We live in a golden age of innovation. We are surrounded by opportunity, but only if we want to take it.
The age of innovation started 200 years ago with the Industrial Revolution, and shows no sign of slowing down. If anything, the pace of change is growing and the opportunities are greater than ever. Even I have benefitted from this: in the last 20 years, I have started-up 10 successful enterprises. I have also started quite a few heroically unsuccessful enterprises, which I normally keep quiet about.
The more successful enterprises I have started include a bank, the United Kingdom’s (UK’s) largest graduate recruiter, several education enterprises, and a charity which gets prisoners to start their own business on release from prison. So far, we have helped 500 ex-prisoners go straight and build their own business. None of this is down to any innate genius or hard work, as my family, friends and colleagues will testify. It is all about having a simple method, which I have followed consistently over the last 20 years. If I can do it, so can you and your firm. What follows is my formula for success, which can be yours if you want.
The success formula for innovating, finding new markets, and starting new businesses is very simple: IPM. IPM stands for Idea; People; and Money, Machine, and Mindset. We will explore each part of IPM in turn.
The most important thing is to have a good idea. You do not have to be original or creative yourself, because you are surrounded by great ideas: you just have to see that they are there. Here are three easy ways for you to find your killer idea:
1. Copy an idea from somewhere else. This is how Teach First, the largest graduate recruiter in the UK started. I was listening to KFOG, a San Francisco rock station, when it carried an interview about a great project which got top graduates to teach in inner city schools. I knew nothing about education, but thought it sounded like a great idea. So I rang the KFOG, and got the name of the project which was called Teach For America. I then called Dr Wendy Kopp, the chief executive officer (CEO), and suggested the idea should come to the UK. She pointed me to McKinsey in London and the rest is history. The idea was presented to me on a plate.
2. Listen and talk. In every industry, people know what the problems are, and have insights about how to solve them. So when I decided to start a retail Internet bank, I did not keep my idea secret: I talked to everyone who would give me time. After about 100 discussions, I realised my idea was rubbish, because anyone else could do it as easily as I could. But in the chats, I found that banks in the UK were ripping off mid-sized firms: high prices, poor service, staggering inefficiencies, and no innovation. That is the sort of thing which disgusts regulators and delights entrepreneurs. All I had to do was to be slightly less greedy and incompetent and we could win. Listening and talking reduced risk by eliminating a bad idea and finding a new and viable one. Then there was the minor problem of raising the US$1 billion start-up capital. But the idea should always come before the money…
3. Solve a problem. I went to prison, fortunately by invitation and not by force. Prisons are full of problems waiting for a solution. The biggest problem is that 70 per cent of prisoners re-offend within two years of release. One of the reasons is that they cannot get employment, although many of them are highly entrepreneurial and resilient. Running a drugs business or car-jacking enterprise makes running a legitimate business look like child’s play. All we had to do was find a way of helping prisoners use their entrepreneurial talent legitimately on release from prison. We have now helped to start over 500 businesses including rafts of plumbers, electricians, and gardeners, as well as a wig maker, roti cook, a Buddy Holly tribute act, and a supplier of spare parts for split screen Volkswagen combi vans. We tapped into a bottomless well of human creativity.
Any idea is only as good as the people who stand behind it. Venture capitalists back the person as much as the idea. You have to build the right team. Don’t attempt to be the lone hero who conquers the world: it will not happen.
The easiest way to discover the importance of having the right team is when you build the wrong team. I realised that one of my new businesses was in trouble at the second board meeting. The first person arrived and started to undress. He needed to change from his cycling gear into business dress, and there was nowhere else to change. So far, so good. The next person arrived in a white tie and tail suit: he was going to dinner with the Prince of Wales after the meeting. The third person arrived looking suspiciously normal. I made the mistake of asking him what was in the long case he was carrying. His answer: two shotguns, which he promptly pulled out. I realised that this was a team which was not going to be 100 per cent focussed on the business, which folded a few months later.
There is a simple way to find the right team: talk to people. As you form your idea, you need to talk to lots of people to give you advice. As they talk, they are not just advising you: they are selecting themselves onto or off your team. The people who select themselves onto the team will have three characteristics:
4. Enthusiasm, energy, and engagement. You can train skills, but not values. With the right values, your team will overcome all the crises and challenges that any new idea encounters. With the wrong mindset, every molehill becomes an impossible mountain to scale.
5. Expertise and insight. You need people who know what they are doing and will be credible with investors and partners. But some experts are negative and problem-focussed. You need the experts who see the problems, but then quickly offer solutions as well.
6. Right priorities. Look for people who are enthused by the idea, not by the money. If they start negotiating money or shares at an early stage, just walk away. They are focussed on the wrong thing, and they will always come back for more.
M: Money, Machine, and Mindset
Money. With the right idea and right people you are 95 per cent of the way to success. The money is vital, but flows from having the right idea and people. If the money does not flow, then there is something wrong with the idea or the people. A fatal flaw is to focus on the money first: the tail should not wag the dog. When you test the financial viability of your idea, it should be absurdly profitable. Inevitably, reality is harsher than any plan; costs always escalate and competitors always retaliate. If you are projecting marginal profitability, you are projecting failure.
Machine. You have to build an organisational machine to deliver your dream. This is where all the hard work is. Empower your team to change things: they may well improve your original idea. As you grow into a sustainable machine, you will find that many of the start-up team will leave: they will have enjoyed the anarchy of the start-up and will hate the discipline of the machine. But if you are to grow, you need a machine which works predictably and reliably.
Mindset. The last M is the most important: mindset, your mindset. There is no lack of opportunity for you to chase. But you need courage to chase your dreams. Fear of failure is real. The best way to deal with fear is to stare it in the face. If your idea crashes, what happens? In practice, what happens is that the best entrepreneurs just move onto the next idea, and keep on trying until they succeed. The difference between success and failure is as simple as giving up. Never give up.
The most important barrier to your success is not in the market place; it is in your head. What is your dream? What is stopping you?
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