5 Painful Lessons from Value Driven Leadership

What is value-driven leadership? Simply put, it’s leading by creating a common set of values and goals that everyone agrees to and aspires to uphold, then doing your best to get out of the way! It can be very painful, however, because having a strong culture with clear values, means living up to them. Here are 5 Painful lessons I have learned while trying my very best to do value driven leadership as CEO…. In reverse order to the #1 most painful lesson.

 5. The values you create can make you feel trapped because you yourself have to live up to them. The lesson is don’t create values of your company that you can’t live up to!

 4. Getting out of the way is hard to do. It’s especially hard when you know how to do the job better and faster than the person who’s job it is to do it. That’s really hard… The lesson is, you have to be able to let someone fail, and let them come to you for help. As soon as you break the rule and do the job for them, without them asking for help, you’ve broken the value-driven leadership.

 3. Recruiting is harder. Finding people is just plain hard because you know they have to both match the values of the company AND be able to do the job. Creating a good set of screening questions is key.

 2. It hurts when you have to let someone go. They probably do live up to many aspects of your culture and you’ve grown to like them… but either they can’t do the job, or more likely, there has been some value mismatch you didn’t catch on #3 above. The lesson is, do it quickly, before you become too attached (if you can)… and if not, do it as soon as you are sure there is a core value mismatch.



1. It hurts really bad when people decide to quit. Especially when they were a perfect match for value and role… or then again, maybe they weren’t a perfect match after all. Either way, the trick here is to move on quickly, but stay in touch… you never know, Austin is a small town!

Selling Sucks. Do someone a Favor instead!

In the past, I’ve blogged about the SPIN Selling Technique.  I think this is definitely a great technique for selling, but there is one very important thing to remember.  Selling sucks.  Nobody likes to be sold to.  Instead, the whole point of SPIN Selling, the whole point of “transacting value between two peoples” is a POSITIVE exchange of value.  E.g. the result of the sale should be of MUTUAL value.  So, when you find yourself in need of selling something… DO not sell it… simply see if “the exchange” would be mutually beneficial or not.  The whole point of SPIN Selling, or selling of any kind, is simply to determine if you or your company would be benefited by buying this.  When I SPIN Sell, I try to discover, truly with an open heart and mind, would you or your company benefit from buying this (product or service).  I like to think of it like this: Would you consider my selling you this thing or service like “a favor”?  If not, maybe there isn’t a match.

By the way, if you don’t believe in your product or service enough to think of it as “a favor”, you should take the time to learn more about your product and who it was built for, or else get a new job ASAP.

Business Use of Patents and Provisional Patents

The raging debate about Patent Trolls and what can and should be patented might lead one to consider, what is the business purpose of a patent?  Particularly if you are a startup (very early stage, perhaps pre-funded) with little cash, little time, and a need for focus, the question of patents, to patent or not, seems to be somewhat common.  This post is a summary of my advice and knowledge on the topic, as I recently provided to a new company called Basedrive who are working on their business plan as part of The University of Texas Longhorn Startup class and program.

Here is my advice…

1. First, don’t be a Patent Troll:

A Patent Troll is someone who patents something with no real intention of building it, so that later they can ‘claim royalties’ or sue big companies for ‘stealing their idea’.  This approach is not something upon which to build a true entrepreneurial business; and such loopholes should be looked on with great skepticism.

2. Don’t do patent searches…

If you are thinking of writing a patent, and are worried if your patent is truly novel or not, you may be tempted to ‘search prior patents’.  DO NOT DO THIS!   You will be required to list all the patents you looked at, and this could taint you or your ideas… further, you WILL likely find something similar.. but it’s not your job to know this, or if yours is “different enough”.

IF YOU THINK IT MIGHT BE UNIQUE, do not search… just move to step 3, below.

3. Decide if $130 (or so) is worth spending or not…
For $130, all in total amount, you can file a provisional patent.  (See Patent Fee Schedule)

So, what would a $130 Provisional Patent buy you for your business?
a.) You can put the words “Patent Pending” on your product.
b.) Investors will see you as ‘better’ than companies without a patent pending.
c.) It can lead to a real patent in the future, with a priority date equal to the date you submitted the patent (or earlier).

The downside?  None.  In order to claim the priority date by means of your provisional patent, you need to file the final patent within 12-months of submitting the provisional; but this is not a bad thing… even if you don’t write the final patent in the 12-months, you can still write the final patent later with no penalty. (just no claim on the provisional).

If you need to buy food, don’t spend the $130… but otherwise, I say do it.. at least for 1 thing!

4. What is Patent-able/What to write?
So, what do you patent?  My best advice is to focus on some implementation detail that you do that helps your product/service be unique.  Got no technology?  Don’t bother writing a Patent (IMHO).

What kind of technology?  Hardware?  Yes.   Software?  Yes.  Both?  Ideal!

Even if your use of the technology is in software, I suggest writing the patent as though the software could be implemented “into a device”… (thus covering both hardware and software).  This might require creative thinking, but it might also get you the patent later!

What do you write for a provisional?  SIMPLE:  Just write in plain English how your technology works, and how it might work in software or hardware.  Simple, plain, English.

You will also need 1 drawing.  1.  not 2.  1.  Simple block diagram is ideal, showing the system.

Now, go to uspto.gov and SUBMIT IT YOURSELF!   No need to pay a lawyer to submit or review a provisional patent.  JUST DO IT!

5. Should you file a final, full patent?

Maybe.  But not yet.  Not until either: a.) you can easily afford the $8,000-10,000 for a lawyer to do it right… or  b.) your business really needs it for some reason [e.g. to increase your stock’s value even more by having full issued patents ].

When you do a final patent… simply get a lawyer to do it.  Simple.   A real patent lawyer.  You don’t want to do a final by yourself.  Just give the lawyer your provisional as a starting place, and off you go!

6. So business value?
Yep.  Provisional = Obvious.  It’ll help you stand out and raise money and look good. (that’s it really).
Final full patents… = Less Obvious.  It MIGHT help you raise more money at a better price, it MIGHT protect you from getting sued [because you could counter-sue], it MIGHT help you go after someone who is infringing on your patent (doubtful)…

So, Provisional = Yes.  Final = Doubtful (IMHO).

So, get to it!

SPIN Selling for Engineers: How to teach Engineers to Sell!

“Wow, that was so cool, it really works!” – University of Texas Engineering Undergraduate

This was the general sentiment this week when I demonstrated the SPIN Selling technique to a group of undergraduates (mostly engineering-types) who are studying entrepreneurship at The University of Texas in the 1 Semester Startup Class (now called Longhorn Startup).  I volunteered to demonstrate the approach on their very first sales call (yes they are really that far along, and I’m so proud of them!  They have overcome the first and second hurdle of entrepreneurship: 1. Selecting a Target Market.  2. Getting over their Fear.).

So what is SPIN Selling?  And why is it a great technique for Engineers?  Read on My Friends!

First, SPIN Selling is a technique originally developed by Neil Rackham.. in his book SPIN Selling.

If you don’t like reading, this site has a nice summary of the book on 1 page: http://wolfram.org/writing/howto/sell/spin_selling.html
However, I’ll also summarize SPIN Selling in my own words below with one major tweak: from the perspective of an Engineer trying to make his/her first sale…
  1. SPIN Selling is great for engineers because it is an easy to understand acronym: S=Situation Questions, P=Problem Questions, I=Implication Questions, N=Need-Payoff Questions
  2. One of the best approaches to sales naturally emerges by “following the process” which, following processes is easy for engineers to do.
    1. This process is one of ‘connecting to the client’, ‘understanding their needs’, and ‘fitting or not fitting your product to satisfy their true needs’….   if you can connect the dots for the prospect: the sale is just a natural thing!
      1. And they’ll want to buy from YOU specifically, not necessarily because your product is superior (a concept Engineers need to not focus on), but because you understand them best, and have built a rapport with them through “the process”.
  3. The Process:
    1. Ask a few “Situation Questions” to get them thinking about their business, not yours: Initially on the call or in the meeting, simply ask how his/her business or life is going and uncover the specifics of their business as it might relate to your product. 
      1. Examples:  How is your business going?  How do you measure success?  What kinds of files do you use?  Who are your clients?  etc.
    2. Ask a few “Problem Questions” until you uncover a problem you might be able to solve: Basically try to uncover what problems they have (not if, we all have problems)..  Focusing on Throughput or Cost (throughput questions are ones of ability to deliver product/service, or inability to get new clients/customers)… cost is cost and headache (mental cost).  Obviously, focus on those areas which your product/service might solve…
      1. Examples: Do you feel you have plenty of clients?  Do you have any major cost problems?  Are you able to fulfill all your orders on time?  What is preventing you from being more successful today?  What gives you the biggest headaches today?
    3. Ask enough “Implication Questions” such that they agree that the problem is serious: Try to get them to see the light that the problem has real consequences.  To understand, for example, that those extra costs are cutting in to margins, which slows growth.  Or that the lack of enough customers means you are wasting resources from under-utilization.
      1. Examples: Do you agree that the lack of customers means you are under-utilizing your fixed resources?  Do you agree that the extra costs you are incurring is hitting your bottom line, and that extra cash you could have had would be useful to help you grow?  Do you agree that your headaches might be making you distracted on other issues?
    4. Ask enough “Need-Payoff Questions” such that they agree a solution has real value.  Need-Payoff sort-of restates the Implication question in such a way that a solution has real value.  Once they agree to real value… then, and ONLY THEN, can you pitch your product/service…. and it will be in their terms…  
      1. Examples: Do you agree that getting rid of that headache would let you be more productive at other more important things?   Do you agree that your increased productivity is worth real value?  In hours per day?  In Dollars per day?  Do you agree that being able to get more customers has real value?  In Dollars per Customer?  Do you agree that reducing costs impacts the bottom line directly?  In real profit dollars?
    5. Now, and only now that they agree there is real value in a potenial solution, are you permitted to pitch your idea… AND ONLY PITCH IT IF YOU CAN GIVE THE PAYOFF (or a part of it) THEY AGREED TO IN STEP 4.  If not, continue with Steps 2-4, until you can or until they hang up!
      1. The pitch should be short, just 3 slides (more on this next time): Benefits, Tech, Price.
      2. Don’t talk to the slides, talk to how YOUR PRODUCT might help solve THEIR PROBLEM… And point back to those NEED-PAYOFF questions you asked.
    6. Finally, Ask a few “Qualifying Questions”, and then “ASK FOR THE SALE”: You need to “flip the conversation” to be more about potentially fitting them to your business….   Now, they need to SELL YOU!
      1. You truly want it to seem like buying your product/service means belonging to an exclusive club.. and only some people are PERMITTED TO BUY!
      2. You questions now are “Qualifying Questions”… here is some good ones:
        1. We want to work with ‘thought leaders’ and ‘early adopters’, how forward-thinking about new stuff is your company?
        2. It is important that we work with companies of just the right size, how big is your business?
        3. We want partners who will become our reference customers, if things we work together to solve your problems, would you be willing to be a reference customer?
        4. Alright… it seems like we might be a good fit… it also seems that OUR PRODUCT/SERVICE will really help SOLVE YOUR PROBLEM and has a REAL DOLLAR IMPACT TO YOUR BUSINESS… 
          1. ASK FOR THE ORDER!!!!
            1. How many units can we sell you today to see how well this works?  or  
            2. What size initial order can you place today to test our ability to deliver?  or
            3. Who in your organization needs to sign off on this deal?
    7. Level Up!
      1. Regardless of the answers to step 6… be sure you try to “level up”.
      2. Often-times in a big sale, it takes many approvals and other folks to help decide.
      3. Leave EACH MEETING with a date/time for the next meeting and try to “level-up” the meeting….  TRY TO ATTEND ANY APPROVAL MEETINGS IN PERSON.
      4. Bring up all you have learned about their problem and the NEED-PAYOFF in REAL DOLLARS! (I hope you took notes).
And that’s it my friends!
Go out and sell!  But remember, only sell IF you can make a real dollar impact… if not, trust me, you don’t want them as a customer…. they won’t be happy, and neither will you.

How to Avoid Fistfights with Co-Founders: Founder Equity Split Suggestions

Fistfights with Co-Founders can be avoided!  Here are some tips for founding your company with partners, such that later on, when things get complicated (like founders quitting, etc.), ya’ll don’t kill each other.   Nothing feels more frustrating than a founder that quits, and takes a bunch of stock with him….  A big benefit of this method is also: many VCs will prefer this type of structure (vesting)!  And.. the IRS might prefer it too… so, here goes!

  1. First, decide who is bringing “value” to the company at this point… (like who is bringing ‘the idea’, or ‘some tech’, or contributing ‘some gear’, or contributing ‘some money’).  If nobody is bringing anything, skip to step 3.
  2. Set aside 10-30% of stock to give to people who ‘brought something’ to the team…   Rule of thumb: 5% for money or stuff, 10% for tech, 20% for idea.
  3. Now take the remainder (90-70%) and set that aside to distribute evenly to the whole team for “work on the business plan prior to formation”.
  4. Okay, now assign the remainder amount evenly with all founders (example 7 founders, 70% means 10% per founder).
  5. Next assign the ‘brought something’ extra stock to the given founders (example idea will have 30%, tech guy has 20%, and the rest have 10%).
  6. Agree on a vesting term (3 year, monthly vesting is common).
  7. Now, write a VERY short Memorandum of understanding with everyone’s name, the date, signature places, and most importantly the vesting terms.
  8. Pick a CEO!  (the 1 person who shall be the CEO and in the drivers seat!  All other roles could be identified too, but the CEO role is a must.).  It does not have to be the idea guys, but it’s nice if it is.

Here’s an example Memorandum (note: I’m not a lawyer, and this wasn’t written by one: use at your own discretion).  (names are made up, except mine)

Memorandum of Understanding

We, who plan to found company ______ each agree that when this founding occurs we will split the shares of the company as follows:
   Joe Smith:  30%, Whom we agree shall be the CEO of the company.
   Frank Toe:  20%
   Alan Man:   10%
   Harlan Beverly: 10%
   Sally Jenson: 10%
   Erin Klause: 10%
   Jessica Stower: 10%

We agree that these shares should have a vesting period of 3 years, whereby vesting happens evenly, monthly, over a period of 3 years.  the company shall have the right to any stock not vested in the event that any founder leaves the company (voluntarily or involuntarily).  We, agree that this vesting shall begin on this day ________.

______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________
______________________________, Date ______________

That’s about it!

Now, get it done right, so that you don’t have to fight!

Later on, when you actually found the company (as in incorporate), this document will go away… and be replaced with real shareholders agreements and so forth.

Branding 101: What sets your Brand Apart?

Brand is one of those things many people (including engineers AND marketers) misunderstand.  Some think it is a color, a logo, a label, a trademark, a phrase or some combination.  It is not.  Brand is exactly this: what those who have heard of your product/company ‘think’ your product/company is about.  That’s it.

Where in the mind of your target audience does your company/product sit?
Which ‘mental filing cabinet’ do they put you in?
Can you influence it?

These questions have led to the development of most modern branding theory.  The answers may surprise you.

Learning where in the mind of your target audience your product lives is easy: just ask.  Ask your customers.  Ask them how you compare to competitors.  Ask them what they think.  http://surveymonkey.com can help.

The answers should let you see what kinds of filing cabinets exist (usually arranged in the minds of users by “Price”, “Value”, and “Quality”).  But can you get into a “New/Empty” filing cabinet?  Can you be the “most/best” of something, so your file comes up first in the mind?


You can influence where in the mind your product lives.  To do this you must first really understand your product & your competitors products.  WHAT SETS YOUR BRAND APART?  What are you really special at?  Nothing?  Going to be hard to file you in a cabinet.  (no room for ‘not best at much’ category).

Figure it out or make it so.  Be the “most or best” at something.  Unequivocally.

Now how to brand it that way?   Exude your most-ness.  Your messaging should refer it.  Your graphics should bleed it.  You should get your customers give testimonials claiming it.  You should get reviews saying it.  You must emphasize at all times, you are the ‘most/best/only’ X.

Build that brand on top of your key distinguishing attribute.  Then stick to it.

Got a new version of the same product that is even more “mostness” of the same key benefit?  Fine.  Keep the same brand name.

Got a new product with different feature mix?  Fine.  Build a new brand! DO NOT extend your old brand.  Don’t even keep the company name unless you have to (see P&G, Kraft, etc.).  The new brand should exude it’s new uniqeness and key attribute.  (not attributes mind you).

Debate welcome below in comments.

Choosing to make a difference with charity over profit.

If you know you could make a difference, would you?  I mean really?  My company, Karmaback, has a chance to leverage some of our profits to help a ton of very worthy charities… all we have to do is… well, do it.  Yes, it will cost us some profits.  The profits we lose are probably 10x in value because of leveraging effects.  So, I ask, if you could make a difference, one where it has a “multiply” effect, would you take it at the expense of some profits?  I would.  Here’s why you should, and how you can!

You should take it, because you are doing MORE than just “linear” help.  You are doing non-linear, multiplicative help when a business gets involved supporting a charity.  Your employees participate, your partners participate, and your customers participate too.  For Karmaback, all 3 will be true when we launch our upcoming new program! (more details to come in the future).  So, just find a charity or 2 that you believe in, and do it.  The KARMA you get back will nonlinear as well.

And how can you do this?  How can you participate in charity in a “non-linear” fashion?  Simple, get your business involved.  Don’t have a business, easy, get your community involved.  Don’t have a community?  No problem, get your family involved.  Don’t have a family, for goodness sakes, join a community!  After all, we humans need each other!