adopt? Can this session help us look beyond the probable futures, more broader into possible futures, to identify unforeseen opportunities?

The image above shows the difference in convergence and divergence of futures thinking versus design thinking (source:

WELCOME TO THE VOROSCOPE

 

To understand Futures Thinking, it is often explained through the “futures cone“, also known as the “voroscope”, named after its inventor, Joseph Voros (and to confuse you even more, this one is sometimes also called “the cone of uncertainty”)

For more on the origin of the voroscope, please visit https://thevoroscope.com/2017/02/24/the-futures-cone-use-and-history/

The futures cone lists out 7 types of alternate futures, from the default “business as usual” future all the way to “preposterous” scenarios.

The Voroscope from Joseph Voros

One other version of this one is the “Framework Foresight” tool from the University of Houston (https://www.houstonforesight.org/foresight-resources/)

The Framework Foresight from the University of Houston

FUTURES THINKING TOOLS

 

There are a number of specific exercises that are well tailored to Futures Thinking. Below is a non-exhaustive list of tools and exercises that can be used as part of a Futures Thinking session:

Scenario analysis: used in strategic market analysis. Questions to ask here are “what are the most likely scenarios?” and “Can we extrapolate current trends?”

Business model canvas exercises: the BMC can be adapted to imagine different possible futures by altering any of the building blocks in it.

Horizon scanning: the systematic examination of potential threats, opportunities, and likely future developments, including those at the margins of current thinking and beyond conventional foresight timeframes.

TAIDA: Tracking, Analysing, Imagining, Deciding, Acting. Analyse the changes happening around us, imagining a vision, decide on a strategy, and execute that strategy.

The futures triangle (Sohail), with the weight of history, the push of the present and the pull of the future:

Weight of history: What could hold us back? Which barriers are necessary to change? What deep structures are resisting the change?

Push of the present: Which trends push the people towards specific futures? What quantitative trends and drivers are or may be changing the future?

Pull of the future: What is going to pull us towards a specific future? What is a compelling image of the future? Which images in the future are competing?

what if questions: exactly what is says, a guided session to answers “what if” questions to find new ideas and examples for your industry.

The 4 archetypes : Also knows as “Dator’s four futures”, we look at 4 alternative futures: one of continuation, one of (societal) transformation, one of disciplined society, and one of collapse. (for the details, please read https://foresightguide.com/dator-four-futures/)

the Shell approach: associated with the multinational oil and gas company Shell, this is a  method in futures thinking and scenario planning that involves systematically exploring possible future scenarios to inform strategic decision-making and manage uncertainty effectively.

Futures wheel : The futures wheel is one of the most widely used methods of futurists. It is a creative way of encouraging people to think about the future. It is usually about organizing a trend or about the ideas surrounding a future development (Bandhold, Lindgren, 2003).

Persona cards: what will the life of persona X look like in 20 years?

trend canvas – collect anc luster trends you see in the world. For an explanation, see https://wrkshp.tools/tools/trend-canvas – you can also find a miro template to a consumer trend canvas on https://www.trendwatching.com/news/ctc-live-on-miro

2×2 SES: 2 by 2 scenario exploration system: find a question (about the future, after all, this is a futures thinking article) you want to investigate, find the 2 most crucial driving forces and work on these in a matrix – here’s an example of to go about it: https://www.futuresplatform.com/blog/2×2-scenario-planning-matrix-guideline

The Sarkar Game: a foresight role-playing game playing the 4 types of power (worker, warrior, intellectual and capitalist). For more information, see https://jfsdigital.org/wp-content/uploads/2013/10/181-A01.pdf and https://library.teachthefuture.org/wp-content/uploads/2017/01/Sarkar-Game.pdf

(some input and ideas came from this paper: https://scriptiebank.be/sites/default/files/thesis/2020-10/Eindrapport-bachelorproef_Facilitating-the-exercise-of-futures-thinking-2019-2020.pdf as well as this strategic foresight presentation: https://coe.gsa.gov/docs/StrategicForesight101.pdf )

SO WHERE SHOULD YOU FOCUS?

Futures thinking can be useful for when a CEO wants to lead their company into a certain future, without being disrupted by new technology or competitors. What will the company need to do today in order to survive shifts in the market?

For example, if you are  running factories, you can analyse the impact of trends like automatisation, on the future of the plants.

Sessions can also be about desirability (what will people want in the future?), Technological feasibility (what could technically be possible in the future), or Economic (how can it become a sustainable business model in the future?).

FURTHER READING

Jane McGonigal, imaginable: https://janemcgonigal.com/2021/12/17/imaginable-how-to-see-the-future-coming-and-feel-ready-for-anything-even-things-that-seem-impossible-today/

Santosh Gandhi on business strategy: https://www.santhoshgandhi.com/post/how-does-futures-thinking-help-for-a-better-business-strategy

Futures and Design thinking explained: https://bootcamp.uxdesign.cc/future-thinking-and-design-thinking-simply-explained-d65716d67651

How Futures thinking is used in EU policymaking: https://knowledge4policy.ec.europa.eu/foresight/tool/scenario-exploration-system-ses_en

A video explanation Top 3 Futures Games: Polak Game, Sarkar Game, and 2×2 Scenario Exploration System: https://www.youtube.com/watch?v=sRt85iHwov8

(PS the main image was generated with ChatGPT –  The image has been created to convey what futures thinking is all about, embodying the essence of looking into the future with optimism, curiosity, and strategic planning. It symbolizes the collaborative and multidisciplinary approach to envisioning a range of possible futures.)

About grey rhino’s, black swans and the incumbent’s dilemma

About grey rhino’s, black swans and the incumbent’s dilemma

Black swan versus Grey Rhino Image by Holger Detje from Pixabay and by Geran de Klerk on Unsplash

 

 

There are a number of articles online comparing COVID-19 to a black swan event. But is it really?

 

Let’s check out some definitions. Investopedia describes a black swan as “an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the widespread insistence they were obvious in hindsight.”

 

Impact? Check.
Obvious in hindsight? Check.
Extreme rarity? Not so sure… Humanity’s history has been rife with widespread pandemics. Smallpox, tuberculosis, the black death (killing 75-200 million people in the 14th century), not to mention the 1918 spanish flu pandemic, which killed an estimated 20 to 100 million people (caused by the H1N1 virus which also cause the swine flu pandemic in 2009). SARS, H5N1 (the birdflu), the Zika virus, smallpox (which was virtually eliminated thanks to … vaccinations). And the list goes on  As a matter of fact, Bill Gates mentioned it in his Gates notes already in 2015. Which could mean that the new coronavirus wasn’t really a black swan event, but something more akin to a “grey rhino”.

 

So what is a “grey rhino”? Other than a  massive beast that can trample you to pieces, a “grey rhino” is a highly probable, high impact yet neglected threat. Where these differ from a black swan event is that they are NOT random, NOT unexpected, but they are preceded by a number of warnings and visible evidence. Yet, decision makers, governments and companies rarely act on them until it is too late, because they consider them too remote, and neglect them.

 

“highly probably, high-impact, yet neglected threats.”

 

So maybe COVID-19 was not a black swan, but something that we knew was coming one day but chose to ignore. Much like big companies tend to ignore incumbents eating away at their margin, while they are focusing on the next quarter’s results of their cash cow products.

BCG Growth Matrix

The BCG Growth Matrix helps you identify your rising stars.

This is something that those familiar with the BCG Matrix (a.k.a. The Boston Consulting Group matrix or growth-share matrix) will recognize. Deciding whether the “question marks” you are investing time, money and effort in will be able to turn into stars or not. This proves to be quite difficult for larger companies, as they are not very keen on betting the firm on new innovations. But for those who do, it can pay off big time. An interesting case study here is Microsoft, that under the leadership of Satya Nadella was able to significantly grow its market cap by making the transition to the cloud and AI (for those interested in more, Nadella’s book “Hit Refresh” is a good read).

Microsoft Stock rise since Nadella became CEO

Microsoft stock rise since Nadella became CEO

The incumbent’s dilemma – why are companies blindsided?

 

Very often they are blindsided by disruption because they did not see the grey rhino that was coming for them. There is no one reason for this, but it is mostly a combination of the below reasons.

 

  • It can be that their core products are built on “older” tech or legacy platforms that need to be maintained, and where new products or additions need to work/plug in/be backwards compatible with these platforms… Startups, on the other hand, can often start from a clean slate, giving them faster time to market. The answer to this is very simple: accelerated digital transformation (ok, even though the answer is simple, implementing it is a daunting task)
  • Due to their structure bigger companies also tend to move slower the bigger they get: testing, retesting, panels, committees, approval loops, all things startups are not bogged down by. This is one of the more difficult things for bigger companies – making sure that innovations from within are not stopped by corporate policies and politics – something that should be recognized by the corporate leadership and addressed from the top through real support for change, and not just innovation theatre.
  • And of course the other part of incumbent’s dilemma of keeping their shareholders happy with cash cows generating revenue versus investing in new and unproven products, techniques, business models. Companies should keep an eye out for what is happening in the market, identify the forces that can disrupt their cash cows and make sure to really act on them. Various solutions to address this are possible, ranging from innovation teams over internal programs to stimulate innovation throughout the company, all the way to corporate Venture Capital groups.

 

As mentioned before, what they absolutely need to avoid is the infamous Innovation theatre”, where big companies realize that they have the challenges mentioned above, and desperately try to address these with all kinds of innovation initiatives… that then don’t get implemented because of the issues listed above.

 

In summary, the problems to address are: failure to see the strategic inflection points coming, failure to see the disruptors coming from different angles, and failure to act and really implement change.

 

PS if you’re wondering what other grey rhino’s are still out there, have a look at this Politico article.
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Startup success is the execution of your ideas

Startup success is the execution of your ideas

 

 

Startup success is in the execution of your ideas

 

“Ideas are just a multiplier of execution” is what Derek Sivers wrote in his book “anything you want”: You can see how this plays out in the visual scoring table of idea versus execution below. To see the true value, you need to multiply the idea with the execution.

 

ideas are a mulitpier of execution

 

Investor logic supports this approach: investors usually prefer investing in an A-team with a B-idea instead of the other way around. This is because ideas are easy, turning them into a profitable business isn’t. Once you have your brilliant idea, you need to see if it sticks, check with real potential customers if it is a viable solution to a real need that they have. You will need to get out of your bubble and gather hard feedback. You will need to create a product, scrape money together, build a first version (MVP) of that product, and IF you get traction, scale the business. It sounds easy enough, but as the startup curve shows, it’s a tough process, and most don’t make it past this stage.

The Startup Curve

The Startup Curve

Once you do get to a real solution/market fit, you’re ready to start scaling. But be warned: scaling at a rapid pace comes with its own unique set of challenges. What has worked for your startup in the past may not work going forward with your scale-up. You’ll likely experience additional stress and chaos that comes with exponentially growing your company. You will need to navigate additional pitfalls like shifting focus and alignment, hiring prematurely or too late, establishing long term goals, focusing too much or too little on marketing, postponing the next funding round, and lacking of a scalable infrastructure, to name but a few.

Implementation is everything

Everything needs to fit together in order to get to a successful implementation of your growth plans. Ignace Van Doorselaere, current CEO of Neuhaus, explains thus as follows:  “If you line up five dominoes, and you push the first … so that the second, third and fourth fall – but the fifth remains standing – then the score is not 4 out of 5, but 0 out of 5. Because everything that is not implemented does not exist.”

The good news is that companies have been scaling for ages, and that there are some strategies you can build upon. One needs real implementation of the strategy and ideas, because if something isn’t implemented, it’s all wasted effort. You’ll need to take a hard look at your current capabilities and how they fit with your future aspirations, clarify your strategic priorities/opportunities/challenges, and then build an action plan to take your company to the next level.

 

 

If you have a startup, how can you hire your A-team?

If you have a startup, how can you hire your A-team?

Image by Lynn Andrews | Department of Defense

I can’t help it, I’m seventies kid and grew up with the A-team. So if you have a problem no one can help you with, it’s time to put together your own startup A-team.

One of the things that is important to grow your startup and scale-up is the team composition. Investors tend to look at the team behind the startup, and prefer well-balanced teams. Especially the core team needs to have what we call “complementary skills” – you can’t all be the CEO or the head of tech or the finance wizard. Put all finance wizards together, and most likely you get skewed views on the market, and the chances of success diminish significantly. The same goes for all the other functions. After all, not having the right team is the third reason startups fail:

Source: CB Insight

Complementary skills

Hence the reference to the A-team. Those who remember the series or the movie know that all team members had wildly different personalities and skills. And for those who don’t remember the movie/series, let’s look at two other sectors where the right diverse team matters: gaming and the military. One of the more popular game formats these days revolve around different teams competing either team on team or in large battle royale games (if you’re not familiar with the latter: in a battle royale game your team and about 60 to 100 other people get dropped without anything in an ever closing circle of doom until one team is left standing… much like startups trying to conquer markets). in Overwatch, a typical team on team game, you are in a 6 vs 6 team fight, where the only chance of winning is if you have a team of complementary members that can fill in the gaps in the other’s weaknesses.

Another adaptation that is in vogue now is the link with SEAL teams. After all, if they can kick the behinds of people in jungles and deserts far off, something useful has to be in there, right? Well, other than a lot of training, SEAL teams focus on group flow and what they call “dynamic subordination“, which basically means that the person who knows what to do next is the leader, a form of fluid leadership.

” We expect to lead and be led. In the absence of orders I will take charge, lead my teammates and accomplish the mission. I lead by example in all situations.”
Excerpt from the Seal Code

Why the link? Just like combat situations can be very chaotic, so can be the life of a startups. Pivots, anyone? To get into this group flow, teams need to really work on getting their culture right, in order to work together as one well oiled machine.

Successful teams work like a Formula 1 tire switch

Team performance is a whole other topic for another post: how to make the team work together? How to get different working styles perform as a team? For this, startups can learn a lot also from sports teams and sports coaches, as they really work on how to make teams of alfa players work together where each know their place.

A basketball team is like the five fingers on your hand. If you can get them all together, you have a fist. That’s how I want you to play.”— Mike Krzyzewski

What’s the right team composition then?

Well, that’s highly dependent on the mission. For one, in a startup you need FSO’s or “Figure Shit Out people“. More on that in this article on startup hiring. In a nutshell, you need people you can throw a problem at and that will then run with it and solve it without you needing to micromanage them to do that. Lateral thinkers. T-shaped people. Think The Hipster, Hacker, Hustler team – also know as the 3H. More on that here and here. In this composition, the hipster is the creative lead, the hustler the sales lead and the Hacker – of course- the tech lead.

But that’s not quite enough…

Investors would rather invest in a great team with a mediocre product than vice versa, because they know the team makes all the difference. Management is the most important factor that smart investors take into consideration. VCs invest in a management team and its ability to execute on the business plan, first and foremost. Ideally they invest in executives who have successfully built businesses that have generated high returns for the investors. If you don’t have experience, create an advisory board of experienced, qualified people who will play central roles in your company’s development. Or join an incubator or accelerator, they can usually help you find the right people in their network. If you’re still an early startup, you can find a match with a business angel that has experience in your field, and that can either help you him/herself or look for someone in his/her network.

If you’re convinced now of the importance of a good, well rounded team, go ahead and start putting it together.

And in the mean time, enjoy putting your A-team together.

… You’ll love it when the plan comes together.

Venture Capital, the Secret Service and the military

Venture Capital, the Secret Service and the military

Image by ar130405 from Pixabay

What do spies, soldiers and venture capital have to do with each other, you might ask? Well, even spies need innovative new ways of working and spying. Not to mention that the whole security and protection market is also moving online. Servers and sensitive data need to be protected … or hacked. New wearable technologies need to be developed to support agents and soldiers in the field.

No Matter Who You Are, Most Of The Smartest People Work For Someone Else (Bill Joy).

Nobody has the monopoly on knowledge

After all, not all the brightest people in the world work for your company, so why not invest in those companies that employ a number of these bright people?

Even though their investments are (mostly) public – after all these are VC investments in startups – not many people know that the secret service departments of various countries tend to also invest in startups.

Starting with -of course- the United States. The most well-known secret service in the world- the CIA – invests in startups and scale-ups through its own investment arm in-q-tel (apparently a a cheek-in-tongue reference to the original Q character from the James Bond movies). Business Insider tracked down a number of their investments in their article on companies funded by the CIA (link here). Some of these investments may surprise you, but there’s always some link, like the Atlas Wearables fitness tracker, which is something that can be used to manage the status of operators and agents in the field. For the full list of the on-q-tel portfolio, check out the IQT site here.

But they are not the only US agency investing in innovative startups. Meet AVCI, short for “Army Venture Capital initiative”, managed by Onpoint, and the DIU (Defense Innovation unit. AVCI is or was (it’s unclear whether they are still investing) the venture capital agency of the U.S. Army and Department of Defense. From their website, they were to strategically invest in cutting- ­edge technologies, and support venture-funded companies developing innovative technologies in areas such as mobile power and energy enabling technologies, autonomy, cyber, health information systems, and advanced materials. There are no investments listed on the website, but Crunchbase does list a number of investments of Onpoint. It’s unclear whether the fund is still doing new investments at this stage (2016 was the last one tracked on crunchbase). The DIU on the other hand is still active, but takes a different approach, going the other way and accelerating the adoption of leading commercial technology into the military.

The US is of course not the only country seeing the value of startups. Libertad Ventures is the Technological Innovation Fund of Israel Security and Intelligence Service (the Mossad as most people know them), and tends to be a bit more secretive, so they haven’t posted any startup on their website – you can however find the the challenges that they put out to startups: robotics, energy, encryption, web intelligence and big data and text analysis. This doesn’t sound too far off of what regular VCs also invest in. And if you are wondering where all that startup talent in Israel comes from, have a look at Unit 8200, its crack cybersecurity and intelligence team, whose alumni, FORBES estimates, have founded more than 1,000 companies including Waze, CheckPoint and Mirabilis.

But even closer to home, we have the Cyber Innovation Hub of the Bundeswehr, which is the digital innovation accelerator of the German Armed Forces, linking the military with the start-up scene and driving digital innovation in the Armed Forces. They look at technologies in the international start-up scene and then adapt these for use in the military. In the UK, they are doing it by means of DASA , their Defence And Security Accelerator.

NATO is also looking at the space, with their NATO Innovation Hub which looks at the future capability challenges of NATO, and design solutions for them through their innovation challenges.

Self-driving cars and the military

Even though we now see a big push towards self-driving cars and big strides being made by Google and others, it was actually DARPA that initiated the autonomous vehicle challenge, spurring innovations from different actors in the ecosystem, as early as 2004. DARPA stands for “Defense Advanced Research Projects Agency” and is a US Department of Defense agency that drives the development of emerging technologies for use by the military.

If you are curious what the current challenges (and associated prize money) are, check out the current DARPA challenges. Two interesting active challenges are the subterranian challenge (tunnels and boring companies anyone?), and the launch challenge (launching stuff into orbit on extremely short notice – think Space Force). AI research is another ongoing program. – giving you an idea of where the future challenges for the military are taking us. Quoting: ” DARPA envisions a future in which machines are more than just tools that execute human-programmed rules or generalize from human-curated data sets. Rather, the machines DARPA envisions will function more as colleagues than as tools. Towards this end, DARPA research and development in human-machine symbiosis sets a goal to partner with machines.

But what does this mean for us

It is worthwhile to note that a lot of what comes out of secret service and military research and investments can and will also be used to enhance people’s everyday lives.

Take your iphone for starters. Mariana Mazzucato made a whole study on how almost al of the technology in your iphone come out of the US army research programmes.

Source: Mazzucato

The below 2 video’s also give you a good idea of how US future soldier research programmes can have an impact on commercial exoskeleton development. A quick look at the below video of US research on enhanced soldiers gives you an idea that what comes out of this also has applications for our daily lives. Exoskeletons, personal drones, better motorcycle helmets, thermal management for people working in in extreme envorinments etc.

US Research on the future of tech-enhanced soldiers
Ford’s take on using exoskeleton vests to prevent worker injuries

For more on this topic, have a look at this keynote of Mariana Mazzucato :

The Secret history of Silicon Valley

In light of what was written above, it is also very interesting to see the story of the actual origin of Silicon Valley, as told by Steve Blank, silicon valley investor and author of the startup owner’s manual.

Take for example your microwave oven. That technology was actually invented by Dr. Percy Spencer as part during a radar-related research project around 1945, and subsequently patented by his employer, defense contractor Raytheon, into a device to cook food. I kid you not, you can see the original patent here.

You can see the full history, slides and video on https://steveblank.com/secret-history or below this article.

So, what to take away from all this?

The one thing is that innovation doesn’t happen in a vacuum. Fundamental research is still required, and then people that can build successful technologies and companies, and whether they are funded by the government or private investors shouldn’t matter. As long as these companies get to develop tech and product that get to better our lives.

Is there a second valley of death for startups and scale-ups?

Is there a second valley of death for startups and scale-ups?

Before we talk about the second valley, let’s go back in time to 1991, when one of the “must read” book for high-tech startups was “Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers”. 

Crossing the Chasm

It was a book targeted at tech startups (yes, in the nineties we had those too) and focused on how to bridge the “chasm” between early adopters and mainstream customers. For a more in-depth intro, check out the wikipedia page.

After crossing the chasm (what we would now call the valley of death I guess), came the ride up “inside the tornado” (yes, that was the follow-on book, still available on amazon). It becomes interesting when you also plot the visual of the chasm onto the Gartner hype cycle. It is often in the stages between getting from their early adopters into getting sustainable traction through larger and consistent sales that most fail. But for startups turning into scale-ups the story doesn’t end there.

 

 

 

 

 

 

Credit www.businessprocessincubator.com

The second valley of death

Recently, some articles popped up talking about the further challenges for scale-ups, namely in wat is now dubbed “the second valley of death”.

What happens to companies once they have secured their first funding rounds and achieved product-market fit? According to the statistics, they’re not all successful in the long run. There are different opinions on what entails this second valley of death for scale-ups, and I tend to go with this one: overcoming the financial hurdles (i.e. later stage funding gap), and finding the right markets to truly scale up into.

Getting your future funding secured on time is key, as the story of our local startups Collibra and Small Teaser illustrate. 2 great stories, yet quite different outcomes with one becoming a unicorn and the other forced to close shop due to a lack of further funding…. which actually prompted this article (in Dutch) about the lack of growth capital in Belgium for scale-ups. But Belgium is not the only one with this challenge, as this Australian story highlights – clear issues in later-stage funding. SO … don’t forget to start your next funding round on time, and don’t be shy to get out of your home market to find additional funding.

Of course money is not the only pitfall when crossing the second valley of death. Have a look at the video below where Mahesh Kumar of Result talks about other challenges faced in the second valley of death. And if you’re looking for help, don’t hesitate to contact us at EYnovation.

Mahesh Kumar on the second valley of death.
Always think Attack – what does self-defense have to do with management

Always think Attack – what does self-defense have to do with management

Some years ago, I assisted Ignace Van Doorselaere with the creation of his book “Always Think Attack, street fighting techniques for managers“. This project allowed me to combine my professional knowledge with my activities as a self-defense instructor.

The purpose of the book was to help create better managers that keep the focus on their customers, employees and shareholders. We were not advocating dirty tricks for managers, but on the contrary, using the principles of self-defense to protect companies against disruptive forces.

Purpose of a fight: survive

Self-defense is all about self-preservation. This means avoiding to fight if possible, but but be extremely effective if you cannot avoid the fight. Projecting this on your company, the goal is self-preservation in the long term, which usually means thinking of what is best to both your customers and shareholders. But at the same time be prepared to take immediate action to ensure the survival of your company.

Avoiding the fight – be aware of your environment

In self-defense we call this the pre-fight situation, where you can still get away without having to resort to violence or being attacked. This is broken down into avoidance (don’t get into the fight) and control (stop a situation from escalating, or defuse it). Because once you do get into a fight, you may not escape unharmed either. So the key here is to be alert, and scan for threats around you. This crosses over well into the corporate world, where you need to be on the lookout for potential threats to your company. Those threats can be competitors but also market forces at work that may in the long run totally disrupt your business. Look out for the small signals that can lead to big changes!

Winning = execution

“Winning” in the case of self-defense means that your attacker is not willing or able to continue. This can be through being “broken” either physically or mentally. To be able to win, you will need focus and impact. A near miss is still a miss. Winning means reaching the goals you set, and not letting your ego or emotions get the better of you. In practice, this may mean running like hell if you are attached by a huge group of attackers, because it is in line with your long term goal of survival without being injured.

In the business world, you will need an actual growth state of mind, and the real implementation of the strategy and ideas, because if something isn’t implemented, it’s all wasted effort. A strategy can be for example deciding to not enter a certain market because it is a red ocean for you. But once you do commit your company, don’t do it halfheartedly.

You cannot fool human intuition

Listening to your intuition is important both on the street and in the office. It’s usually your brain or subsconcious mind trying to tell you something that you have not yet consciously realised. So if you have a nagging feeling about a competitor or new product, take a good hard look at them, because there are subtle signs of an imminent danger that you may have missed.

Stay flexible

“If you have a hammer, everything looks like a nail” is a trap that people can fall into. In self-defense, if your strategy or tactics don’t work, change them rapidly before you get in more trouble than you already are. The same goes for corporate life. Don’t hang on to your strategic long range plan if the ground starts to shift beneath you but be ready to shift into a totally new direction.

You can order the book in Dutch on the site of 4F (link here).

So you’re looking to fund your startup?

So you’re looking to fund your startup?

Congratulations, and realise: you are not alone. The startup scene is still growing across Europe and is a focal point of governments, private companies and the EU. On the bright side, this means that there is money available from both private and public sources to support innovative startups. On the other hand, there are a LOT of startups competing for that money, so you will have serious competition to get hold of the money you need to grow YOUR company.

A lot has been written about the different forms of funding, so I’m not going to go into detail on all of them. if you want an overview, here is a good start for the US,  and here is one for the Belgian market. Below, I’m offering some general thoughts and tips.

Get the right funding for your stage

The type and size of funding you can get access to will typically depend on the size and stage of your company. if you’re just starting out and don’t even have a product or an idea of your customers and revenue plan yet, don’t count on getting in millions of dollars. That typically doesn’t happen. There are always exceptions of course… don’t count on you being one. So for you, this will mean that you will need to work within the smaller budget, find creative ways to spend that budget and work like hell to get access to bigger funding.

Very early companies typically have to start with using their founders’ own money, and some funding from the infamous  3F’s: friends, family and fools. The good part of these latter 3 investors is that they typically want to help you, may not be as focused on a return on investment as a VC, and will be more hands-off. You won’t face too many difficult questions from them, and they won’t conduct an in-depth due diligence before handing over the money. Of course, they usually won’t put in big budgets either, so if you can find an angel investor early one, you’ll have a shot at bigger funding, and angels typically also take on a more hands-on role. You can also get bank loans here, or get free office space and mentoring through incubator or accelerator projects. Now… do not get focused only on the money, and don’t underestimate the value of the mentoring – that is, if the incubator you are in has a good mentor network. Why, you ask? A good incubator project and mentor can get you faster access to funding by helping you getting your story right (that’s right, pitch training) and help in validating your product ideas to make sure that your business idea is a viable one that people will pay for.

At this stage, you will typically not have revenues yet. But even here, there are some options to get funding and support from other sources. Do your homework: there may be a number of different possibilities depending on your specific sector and country. Did you know for example that if you are a European startup in e-health, you can apply for the EIT Health Launchlab, where you get no money but – if you are selected – you will become part of a 2 month program to test out your idea for a company. KBC StartIT also offers fresh starters in Belgium incubation space and mentorship.  There are surely opportunities in your country or sector. Do your homework and find out what is available.

Don’t forget to look at public funding

In these early stages, you can get both private and public funding. The advantage of getting public funding is that it typically comes without you having to give up any equity in your company. But there is a lot of competition for public funding too. In most countries there are specific government agencies that can provide funding. For example in Belgium, and depending on whether you are in Flanders, Brussels or Wallonia, it will be either VLAIO (Flanders), Innoviris (Brussels) or AEI (Wallonia). There are a lot of options in public funding, ranging from low to high budgets on innovation, research, etc. Every country that takes it startup and innovation support serious will have a program to support their local companies. A good start to look in your own country is the government subsidy sites (just google for these terms).

Next to these agencies, there are other option to get public funding, like “open calls”, typically from local organizations or bigger Horizon 2020 projects. One program that is now finished was the FIWARE accelerator program, where 80 Million EURO was invested in startups (up to 150,000€ per startup). There are other H2020 projects that are now providing startups with equity-free funding. A good place to start are places like F6S or FundingBox where you can find access to more public funding and incubation programs. Alternatively you can do a google search on terms like “open calls”. One other form of getting access to further funding or mentoring are the so-called startup competitions. These happen on a local and European level. Sites like Startup Calendar or F6S can give you a good start on finding some competitions that are interesting for you. Typically you’ll need to first apply with your idea online, and the best ones then get selected to pitch and get access to some funding and possible investors. You won’t need to do all of this alone. Without a doubt, once you get some visibility you will get contacted by a plethora of agencies and companies that will offer their services to you in order to help you get access to funding; usually for a fee.

More money

So you made it passed the first hurdle, got some funding and are rolling along? Congratulations, but unless you are creating some solid revenues at this stage, you ‘re going to need even more money to keep up. And even if you are creating those revenues now, if you want to grow beyond your borders, you’re going to have to get more money. Welcome to First Round Financing. Here is where you’ll need to get bigger capital for your venture that has successfully passed the initial start-up phase. Hopefully by now, you have your business plan all figured out and a product is under development or even shipping.

At this stage, there is one crucial question that you need to ask yourself: do you need the VC money? Are you self-sustainanble already? Can you grow organically? For some this may be a no brainer, but be fully aware that by accepting VC investments in your company, you will give up some ownership and control of your company to someone else. Do you need to grow big and fast and need funding for that? Then it may make perfect sense. But be aware that once you take on the investments, YOU will be held responsible for the fate of the company by your board and investors, and if things go south, it will be your head that will roll. Not being melodramatic, but that’s what boards are for.  If you’re ready to go for it, do your homework and learn all you can about the investment process. if you are looking at your first round (typically called the seed round), have a look at the advice of Y Combinator.  Next to a mentor that has gone through the process before, there are some good books that can help you with the ins and outs of the investment process. “Venture Deals” is one I recommend you read. One other book that deals with various aspects of running  a startup is “the hard thing about hard things” by Ben Horowits.

The SME instrument

There are some alternatives to early stage VC funding. The best known of these in Europe is the public funding for small and medium sized companies by the European Commission (EC), commonly known as the SME instrument. The SME instrument is part of the EC’s Horizon 2020 instrument, and can land you funding of up to 2,5M€ – equity free, meaning you will not need to give up part of your company. There is always a catch though: as the SME instrument becomes more well known and is open to companies from the whole EU, there is some fierce competition going on. Because, who wouldn’t want this kind of funding? As you would have guessed, a lot of companies apply for this funding, and the success rate is rather low. According to the 2017 report of the EC, out of the 31,000 applications, 2457 companies got actual funding. The figures don’t lie: 8.4% of Phase 1 applications were selected for funding, and only 5.5% of Phase 2 applications were selected for funding. These programs also work with cut-off dates throughout the year. If you miss submitting by the due date, there is no option but to wait until the next date.

The SME instrument has three “phases” where you can apply for funding:

  • Phase 1 is typical for concept and feasibility studies, has a fixed funding of 50,000€, and lasts for about 6 months. it’s got the easiest application process (only 10 pages).
  • Phase 2 is more for companies that are ready to scale up demonstration, market replication, r&d and product development. Here the EU may contribute 70% of your total project cost, between €0.5 and €2.5 million, with project lasting about 12 months. it’s also a harder application process (30 pages) and typically follows after a company has passed Phase 1.
  • Then there is a 3rd phase 3 for business acceleration and support services to get ready for market launch. However, there is no funding here, but business acceleration support, including training, coaching and facilitating access to risk finance.

There is a yearly overall budget for the SME instrument, which is spent as follows: up to 10 % of this is used to support companies in phase 1; at least 87% goes to phase 2; at least 1% of the annual budget will be used for phase 3 related actions, and 1% will be used to support coaching and mentoring activities supporting phase 1 and phase 2 and up to 1% will be used for evaluation. What all this means for you, is that this is a yearly budget, so if it’s spent on the top applications, and the budget has run out for that year, there is no more budget for you, even if you had a great score. You will however get a seal of excellence. Even if you didn’t get funding from the first go, don’t despair, because you can adapt your proposal and apply for the next deadline.

There are at the moment 13 different topics for which you can submit. The open disruptive innovation scheme is the most general, but there are other topics specific for healthcare, agriculture energy etc. depending on the focus of your company.

Getting acquired

OK, this last one isn’t really a way to get more money to grow your company, but it can definitely solve your money problems, and if you have what a corporate acquirer is looking for it can go really fast. Look at Indian company Halli Labs which was acquired by Google.  The company was less than a year old when they got scooped up. So, one of the items in your pitch deck can be your “exit strategy”, where you can list who you think can acquire your business in some year’s time. Techrepublic has a good guide to get your started on the M&A approach of some tech giants. Big corporates realise that they are in dire need of innovation and what better way to “insource” that innovation than to integrate a promising young startup into their ranks? “Innovation through acquisition” as they call it. Of course, that doesn’t always work and acquisitions are no guarantee to succes for either side, but that is for another post.

 

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Reading: The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

When you think of Netscape, those of us old enough to remember the browser, thinks of Marc Andreessen. But at Netscape (and Opsware), he was joined by Ben Horowitz. Together they founded venture capital company Andreessen Horowitz. This book is a compilation of the lessons that Ben Horowitz learned at those companies, and that he is sharing with us.

The book is a must read for startups and growth ceo’s.  It’s not a book written by a management guru, but by someone who has been in the trenches and doubtless had a lot of sleepless nights figuring out how to make his company survive. There’s a lot of advise for CEO’s in there, ranging from how to direct your company through rough times, to minimising politics in your company.

Some of the highlights that I found worthwhile:

Crediting Grove – It was interesting that in the book Ben Horowitz makes a number of references to the works of Andy Grove, name “High output management” and “Only the paranoid survive“. Andy turned Intel around from a memory company to the biggest chip company in the world, so pay attention, and read his work too.

Lead bullets – “Ben, those silver bullets that you and Mike are looking for are fine and good, but our web server is five times slower. There is no silver bullet that’s going to fix that. No, we are going to have to use a lot of lead bullets.” “There’s not always a magical way out of your problems. Sometimes you just have to knuckle down and keep on going with all that you have.” The other interesting quote in this section was:

“There comes a time in every company’s life when it must fight for its life. If you find yourself running when you should be fighting, you need to ask yourself: “If our company isn’t good enough to win, then do we need to exist at all?” if you have the better product, why not knuckle up and go to war?”

War and Peace – what CEO are you? – A peacetime CEO will focus on expanding the market  and company’s strength. A wartime CEO is fending off immediate and existential threats (read Only the paranoid survive to catch up on strategic inflection points) . Can one CEO be both? You can read more on wartime versus peacetime CEO’s here.

People Product Profit – In that order. Take care of your people first, they are the ones that will make your product win, and in turn realise your profit.

A Market of ONE – The most important rule of raising money privately, look for a market of one. You only need one investor to believe in you and invest

2 kinds of friends – You need 2 kinds of friends in your life: one with real excitement, and a second kind of friend to call when things go horribly wrong. When your life is on the line and you only have 1 phone call to make, who’s it going to be?

If you’re going to eat shit, don’t nibble – Pretty straightforward!

Don’t believe in statistics – Startup ceo’s should not play the odds. Don’t believe in statistics, believe in calculus. Secret of a successful CEO? There is one skill: focus and make the best move when there are no good moves.

Ask for problems – Build a culture that rewards, not punishes people to bring problems in the open where they can be solved. The “old management standards” say “don’t bring me a problem without bringing a solution”. Well, if the employee had the solution, he wouldn’t need to bring it to the manager now, would he?

Time – spend zero time on what you could have done and spend all of your time on what you can do. Because in the end, nobody cares

Product Managers – good product managers think in terms of delivering superior value to the market place during product planning and  achieving market share and revenues goals during the go to market phase.

Hiring senior people in your company – When do you need to start hiring senior people, what types, advantages and disadvantages? Also an Andy Grove quote that hits home: the peter principle is unavoidable (full quote: “the Peter Principle is unavoidable, because there is no way to know a priori at what level in the hierarchy a manager will be incompetent“). The author gives some good advice on how to check if they are doing a good job, and when and why you need senior people. He addresses the questions like “won’t they ruin the culture with their costumes, political ambitions and the need to go home to see their family?” Maybe yes, but bringing in the right kind of experience at the right time can mean the difference between bankruptcy and glory. You’ll need a new executive to be more than a goal achiever, he/she needs to be part of the team. The CEO needs to evaluate people on current role, and nobody comes out of the womb knowing how to manage a 100 people. Managing at scale is a learned skill rather than a natural ability, and it’s nearly impossible to make judgement in advance.

The shit sandwich – from “the one minute manager” – go look it up. 🙂

Be honest but courteous with feedback – if you think a presentation sucks, just say it and give the reasons why. Watered down feedback is worse than no feedback at all. But… don’t go and show off your superiority.

What’s your story – a company without a story is usually a company without a strategy (see the amazon example – it’s amazing, Jeff Bezos wrote this in 1997!)

 

the hard thing about hard things

Reading: Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

Reading: Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist is a great read by Brad Feld  and Jason Mendelson

Brad Feld is the founder of Techstars, a well recognized name in the startup world.

Written in 2012, it is  one of those books that every entrepreneur looking to raise money should read.  The 3rd edition of the book was released in November 2016 and made it on the list of best books for entrepreneurs in Inc’s 2016 list.

The book goes  into detail on the different players in the game: the entrepreneurs, venture capitalists, angel investors, syndicates, lawyers and mentors. It also goes into the nuts and bolts on how you should select the right VC for you, how VC’s invest, how you can structure your term sheets etc.

What I liked about the book are also the clear explanations and examples of the more “technical” terms that founders rarely came into contact with before they had to look for money to keep their idea afloat, like liquidation preference, pay-to-play, vesting, antidilution, redemption rights, etc.

If you’re thinking of raising money, read this book first. Investing is the VC’s core business, so as an entrepreneur you need to make sure you know enough to also make it your game. Either that or get yourself a damn good deal lawyer for raising money.

You can follow Brad Feld’s blog on FeldThoughts.