Burn the Business Plan

by Carl J Schramm

  12. If Opportunity Doesn’t Knock, Build Your Own Door

  Every successful entrepreneur can point to one or two lucky incidents that shaped his success. Formal business plans never mention luck, for good reason. No one can teach you how to maximize good luck or avoid a bad turn of events.

  How do entrepreneurs get to be in the right place at the right time? Thomas Jefferson is alleged to have suggested an answer. “I am a great believer in luck and I find the harder I work the more I have of it.” For entrepreneurs, good luck is a return on three kinds of hard work. First, the ability to create an innovation relates to the breadth of facts at your command. The more you know, the more creatively you can think. Louis Pasteur’s observation about scientific discovery applies equally to entrepreneurs: “Fortune favors the prepared mind.”

  Second, entrepreneurs, must be effective at building valuable social networks. The more encompassing their web of relationships, the more likely it will produce new opportunities and lead to new ideas, better employees, and more sales. An analog of this rule explains one feature of labor markets. Most people who get a job on the basis of word of mouth, not being recruited or applying for work, benefit from the referral not of a close friend but someone in a more remote second or third circle of acquaintances.

  Third, good luck involves making opportunity from accidents. Everyday occurrences, a new twist on a product design, or a comment made by a customer on a sales call, may open an unexpected door. Entrepreneurs must make their own luck or, as the comedian Milton Berle once advised, “If opportunity doesn’t knock, build a door.”

  Being familiar with these twelve perspectives on what every entrepreneur should know will help you find more value in what follows. These lessons do not serve as a formula for success in which each operates as a critical ingredient. In all likelihood it will be only after the fact that you will recognize which were most important to your experience. Without such experience, however, these elements, considered together, may help you understand the task of becoming a successful entrepreneur—and whether what’s required of you seems authentic to your aspirations.

  CHAPTER 3

  Why Start a Company?

  Every morning, the trellised parking lot at the Kauffman Foundation shook with the roar of an incoming Harley-Davidson Road King, a real hog. The manager of our mailroom had arrived for work. Dan defied the stereotype of a biker: no leather jacket, no tattoos, and no scraggly beard. He was a quiet professional, a model employee who had worked at the Foundation almost from its inception ten years earlier.

  Dan’s passion was working on motorcycle engines. He enjoyed a reputation for being able to fix the tough problems that most professional mechanics couldn’t solve. One day, after we had worked together for three years, Dan came to talk with me about something exciting. After years of working on bikes, he had become exasperated with the way that many engines were designed. His chief irritation was that it was almost impossible to access some critical engine parts for routine cleaning without taking apart much of the motor. To solve this problem, he had invented an articulated wrench that allowed a mechanic to access inner areas of the motorcycle motor, unbolt hard-to-reach parts, and extract them for servicing. Dan had filed a patent application for his wrench, and two other tools as well. He had a local foundry produce the parts and then assembled them in his garage. Word of mouth had spread the news of his innovation, and he now was shipping wrenches to bikers all over the world.

  When Dan told me that he was leaving his Foundation job to start a company, I asked if he was sure that he wanted to give up the security of his steady employment. He was in his forties and had a family. Smiling broadly, he told me that his wrench sales already almost matched his Kauffman salary, and that his wife, who also had a good job, was encouraging him to devote full time to his hobby-business. Like many entrepreneurs, Dan saw nothing but blue skies ahead. In his case, it seemed justified; he had a growing business and customers who were showing enthusiastic demand for his unique products.

  Dan’s news came as a surprise to everyone. No one had suspected his secret life as an innovating toolmaker who would morph into an entrepreneur. He worked in the belly of the beast of entrepreneurship, but had never revealed any particular interest in our mission nor had he used our library, which included the biographies of hundreds of entrepreneurs and reams of material on startups. Over his years at the Foundation, Dan had shipped out thousands of books on the process of business formation, but never thought that he might need to read one. He said he was surprised to discover that he was an entrepreneur; as he saw it, all he had done was to apply his common sense to a problem that cost him, and other mechanics, a lot of time and aggravation.

  How did Dan’s idea turn him into an entrepreneur, one secure enough to leave a steady job to set sail for motorcycle-tool success? What motivates anyone to take the risks and persevere to build a successful company? My years of interactions with entrepreneurs showed me the fascinating array of reasons and circumstances that have catalyzed various individuals into action. These individuals, and their motivations, seem as different one from the other as are the enterprises that resulted.

  This Idea Will Make the World Better, and It’s Mine

  Dan discovered that his identity was more rooted in his passion for motorcycle mechanics than his capable management of our mailroom. By tinkering to resolve his own bike’s problems, he realized that he had solved the same problem for thousands of others. If his idea was to be of any benefit to his fellow bike enthusiasts, though, he had to figure out how to tell them about it. This is a great example of how many entrepreneurs come to deeply love their ideas, much as they would a child who requires their stewardship. They develop a sense of responsibility for the idea, and a sense of obligation to those who could benefit from it, to nurture, develop, and share. In short, they know that if they don’t put this out where others can benefit from it, they will be wasting an opportunity to help.

  A wry corollary to this sense of responsibility and obligation, which I’ve heard time and again, is a fairly common spectral nightmare. This dream has many variations, but the gist of it is that someone comes along, just a few months or years later, and has built a product that is similar but inferior to what the aspiring innovator had laid to the side in favor of safety and security. This surreal nightmare plays out in imagined media stories, YouTube product demonstrations, and fantastic sales reports that go viral on the Internet, while the “But That Was My Idea!” salary man shouts at the computer screen. The moral of the story is that many entrepreneurs are motivated to succeed by the fear of being inconsequential when they had dreamed of better.

  Business Is My Creative Outlet

  College students, including those studying entrepreneurship, live in an environment that celebrates creative people—thought of as those who make movies, paint, compose music, design buildings, or write novels and poetry. The most intriguing are those who make lots of money and become famous in the process, which may explain the astonishing number of film majors in universities across America.

  Yet, data clearly shows that most college graduates spend their lives in the business side of the world, even when the underlying nature of the business, whether in a small landscaping company or a large fabric manufacturer, is a creative enterprise. Why does our culture limit the application of the creative label to the arts, but doesn’t apply it to innovators who develop ground-breaking ideas—for Invisalign braces, cordless screwdrivers, vacuum food packaging, and electronic textbook rental—and who then figure out a way to bring those innovations to the market? The development of thousands of new products and services that make our lives and work more efficient, convenient, safe, and pleasurable, and the business systems that get those products and services to us, is a creative art form.

  One very successful entrepreneur’s story is a perfect example of the intersection and synthesis of artistic and business acumen. Billy Mann grew up in a poor Philadelphia neighborhood. To pay for co
llege, he worked in the cafeteria by day and operated the school’s old-fashioned manual switchboard at night. Hoping to become a songwriter, Mann majored in music, although he realized that his chances of becoming an income-generating composer were infinitesimal. His mother thought so, too, and pushed him to go to law school. But Mann couldn’t let go of his dream of writing songs. To mollify his mother and settle his dilemma, he gave himself a year to make it in the entertainment world. If he flopped, he promised his mother that he’d take the LSAT and move on.

  After graduation, Mann set out for California. He drove his old Nissan Sentra, taking two months to make it across the country. He worked odd jobs along the way to pay for gas and food. Once he’d made it to San Francisco, Mann got a job at a futon store. A few weeks later, he fell asleep at work while “testing” the product and was fired.

  Flat broke, Mann took his guitar to Fisherman’s Wharf to busk for money. He made less than eight dollars on his first day, not nearly enough to eat or pay the rent that was due in two weeks. Early the next morning, he was riffing on his guitar when a newlywed couple strolled by. He was talking them up when he had an inspiration. “If I compose a song about you in the next five minutes, will you give me five dollars?” On the spot, he invented a sweet song about where the couple had grown up, how they had met and fallen in love, and how happy their future would be. Delighted, the couple gave him ten dollars.

  Mann realized that Fisherman’s Wharf was a favorite spot for honeymooning couples, so he spent the next day plucking at their heartstrings, improvising custom songs. By evening, he had made $318. Mann told me, “That was the moment that I became an entrepreneur. I saw the entrepreneurial matrix in 3D and knew I could integrate my passion for music into my working life.”

  Making a living on the street was tough and unpredictable work. Mann gradually moved on to make a subsistence income playing in bars and clubs, where he sang hit songs on request. “I knew I could write better songs than what people were listening to,” he says. He began using his club gigs to try out his own compositions. Once in a while he sold a song to a record company. The contracts provided a bit of money up front and promised royalties that never seemed to materialize. Mann was slowly sinking. Just as he was about to give up and head back east to law school, a royalty check for $136,000 arrived in the mail.

  That windfall settled the matter: Mann would stick with songwriting. He started composing more and better songs, but quickly realized that he also needed to understand the complex ins and outs of the music publishing and marketing world. Within five years of his first ten-dollar gig at Fisherman’s Wharf, Céline Dion sang two of Mann’s songs, including the title song of her platinum-selling album, Let’s Talk About Love.

  But Mann still couldn’t interest a major record label in his songs. He decided that the only way to break through was to make his own albums. Then, as his reputation grew in the music industry, he found himself arranging extra gigs for vocalists and band members, all good friends, who he had employed at his recording studio. At one point, his lawyer pointed out that every time Mann sent one of his pals out to a gig, it was their agents, not Mann, getting paid. Mann took on the job of representing talent, eventually building Stealth, a New York talent agency, and garnering P!nk, Art Garfunkel, Jessica Simpson, Sheryl Crow, Justin Timberlake, and the Backstreet Boys as clients.

  In 2007, Mann sold his company to EMI, one of the world’s biggest entertainment companies, which had recorded the Beatles in its famous Abbey Road studios. He moved to London and eventually became president of EMI’s record division. When EMI was sold in 2012, Mann returned to the United States and started another talent agency. He hadn’t lost his touch: Among the winners on Grammy night 2015 were Sam Smith, Meghan Trainor, and Maroon 5, all part of Mann’s network.

  When I asked Mann what he had learned about being an entrepreneur, he boiled it down to a five-word formula: “First, create; second, be judged.” He explained, “There is no way you know anything new is good until you test it in the market.”

  As an entrepreneur, Mann is pushing the frontier of the entertainment business. His own experiences led him to wonder how many talented artists remain undiscovered because of the difficulty of breaking into big complex media companies. Mann believes that there are lots of star performers out there, but that many go unrecognized because gaining the attention of record companies involves convoluted steps such as making expensive demo tapes and desperately scrambling for auditions.

  In 2014, Mann met Jacob Whitesides, a talented young songwriter and singer. No matter how hard Jacob had tried, he couldn’t get an audition with a major label. Mann was inspired by Whitesides’ frustrating experience and urged him to try a new approach, which Mann called “busking on the Internet.” He developed a strategy that enabled Whitesides to bypass corporate gatekeepers and go directly to the market to leverage social media. In February 2015, following Mann’s roadmap, Whitesides released a new song, “A Piece of Me,” which he promoted with an Internet-only campaign. It shot into the iTunes Top 10 and rose to number five on the Billboard charts. Mann proudly told me that Whitesides, “along with his fan base, had given himself a record deal.”

  One evening, while I talked with Mann over dinner in Mexico, he quietly observed that he couldn’t determine which of the two parts of his life, music or business, required more creativity. What Mann did was to bring the full force of his creative talent, including some talents that he didn’t know he had, to his work of writing music, managing a recording studio, and bringing other artists to the attention of the world through innovative vectors. For Mann, forging new paths in the entertainment business has provided its own creative rewards.

  * * *

  Solomon Snyder, who is widely recognized as the most productive brain biologist in the world, illustrates the confluence of creativity and business. Snyder, for whom Johns Hopkins named its department of neuroscience, is famous for many discoveries including how proteins on the surface of specific brain cells act as neuroreceptors for specific drugs. The technology he subsequently devised to do high-speed testing of the reaction between an infinite number of chemical agents and millions of types of brain cells, led to the creation of two drug-discovery companies, and many new drugs.

  Snyder once told me that business provided him with an environment in which he could accelerate the invention of new drugs, moving faster and with more freedom than university research culture allows and leveraging his talent in ways that would be of most value to many more patients. Once he had ingeniously routinized the drug-discovery process, he was able to focus his research on exploring whole new frontiers of brain science. Subsequently, Snyder discovered the presence of gases in the brain, something scientific consensus previously had believed was impossible. In time, the discovery of the chemistry for Viagra confirmed Snyder’s discovery that nitrous oxide in the brain could signal the body to increase blood flow to specific organs.

  I Want to Be the Boss of Me

  Research tells us that, at some point in their lives and for however short-lived a time, most people aspire to launching their own companies and working for themselves. As we have seen, more than 90 percent of entrepreneurs spend their early working years in the employ of someone else. When an idea begins to form, however, some employees decide to start their own companies as the means to take control over their lives, to do things differently and better as a boss, and to work with an inspired purpose.

  When he was growing up, it would have been impossible to guess that Ewing Kauffman would start a major pharmaceutical company. He was born on a Kansas farm in 1916. His father was missing most of the time and his mother, to make ends meet, moved to Kansas City to run a boarding house. Kauffman was ill and bedridden for part of his childhood, a period during which he became a voracious reader and taught himself to do complex math problems in his head.

  Before Kauffman could realize his dream of going to college, he was drafted into the Navy during World War II. When the Navy asses
sed him to have quantitative skills, he was trained to be a ship’s navigator. In his off-duty hours, Kauffman’s math acumen came in handy in other ways: He played poker so well that he earned the nickname “Lucky.”

  One night, while serving on the flagship of a large convoy carrying much-needed oil from South America to U.S. refineries, Seaman Kauffman came to doubt the calculations set by the chief navigator, an officer. He was convinced that all twenty ships were heading out of a deep-ocean shipping lane and would soon be dangerously close to shoals, which would surely lead to disaster.

  Kauffman knew that he could verify his fix on their true position by using maps of ocean depths, but to do so he would have to use the ship’s sonar. This was forbidden; German submarines were thought to be in the area and, if they heard the distinctive bounce-back ping of the sonar, the next sound that anyone in the convoy would hear would be the whine of German torpedoes. But when Kauffman’s superiors dismissed his pleas to reconsider their calculations, Kauffman knew that he had to do something.

  In desperation, he activated the sonar and sent one ping to the bottom, which confirmed his theory about the convoy’s true position. Then, breaking the chain of command, he awakened the captain by pounding on his cabin door. The irate commanding officer greeted this insubordination by loudly announcing that, if Kauffman was wrong, he would be court-martialed. Lucky for “Lucky,” his calculations were spot-on and a catastrophic accident was averted. Later that night, the captain promoted Kauffman.