4 Key Lessons From a Startup's Spectacular Failure

When it comes to launching a startup, it sometimes turns out that the idea with the grandest buildup results in an equally spectacular collapse. Just take the now-defunct Israeli electric automobile manufacturer, Better Place. 

Better Place’s founder, Shai Agassi, promised he would sell millions of electric vehicles, end oil dependence and completely change the world by 2020. His bold idea was heralded by many renowned investors, and everyone involved was optimistic.

Then, as one former employee put it, “Everything we needed to go right went wrong.”

The company was hit from every angle, with problems ranging from overspending to poor marketing and hiring decisions to dubious director oversight. Perhaps the most problematic issue was a company culture of hubris fueled by Agassi himself, saying things such as “If we go down, we’ll make a lot of noise.”

The company did go down, and today it’s known as the perfect storm that resulted in a massive failure every entrepreneur can learn from.

Better Place made several key mistakes that many startups fall prey to. By themselves, these mishaps might not have spelled disaster, but combined, it’s difficult to imagine how any business could have avoided calamity.

1. Better Place didn’t understand its customers.

It’s a well-known fact that consumers make buying decisions based on a human nature that readily embraces trends. Would you rather be the guy who still has to go to the gas station, or the person who hangs out at the local charging station, sipping a pumpkin spice latte and checking text messages while the car battery is swapped within minutes? Sounds like every PTA mom’s dream, right? But Better Place didn’t ask, “How many of these consumers live in metro Tel Aviv?”

2. Agassi overpromised, then under-delivered.

Confidence is critical for any entrepreneur, but Agassi went into Better Place making bold promises that he would bring millions of electric cars to cities around the globe. But as the cars failed to appear and public interest waned, Agassi’s declarations began to seem like a lot of talk with no follow-through.

3. Better Place had a great concept but poor planning.

Agassi ignored market analysis and made the poor decision to launch exclusively in Israel. Despite having the support of former Israeli President Shimon Peres, Better Place didn’t have the government backing it needed to push through early roadblocks.

4. The company became complacent.

Better Place viewed itself as the only innovator in the electric vehicle market and acted as if it had no competition. With no perceived threat, the company failed to identify its own weaknesses.

This final problem often arises when a struggling startup suddenly gets a ton of funding. The company allows itself to get lulled into a false sense of security, loses its drive, stops innovating and -- in effect --moves out to the suburbs to raise the kids. What Better Place didn’t realize was that if it didn’t keep the ball rolling, its bank account would dwindle along with consumer interest.

There’s nothing wrong with getting excited when you come up with a groundbreaking idea. The tricky thing is to remember that the idea doesn’t exist inside a vacuum and there are more factors than enthusiasm contributing to its success or failure.

Overconfidence and a lack of preparation will doom your idea from the get-go, but if you do your research, consider your customers, continue to innovate and keep a firm grip on your company’s financials, you can avoid these catastrophic mistakes.

From Entrepreneur

Consider These 10 Strategies When Preparing to Grow Your Company

Startups go through three distinct phases early in their lifecycle: building the product, selling the product and growing into a sustainable company.

Preparing a company for growth requires taking concrete actions in evolving product and service offerings, modifying the pre- and post-sales organization, addressing human resource challenges, streamlining operations and more.

Here are 10 suggestions for companies preparing to cross the growth chasm:

1. Reconsider product offerings

Now that the product is no longer in beta, questions to ask include: How profitable is each product line? Can products that don’t "move the needle" be eliminated to double down on the successful ones? How can the product’s addressable market be increased? How can the average revenue per unit be grown? How can the product sales cycle be shortened to reduce the overall cost of sales? How can post-sales maintenance costs be reduced?

Challenge conventions and consider new blue-ocean opportunities, including ones that would require a mergers and acquisitions to fulfill.

2. Invest in product marketing

As sales ramp up, there will be a diminishing productivity rate, largely because the salesforce is no longer only comprised of the passionate founder. Counteract this by making sales easier.

Consider verticalizing sales and marketing teams based on industry, use cases and/or products. Establish a product-marketing team in charge of writing marketing requirement documents (MRDs) for products, evangelizing products with customers, developing customer advisory boards, creating sales collateral, and simplifying product packaging, messaging, and pricing.

3. Adopt a channel strategy

Channels fuel much needed non-linear growth, but they also introduce risk. While a channel strategy isn’t for everyone, most companies opt for a combined direct and channel approach.

Determine if the channel’s sales team has the DNA and required knowledge to sell the product. Make sure they are adequately motivated to sell the product through a sales performance incentive fund (SPIF), but consider compensating them in other ways, too. Allocate enough pre- and post-sales support. Most importantly, be patient but also very critical of progress.

4. Establish a customer-success team

Upon entering the growth phase, significant attention needs to shift from securing new customers to retaining and upselling to current customers.

If it hasn’t been done already, establish a customer-success team with the goal of maintaining customers for life. Measure and incentivize this team by gross churn and upsell level, or by "net churn," which is the net effect of both.

5. Open channels of communication

Companies entering the growth phase are typically large enough to switch from having two levels of management (for example, vice presidents and directors) to three levels of management (chief experience officers, VPs and directors), and the staff is increasingly spread out.

Establish a culture of transparency, including quarterly company-wide video calls for reviewing updated plans, opportunities and challenges. Schedule periodic meetings for all groups with all company executives. Each senior executive should spend a significant portion of time on the "frontlines" to obtain an in-person assessment and encourage contact with all employees.

6. Strive for cohesion

As the company grows, individual offices and teams become less aware of what others are doing. However, company-wide unity and cohesion are critical for success.

Verbalize the company’s philosophy, culture and motto, and seek concrete ways to embody them so people can relate, connect and gradually make it their own. Encourage meetings between teams, trips across offices, company-wide events, and whenever possible, relocate people across countries and groups.

7. Empower middle management

Executives in growth-phase companies need to be less focused on leading by themselves and more focused on empowering others to lead with them.

Put in place a strong middle-management team, delegate responsibilities to them and empower them with rights and freedoms. Encourage middle management to be entrepreneurial and take initiative, assume risk and not fear failure.

8. Put goals and key performance indicators in place

Initial startup decisions are often made by intuition, but as the company grows, they must be backed by data collected and monitored regularly across the entire company.

Leaders at every level should define and track key yearly and quarterly goals. Key performance indicator (KPI) attainment should be shared transparently across the organization, and compensation should be tied to them directly.

9. Instill tighter controls

As the company grows, so too does the risk of losing control of approval processes and spending. Allocate resources to document-required procedures and regulations. Instill processes and systems that ensure compliance.

10. Establish a strong human resources team

Recruiting, training, empowering and retaining talent requires lots of thought, effort and attention, and is key for the company’s success. The HR team should be led by an executive who reports directly to the CEO because HR issues are of strategic importance and need to be addressed by a senior person.

From Entrepreneur

How to Recover When Stress Starts to Build Up

It was my first year of graduate school and my professor was standing at the front of the room. He was telling our class about a mistake he made years before.

About a decade earlier, my professor had been one of the senior executives at Sears, Roebuck & Company, the large department store chain. They were in the middle of a massive national campaign and preparing for a major brand launch. My professor was leading the operation.

For almost two months prior to the launch day, he was flying all over the country to strike up buzz with major partners and media companies. While criss-crossing the country on flight after flight, he was also trying to run his department from the road. For weeks on end he would meet with the media and business partners all day, answer emails and phone calls all night, squeeze in 3 or 4 hours of sleep, and wake up to do it all over again.

The week before the big launch day, his body gave out on him. He had to be rushed to the hospital. Major organs had started to fail from the chronic stress. He spent the next eight days lying in a hospital bed, unable to do anything as the launch day came and went.

Your Bucket of Health and Energy

Imagine that your health and energy are a bucket of water.

In your day-to-day life, there are things that fill your bucket up. These are inputs like sleep, nutrition, meditation, stretching, laughter, and other forms of recovery.

There are also forces that drain the water from your bucket. These are outputs like lifting weights or running, stress from work or school, relationship problems, or other forms of stress and anxiety. 

The forces that drain your bucket aren’t all negative, of course. To live a productive life, it can be important to have some of things flowing out of your bucket. Working hard in the gym, at school, or at the office allows you to produce something of value. But even positive outputs are still outputs and they drain your energy accordingly.

These outputs are cumulative. Even a little leak can result in significant water loss over time.

The Theory of Cumulative Stress

I usually lift heavy three days per week. For a long time, I thought I should be able to handle four days per week. However, every time I added the extra workout in, I would be just fine for a few weeks and then end up exhausted or slightly injured about a month into the program.

This was frustrating. Why could I handle it for four or five weeks, but not longer than that?

Eventually I realized the issue: stress is cumulative. Three days per week was a pace I could sustain. When I added that fourth day in, the additional stress started to build and accumulate. At some point, the burden became too big and I would get exhausted or injured.

In extreme cases, like that of my professor, this snowball of stress can start to roll so fast that it pushes you to the brink of death. But it’s important to realize that cumulative stress is something that you’re dealing with even when it isn’t a matter of life or death. The stress of extra workouts or additional mileage. The stress of building a business or finishing an important project. The stress of parenting your young children or dealing with a bad boss or caring for your aging parents. It all adds up.

Keeping Your Bucket Full

If you want to keep your bucket full, you have two options.

1. Refill your bucket on a regular basis. That means catching up on sleep, making time for laughter and fun, eating enough to maintain solid energy levels, and otherwise making time for recovery.
2. Let the stressors in your life accumulate and drain your bucket. Once you hit empty, your body will force you to rest through injury and illness. Just like it did with my professor.

Recovery is Not Negotiable

I’m in the middle of a very heavy squat program right now.

I’ve spent the last two years training with really easy weights and gradually working my way up to heavier loads. I’ve built a solid foundation of strength. But even with that foundation, the weights on this program are heavy and the intensity is high.

Because of this, I’m taking special care to allow myself additional recovery. I’m allowed to sleep longer than usual. If I need to eat more, so be it. Usually, I’m lazy about stretching and foam rolling, but I have been rolling my little heart out every day for the last few weeks. I’m doing whatever I can do to balance the stress and recovery deficit that this squat program is placing on me.

Why?

Because recovery is not negotiable. You can either make time to rest and rejuvenate now or make time to be sick and injured later. Keep your bucket full.

From Entrepreneur 

9 Reasons to Quit Your Job As Soon As You Can

Quit your job to take a better paying position? Definitely. Quit your job for a great opportunity? Absolutely.

But there are a lot more reasons to quit your job (once you have something else lined up, of course.) And they all fall under one main category:

Life’s too short.

Life’s too short to go home every day feeling unfulfilled. Life's too short to work for a terrible boss. Life’s too short to go home every day feeling taken for granted, feeling taken less than seriously, or feeling taken advantage of.

Life’s short to not be as happy as you can be.

Say your grown daughter called and said, “I hate my job. I’m bored, frustrated, and feel like I'm going nowhere.” Wouldn’t you tell her to look for another job?

Shouldn’t you follow the same advice?

Here are reasons to stop being miserable and start looking for something better:

1. Your input is disregarded… or even not wanted.

Everyone has ideas. And everyone loves when their ideas are taken seriously – and implemented. The feeling that you’ve contributed in a special way is incredibly gratifying.

But when your boss or company shoots down or even laughs at your ideas, that’s not only insulting, it's demotivating. And pretty soon you stop caring.

Life’s too short not to care.

2. You get criticized publicly.

We all need constructive feedback. We all need a little nudge. We all need to be told when we can do something better – and how to do it better.

But we need to be told those things in private.

Life’s too short to walk around waiting for the next time you’ll be criticized – and even humiliated – in front of other people.

3. You never hear the word, “Thanks.”

Everyone also needs praise. We all need to know when we do something well (and everyone, even poor performers, do some things well.)

Life’s too short not to be recognized for the contributions you make.

4. Your boss manages up, not down.

You know the type: as a leader they should focus their time and attention on their direct reports, but they spend all their time “following” their boss. It seems like your only job is to contribute to the greater glory – and advancement – of your boss.

A great boss knows that if her team succeeds – and each individual on that team succeeds – then she will succeed too.

Life’s too short to spend your time developing your boss’s career at the expense of your own.

5. You feel like you have no purpose.

Everyone likes to feel a part of something bigger. Everyone likes to feel they make an impact not just on results but also on the lives of other people.

Life’s too short to go home every day feeling like you’ve worked… but you haven’t accomplished anything meaningful.

6. You feel like a number.

Everyone is replaceable. Everyone, ultimately, works for a paycheck. But everyone also wants to work for more than a paycheck. They want to work with people they respect admire… and they want to be respected and admired in return.

If your boss doesn’t occasionally stop for a quick discussion about family, an informal conversation to see if you need an help, or simply to say a kind word… then you’re just a cog in a larger machine.

Life’s too short to only be a cog in a larger machine.

7. You aren’t even mildly excited to go to work.

Every job has its downsides. (I’m willing to bet even Richard Branson has to do a few things he doesn’t enjoy.) But every job should also have some fun moments. Or exciting moments. Or challenging moments. Or some aspect that makes you think, “I’m looking forward to doing that…”

Life’s too short to spend only looking forward to quitting time.

8. You can’t see a future.

Every job should lead to something: hopefully a promotion, but if not the opportunity to take on additional responsibilities, learn new things, tackle new challenges… to feel like tomorrow has the potential to be different – in a good way – than today.

A decent boss works to improve the company’s future. A good boss works to improve her employees’ futures too, even if – especially if – that might mean some of those employees will eventually move on to bigger and better things.

Life’s too short to live without hope.

9. You don’t think you can do anything else.

That’s the best reason of all quit your job. I know what you’re thinking, “I make too much in my current job; I’ll never find something comparable.” Or, “There just aren’t any jobs where I live.” Or, “I’ve put too much time into this company (or career or industry.)”

All those things are true – if you let them be true.

You can do something else. You can do lots of something "elses."

You just have to believe – and trust that your creativity, perseverance, and effort will take you to new, happier, and more fulfilling places.

Life's too short to just stay where you are instead doing everything possible to live a better life.

Written by Jeff Haden

How I Launched My Health-Care Startup

With the Affordable Care Act in full swing, more entrepreneurs are trying to get a piece of the $2.8 trillion health-care pie.

Rami Rafeh worked in business development and innovation at Pfizer before launching New York-based spott3r, which enables employees to earn gym reimbursements or insurance wellness credits for exercising. As a professional who has worked on the established and startup sides of the health-care industry, he gave us his insights on how to operate in a sector where the only constant is change.

Why is it a good time to get into health care?

I've been surprised by how many big companies want to partner with startups--look at insurers Aetna and startup iTriage, or United Healthcare Group's Optum and Audax Health. Once you crack the customer-acquisition code, the value proposition to mature companies is very compelling. You may have to spend a lot of time courting them, but if you show a good track record, they're willing to work out a way to either do a pilot or to partner in some way. Many of them realize that because of internal politics, figuring out policies or just trying to get out of each other's way, it's easier to partner with a nimble startup.

For spott3r, we looked at forward-thinking brands like DavidBartonGym, the YMCA and Crunch, who wanted to reduce customer attrition and increase new-member registrations--known problems and industry standard metrics that are consistently being measured.

How do you work amid constant change?

It's an infinitely complex environment, and I don't think anyone has a clear view of a simple solution, so you just have to be ready to wake up every day thinking of a different way to approach a problem. If you can start small and own a process within that complex environment, and start working your way up from there, that's a recipe for success.

I remembered a gym reimbursement credit I used to file several years ago with New York Sports Clubs, and thought about how many steps there were in that reimbursement process. We realized that even if a person knew about it, they probably weren't claiming it, because there were so many steps involved. So we decided to use that as our business entry point and build from there.

What lessons did you learn from your launch?

I took a slow approach. I spent a year doing surveillance: looking at insurance companies and the policies they offer, filing a provisional patent and working on a website that never got launched because it was buggy and had features that were not core to the company's mission.

Today, I would suggest taking the opposite approach: Just dive in. Come up with a viable product, get something out there to test your hypothesis, and then iterate from that.

One major thing you need to pay attention to is not breaking any health-care laws. Patient safety and privacy are paramount. I hired a Columbia law professor to make sure what we were doing complied with health-care laws.

How do you keep from getting bogged down in regulation?

You have to learn how everything intertwines, including the policy consideration, the care consideration and how pharma fits into it all.

It's helpful to build a knowledge base of experts who can be your go-to consultants when needed. Sometimes it's great to have somebody on your team who has no health-care background at all, so they can say, "Can't we find a way to make this easier? You guys took a convoluted process and maybe reduced it by one step, but it's still convoluted, and you're not there yet."

From Entrepreneur

The Entrepreneur's Simple Guide to Business Concepts

Positioning is one of the hardest marketing concepts to not only understand, but to do right, as I detailed in my recently-completed series. It’s very conceptual, highly theoretical, and mostly emotional. Not everyone does well with that combination.

It’s also very confusing, especially when it’s not well crafted and when coordinated with other parts of defining your business and managing and marketing it. It occurred to me that perhaps I should take a step back again, and show how positioning is different from other parts of your business plan and other elements you are thinking about for your business.

Many people continue to get positioning mixed up with other business concepts, so here is the entrepreneur’s guide to business concepts, with simple definitions of common elements of a business plan -- quick phrases to help clarify and solidify terms that many get confused.

We’ll begin with where I started: positioning.

Positioning

The space you want to occupy in your customer’s mind when they think of your brand. While your positioning should remain consistent over time, it should also evolve with your business and the marketplace.

Mission

Your core purpose -- why you started the business. This should rarely change.

Vision

A lofty ideal of what your organization does. It’s not the “why” of a mission but more a “what” you do to accomplish that mission.

Values

The principles by which you run your business. If you have business values, and you should, you also need to communicate them to your customers.

Voice

How you represent your business and how you talk to your customers. It’s one thing to have a voice, but it’s even more important to consistently apply it in all that you do.

Objectives 

What you are seeking to accomplish in a given year. You are likely to have multiple objectives that change frequently over time.

Strategies 

How you plan to accomplish your objectives. You are likely to have multiple strategies for multiple objectives.

Tactics 

Specific programs you put in place to fulfill your strategies to accomplish your objectives. Tactics should be constantly changing to keep up with what you have to get done for your business.

Oh, and one last one.

Entrepreneur 

The backbone of American business and economic growth. ‘Nuff said.

From Entrepreneur

Train Your Brain to Think More Clearly

Neuroscience says that honing how you speak and write also hones the way you think.

According to the latest neuroscience, the human brain uses neurons in the left visual cortex to process written words as whole word units. The brain combines these words and their stored meanings to remember and understand information.

Analytical thinking is the process of remembering words and putting their meanings into context. This process is not simply accessing a mental dictionary. Every time you use words, you re-create their meaning.

The words you habitually use when you're thinking (and then expressing those thoughts) mold how you see the world. For example, people who habitually think (and speak and write) the word "hate" tend to find an ever-increasing number of things to hate.

This relationship between word usage and perception is hugely important in business. When you train yourself to speak and write using clearly defined words arranged into concise sentences, you're training your brain to think more clearly.

More important, when you write and speak more clearly, you increase your positive influence on your team. Due to their mirror neurons, they'll begin to imitate your clarity in their own thought processes. Clarity is contagious.

Conversely, if you habitually use fuzzy, ill-defined words crammed into long and convoluted sentences, you're training your brain--and the brains of your team members--to think lessclearly. Confusion is also contagious.

With that in mind, here are four easy ways to hone your word skills:

1. Mentally edit out fuzzy buzzwords.

While most business buzzwords are simply annoying (like saying "utilize" rather than "use"), some are so fuzzy and vague that they automatically lead to confused thinking.

The worst offenders are: alignment, best of breed, client-centric, core competency, crystallize, customer-centric, diversity, empowerment, holistic, leading, leverage, generation, paradigm, robust, seamless, stakeholder, sustainability, and synergy.

Take the term synergy. In physics, synergy describes the creation of a whole that's greater than the arithmetic sum of its parts. Classic example: combining flour, water, yeast and heat to create a loaf of bread.

In business, though, synergy generally pops up when disparate organizations are combined, as in a merger, acquisition, or corporate restructuring. In business, however, synergy is rare to the point of nonexistence.

"Even when you have a deal that looks lovely on paper," says Wharton's Emilie Feldman, "getting cultures to fit together, people to stay on board, merging I.T. systems and back offices: all these things are really hard."

Rather than ask difficult questions and think things thoroughly through, decision makers unconsciously use the word synergy to make problematic deals seem more palatable, like slathering ketchup over rancid meatloaf.

Mentally editing out the fuzzy, vague buzzwords when you talking, speaking, listening, or reading gradually clears your mind of the confusion they create, thereby making you smarter.

2. Simplify your business writing.

If you find yourself writing or reading long, complex sentences at work, edit and reedit them so that they express the gist in fewer words. Do this repeatedly and over time you'll automatically accustom your brain to shorter, clearer wordings.

Here's how this works. A subscriber to my free weekly newsletter recently sent me this fairly typical example of biz-blab:

Leveraging XYZ technology and compliance expertise can give your business an important competitive advantage. XYZ can help you manage the 'people side' of your businesses more effectively, avoiding compliance pitfalls and creating key benefits for the businesses and your employees, while simultaneously freeing up time for owners and executives to concentrate on growing their businesses by focusing on operations, strategy, and innovation.

While that paragraph is grammatically correct, it's using a lot of words to waltz around a fairly simple concept. I'm sure that if you read it carefully, you know what they're getting at, but it can obviously be worded with much more economy, like so:

XYZ handles your personnel busywork so that you can spend more time growing your business.

Simplifying biz-blab to the fewest number of words doesn't just make your writing crisper, it also habituates your mind to seek the simple essence of needlessly complex concepts. The more often you practice this clarification process, the smarter you get.

3. Play the "one syllable" game.

This exercise trains your brain to use smaller, easier-to-understand words rather than complex ones. The concept is simple: Try to communicate business ideas using words of only one syllable.

For example, if I were trying to communicate the rules of the game using those rules, I'd write: "The point of the game is to talk and write with words that are so short that they cannot be split."

While this kind of writing and speaking doesn't result in anything you'd actually use in a business discussion, the mental effort of oversimplifying accustoms your brain to reach for the small words rather than the overly complex ones.

Since complex words tend to "complexify" your thoughts (and your expression of them), habitually using common words leads toward clearer thinking.

From Inc. Magazine