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Recently I watched a TED Talk with Simon Sinek about how great leaders think. There he presents a framework or a way of thinking that these leaders have. He coined that framework the ‘Golden Circle’ and argues that all great leaders communicate opposite to the way most of us communicate. Where most people go from talking about ‘what’ they do, through to (sometimes) elaborating about ‘how’ they do it to finally (almost never) about ‘why’ the do what they do, inspiring leaders start with the ‘why’ (Simon is doing a better job at explaining this). And that is ultimately what makes them the leaders they are.

I generally find a lot of sense and truths in what Simon is talking about, but there is another application to that golden circle that I think deserves some attention. That is the art of asking questions. There are 2 basic ways in which we learn: 1. by interaction and experience, and 2. by seeking knowledge from others. The former is a kind of reactive learning where we don’t have a choice about it and learn lessons from life (often painful lessons), where the latter is more proactive acquisition of knowledge, which is normally triggered by curiosity (or desire). But having curiosity is not enough to gain access to good information especially because today there are countless of questionable sources that supply bad information to the curious mind. However, knowing how to ask the right question will put the questioner at a certain advantage against these ‘junk sources’. 

Everything anyone will ever need to know is in one of these three questions: What, How and Why (WHW framework). And, as Simon points out, each question goes dipper than the former. So ‘What?’ is a question that scratches the surface (what do you do?) and helps you get to the next layer by raising those kinds of questions – the ‘How?’ questions (How do you do it?). Finally, after we understand what something is and how it operates (or came to be) we ask ‘Why?’ (why do you do it / why is it important / what is the purpose of it?). ‘Why?’ is the deepest question of all and it goes to the core of the subject matter – its purpose. In interpersonal interactions, getting to the ‘Why?’ may be a very personal and intimate experience so you should proceed with care and dig in carefully with ‘What?’ and ‘How?’ before getting to the why. But for yourself, it is important to ask ‘Why?’ often.

So, much of our learning is done by asking the right questions (and I will go farther by saying that inspiration stems from these questions) and because I believe that it is a crucial skill for entrepreneurs I will post different questions that I have struggled with in the past in the ‘Question bites’ page. Feel free to comment and add interesting questions of your own. Hope it helps.

This is an issue faced by many first time entrepreneurs. Namely, the challenge of brining your idea to fruition, while avoiding it being stollen by someone else. Indeed, starting up a business even without this challenge is almost impossible and so by definition, adding ‘keeping your idea secret’ to this challenge, makes it absolutely impossible.

Why are entrepreneurs afraid that someone will steal their ingenious idea? Well, this is because in their mind they are sure that their idea is worth at least $100 billion. Therefore, they conclude that anyone hearing about their idea will immediately steal it and go off to start their own business with the entrepreneur’s ingenious idea.

To solve this problem I challenge anyone who thinks their idea is worth $1 billion (or whatever they think) to try and sell it for $1000, or even $100. I will guarantee that no one in their right mind will pay anything for an idea. Why?

The reason is really that ideas are “dime a dozen”. While you may think that your idea is the best thing that a human being had ever been able to conceive, this is probably not true. Moreover, even if it was true, it is far from being enough to create any value for anyone. Value comes from talented people taking that idea and working very hard day and night to make it work. Chances are that, if they succeed, by the time they make it happen, the idea is completely different than what it was when it was just conceived.

A good example is the light bulb. Thomas Edison conceived of the idea for a lightbulb and he also knew (more or less) how to do it. Still it took him over 10,000 tries (legend has it), before he had a lightbulb that worked. At that point he still did not have something truly valuable because to make it work he had to build a grid and serious infrastructure. Edison’s brilliance was not only with the invention, but also in his vision and ability to portray that vision to the people who eventually went ahead and built that infrastructure (including factories to produce light bulbs, electricity grids, etc’). It took super-human determination, perseverance and linchpin (someone who makes things happen) qualities. Same goes for visionaries like Alexander Graham Bell, Henry Ford and more recently Steve Jobs among many other great entrepreneurs. So good ideas are good but they are far from enough to be worth anything. Edison captured this best when he said “genius is 1% inspiration and 99% perspiration.”

On the other side, some really bad ideas turned out to be great businesses. One of the most famous examples is Twitter. Many brilliant business people thought it was “the worst idea they ever heard”. Essentially, the idea was to take the status updates application from Facebook and make that a separate social network (most people responded as follows: “what? so all you could do is post a status update? and you want to limit it to 140 characters? but it already exists in Facebook? and why would people even want to do that, what would they post? and even if they do, why would other people care? this will never work!” Arguably, these people had a good point. In hindsight we know that it turned out to be a great business.

To sum it up real simple: A real entrepreneur has ideas dripping down of him constantly. Most of them are bad, some of them are good, and very few might even be brilliant. What makes an idea into business is not how good the idea is, rather it is how good the team is in coming up with a plan and executing that plan. Finally, I believe that you shouldn’t be afraid to share your idea with others. If you don’t, they can’t help you.

So go out and share your ideas. You might find other people with similar ideas, or with insights to make your ideas even better. And you might just find the kind of people who would help you fulfill your dream (not necessarily the way you thought about it).

Let me know what you think.

Recently I had several conversations with different people about the concept of a business model and several common questions were raised: what is a business model? why do I need a business model? and how can I demonstrate it or prove it?

These are all good questions and I have noticed that there is a lot of confusion surrounding this topic. So here is my take on this simple but very crucial part of any business.

Essentially, a business model is the way you intend to turn your proposed solution into a cash machine. Specifically, when you have a business idea, usually you come up with a solution to a market pain or a common problem. After you figured out your brilliant solution, your next challenge is to figure out how to ask people to pay for your solution. And even more specifically, you need to find a way to make people pay more than it costs you to supply or provide them with your solution. Once you figured that out, you have a business!

Next, obviously you need a business model because without it you don’t stand a chance of surviving. In the business world it goes no cash = no life.

Finally, the simplest (and probably best) way to demonstrate your business model to potential investors (but also to yourself) is to show very simply that there is a significant difference between whatever it costs you to acquire a customer (or CAC) and what an average customer is willing to pay you (or LTV for Lifetime Value of your customer). In a simple formula it would look like something like that: IF Customer Acquisition Costs are LESS THAN Revenues Per Customer, THEN you have a business. The greater that difference is, the better. Note that often you will have to factor overhead costs to that formula. Click on the image below for a great blog post on this issue.

make sure that your business doesn't look like that

Click on image for a great post with more detail about this issue