I learned much from Rupert – also how to build syllogisms and vexilla (I took the picture before 2010).

My first introduction to building vexilla was through my teacher and friend Rupert Lay. He closely accompanied my learning and my development for far more than ten years.

Through him, I made the acquaintance of quite a number of the important managers and entrepreneurs who were active in the German economy in the 1970s and 1980s. I also learned to appreciate them and they taught me a lot.

It was also where I learned how many fundamentally important things were achieved in his seminars. In these seminars, you practice the ancient Greek dialectics based on the construction and analysis of syllogisms (Syllogismen) and on the dialectic technology of building vexilla (Fahnenbildung).

In the Projektmagazin – which, incidentally, I find quite a stroke of genius – there is also an article (one of them by Elisabeth Wagner) that is very much worth reading. It describes how, through building vexilla, you can develop ideas and solve problems in a very baffling way and very efficiently.

Basically, building vexilla is just a dialectic philosophical method and has been used in this discipline for thousands of years. As we know, philosophy tries to analyse, understand and give meaning to the world  and the human existence . In a nutshell, I would say it tries to answer the questions: why, for what reason, to what end, how? And that will also help you when you are looking for new ideas and solutions.

The combination of “agile” and “classic dialectics” is a stroke of genius – in almost all cases, it will render excellent results. This is how you can actually achieve “empowering of the people“.

Again and again, that was my experience when moderating start-ups. Especially for an agile team where the individuals work at eye-level, building vexilla is a fantastic tool for gaining new insights in a creative way. Once on a while, you will even mange to get rid of wrong (and often deeply rooted) prejudices.

Here is how you want to proceed in eight steps if you build a vexillum. I like applying them.

  • Formulate the desired theory and define the central terms of the theory.
  • Collect requirements that need to be met at first sight if you want agreement with a certain and exactly defined event or project. You want a list that is as finite as possible.
  • Definition of the terms you used and common agreement.
  • Evaluation of the requirements following the criteria: useful, necessary, sufficient.
  • In case of different opinions with respect to the quality or applicability of requirements, you need to look for alternatives until all the requirements get a consensus. It is permitted to delete requirements that turn out to be unnecessary.
  • Test if all requirements belong to one language game and determine the end function. 
Example for an enterprise: 
regulative – keep the common good out of danger; 
ethically – realize biophily, 
economical – improve the results
  • Test if all the requirements are met or if they can be met with acceptable cost. 
You want to keep in mind that only the actual realization of a project will show if your assumptions have been correct. Consequently, the vexillum can also contain requirements that make a later correction or omission of an earlier decision necessary.
  • In the ideal case, you will find a sufficient requirement as the result of building a vexillum. You will not always manage that. But the sum of necessary requirements that, taken together, will qualify as “sufficient” is also a satisfactory result.

If you wish to try the technology of building vexilla and need assistance, I will gladly help you.

RMD
(Translated by EG)

P.S.
For more articles of my entrepreneur’s diary, click here: Drehscheibe!

Roland Dürre
Saturday January 24th, 2015

#Enterprise Foundation – Hurrah, Let Us Write an App…

Except:

If it were as easy as that, not almost all of them would fail, would they?

Here is a little story:

A start-up team wants to found an enterprise. Based on an APP, it is supposed to realize a profitable business. There is an industrious team and an intensely discussed idea, and the persons involved have more than enough enthusiasm. They are all prepared to really get under way and accept material hardships. Even nights spent working and, if necessary, postponing or even sacrificing goals of life are accepted.

Accidentally, I get involved. They asked for my help because they feel the project has come to a dead end, yet none of the parties concerned is willing to admit it. After only a few sessions, I discover that the project is off course. The team is already in the middle of implementation, which is especially painful.

During my long life, I already witnessed quite a few founders who ran aground – in the truest sense of the word. Consequently, I now have a lot of responsibility. Yet at that moment, I cannot life up to said responsibility, because the founders are trapped in their own ideas and no longer willing or able to listen. It might well be understandable that they no longer wish to hear bad news.

In this case, I give a warning and leave. And a few months later, I hear that they have “run aground”. This is why I will now give founders a few pieces of general advice.

First advice:

You cannot do it without a blueprint
What are you supposed to do in a project if you discover that there is no “shared direction” in a team? Or even worse: if every one of them has his/her own idea of what they want to achieve?

Admiralty carriage mount for a British 18-pounder carronade

Admiralty carriage mount for a British 18-pounder carronade

I would recommend in such a situation that you immediately stop implementing anything and go back to the beginning. In other words: return to the phase of requirement engineering. It will certainly be painful, but it is the only way to save the project. As a consolation, you can remember that you can later benefit from all the experience.

But this time, it must be a modern, agile, empathic and educational requirement engineering! When defining the requirements for new and innovative solutions, you will have to “experimentally learn a technical situation”. If you want to succeed in innovation, you have to ask the right questions. And before you can ask them, you have to find them. Which is not at all easy.

Only after having finished this, you can start with defining your requirement. And only after that, you can think about solutions. You will find solutions by dividing the goal into the “right” user stories. You want to start with one of those and then analyse the underlying use case. They can be analysed and described. But, please, use the “wisdom of the masses”, rather than the “simple-mindedness of the individual person”. Especially when we are talking the future and innovation!

“Learning the market” is only possible if you use “technological empathy”. Yet we have to know the market. After all, it is where we want to sell and use the product. Especially the market of the future must be discovered through trial-and-error and experiments. Against the dogmatic brain concepts of an individual person. This is how you want to keep learning at all times. Using an honest and optimal discourse: open and agile.

If you forget this important initial work, you will program (or build) things nobody wants to buy. Whatever the team thinks will then revolve around a product that is questionable, at least on the market and that – with its technological and other problems – will detract from the main goal and eat up all the combined energy of the team.

The failure of the product is often delayed through missing functionality. Allegedly, all you have to do is even more programming, then the success will come. This is a misconception. When those seemingly so important functions are finally available, nothing changes for the better. The failure will then be attributed to poor sales and marketing. All you need is a few millions for sales and marketing …which you will never get, because there is no potential sponsor you can convince with the already existing results.

Scenarios like these will always happen when the “start-up” has no valid and flexible blueprint to start with. You have no shared interest you actually live up to and consequently you cannot convince anybody. So what you need is a blueprint. In former times, the blueprint was called “specification sheet”. As opposed to the specification sheet, however, the blueprint only specifies the essentials. And it remains active.

The word “requirement engineering” will easily give you the wrong ideas. Just like the term “specification sheet” is not modern, especially if it is understood as following the idea of the “V- model”. Modern “specification sheets” will have to be agile and improve iteratively and incrementally!

If you have a small but nice blueprint, you can test it on the market. It is easy to come up with a good blueprint. It will develop a life of its own and therefore become more and more resistent. Mind you, I would not wish you to misunderstand my argument in favour of the blueprint. I definitely would not wish to speak up in favour of the antiquated waterfall model.

On the contrary: the implementation, too, must begin at an early stage. But only with a simple and important, perhaps extremely small, user story following the blueprint. With a little luck, you can perhaps quickly gain the first “quick win”, which will carry you towards a successful future.

Consequently, founding an enterprise is a linked tightrope walk in many dimensions.

Here are some more recommendations for start-ups:

Find the right target groups

User software (like many other products), if seen exemplarily, will always have at least two target groups – the “technological department” and the users. Incidentally, that is also the difference between user software and purely technological software development, such as the construction of a compiler.
The technological department wants to achieve a simplification and improvement of the necessary processes with the product. The user is supposed to accept this solution. The product must give him a noticeable help. He can do a better job in an agreeable way.

Business Case

It is of central importance. We need a story. If you found the right target groups and have a nice blueprint, then you can develop the business case. You want to wrap it in a good, even a fascinating story. You want to fascinate potential partners, possible sales and marketing routes, multipliers and others. And then you can approach all the many chances the market offers.
Technology

Only after you have a really good blueprint (perhaps supported by the Oldie Rapper vulgo called „dummies”), only after you made the surface and the functions “understandable”, only after you determined the target groups and the business case, only after your prototypes have shown individual functions does it make sense to build the “King Version”. This “King Version” will then have to be developed quickly and goal-orientedy. Directly to the point, without much ado.

And then the agile tire can start rotating. The main purpose of such a “King Version” is to learn through and with it – on all levels. And the idea to advertise the product. Perfection is not important. Developers and engineers have to be careful, because they often think in terms of technology far too soon. That is something you can do later, after knowing what the evolution will actually accept.

Design

You cannot be too early with picking a logo. It will become the symbol of the team and send a message. As a shared team symbol. Consequently, the entire team should be consulted when the logo is determined.

When trying to find a design or a pattern or prototype, you should orientate yourself towards modern applications. Images and pictures will play an important role with the surfaces of the future. Beauty can do no harm, but is only of secondary importance. The product message is the most important thing. This will also be helpful for the founders when they have to coordinate their constructs.

Financing

More often than not, founders think about the financing far too soon. If I want financing, I first have to have something to offer. Meaning more than a business plan – which mostly is no more than a poor profession of faith. I need all the things that have been written down: the blueprint, the business case, the pattern, a beautiful design – all those things have to transport an idea and fascinate the people. Consequently, external money cannot be expected before you build the “King Version”. And that, too, is rather hard – as a general rule, only special friends will help in this kind of situation.

And above all: you have to be a strong team. VCs, SCs, federal financing, but also partner enterprises or private investors are less interested in your actual product. For them, the business case, the story, and above all, the team, are important. Incidentally, a team is only a strong team if the members themselves are truly and still realistically convinced that their product is top quality.

General Notes

There is no “stroke of genius” when it comes to ideas. Such a concept is and has always been a fairy tale. A stroke of genius is a dream which will only too quickly become a nightmare. Visions will often become hallucinations.
The success of start-ups and innovative founders has many parents. Developing a successful product means hard work. The path includes many setbacks and errors. You cannot force success. You just have to try and create the ideal environment for it to come one day.

Actually, it might even make sense – especially if you cannot operate with cost-covering turnover from the outset – to pave the way through the purgatory of a “Business Plan Contest”. As a general rule, you can benefit hugely from the experience. Finding out that a project is not realistic, too, is of huge value. It saves a lot of money and time. Taking part in such a contest can also help to create the “right” networks and find the “right” mentors.

But above all!

A start-up is not an elegant way towards self-actualization. Instead, it is a very risky and massive challenge. What you need is an enthusiastic team where every member is prepared to accept the task and open for change. If this is not the case, you should keep your distance. Because if founding your enterprise were as easy as some seem to think, we would not see so many founders, even in the IKT sector and the world of elegant APPs, ending as a failure.

RMD
(Translated by EG)

P.S.
In this article, I related my personal ideas based on my individual experiences. They do not claim to be the one and only truth. I believe that every founding process is different from the next and they all have their individual stories.
As I see it, there is no general cooking recipe for “successful” founding. However, if you follow my description, you might actually succeed. Whereas you can assume you will fail if you try a different approach!

P.S.1
About the picture: It is from 1808 and titled “Admiralty carriage mount for a British 18-pounder carronade”.
Source: Scanned from Chappelle, Howard I., The History of the American Sailing Navy: The Ships and Their Development, New York: W. W. Norton and Company, Inc., 1949, ISBN 1-56852-222-3, Plate VII, facing p. 152.
Unattributed, apparently from U.S. National Archives

Roland Dürre
Saturday September 20th, 2014

Start up (10) – The Conciliatory Ending.

But, please, do not forget: not everybody must become an entrepreneur! There are lots of other ways towards happiness
.


If you wish to live your life in self-responsibility, it is not necessary for you to become an entrepreneur. Just like in “real life”, an entrepreneur, too, will be subjected to plenty of control from outside, perhaps only in a different form. Perhaps it is even harder to bear.

”Be willing and able to live your life in a self-responsible way” as an important definition of “living freedom” is quite possible in other ways, as well. All it means is to “do your own thing”, start exciting enterprises (not necessarily companies), or simply live your own life in a very intense and autonomous way. In other words: you want to make your life “your own project”.

It might be something as banal as starting your own family. In fact, I admire the decision of a woman to have a baby as true entrepreneurship. A life led in a very conscious way is already entrepreneurship at a huge scale. Developing your own opinion consciously is entrepreneurship…

Yet there are many more sensible things you can do that are entrepreneurial. It might be the support of an NGO or taking responsibility in all kinds of social systems – be it at the “Tafel” or in one of the often accused political parties. In fact, they are exactly the places where some good and autonomously emancipated-thinking persons would be badly needed.

Basically, it is always about taking responsibility. Consequently, I consider the school crossing guard just as much an entrepreneur as the retired manager who accompanies a dying person on his final journey in the hospice.

Writing a blog or being part of an internet community is a form of courageous entrepreneurship. Just as being part of a barcamp is also already entrepreneurship on a small scale.

And this is where, of course, I warmly recommend the PM-Camp – the next one will take place in Dornbirn between November 20th and 22nd, 2014!!!
RMD
(Translated by EG)

Roland Dürre
Thursday September 18th, 2014

Start-up (9) – Making Use of the Wisdom of the Masses?

I would like to encourage start-ups to open up, but at the same time I would like to warn against small-mindedness and insular thinking. So here is what I would like to say:

Diversity beats simple-mindedness!


Be careful not to become isolated, because it is quite easy to go down a wrong path following an idea and then turn dogmatic idealist. And then you can easily earn the reputation of being a nutcase.

Be open!


Establish a founders’ blog and twitter about your enterprise! Share your experience with many. In return, you will receive lots of precious knowledge and a whole treasure of experiences.

Put trust before secrecy!


Mostly, your ideas will not be all that unique. There are many out there who have similar ideas and would like to share their knowledge with you.

No patents!


It is better to lay open your discoveries early on. Then others cannot have them patented and many potential enemies will no longer be interested. In fact, patents will often cause you a lot of trouble and when all is said and done they do not really help, because the powerful will ignore them, anyway.

Crowd-Funding


Might well be the best way to get hold of some money (and important insight).

Association


Legally, you do not always have to be an incorporated company or a limited liability company. There are other models, too, which can be quite goal-oriented.

Common Welfare

Start early thinking about whether your product might answer to the requirements of a Common Welfare Business . If it does, you might gain sympathizers and comrades-in-arms.

It is all about understanding the future. That is a difficult task, and it is easier if you combine forces.

RMD
(Translated by EG)

Roland Dürre
Saturday September 13th, 2014

Start Up (8) – Learning About the Market!

If you start in a market you do not know anything about, you must have really strong reasons. Especially if you selected a market where many contestants have already established their positions or if the market is generally perceived as basically dead.
Unfortunately, this is exactly what many founders do. Sometimes the reason is probably their inexperience and because they do not know how complex such a market is. Perhaps they also do it because they want to emulate famous idols, like Steve Jobs. He shattered the market of classic mobile phones with his i-phone.

At the time, the “other Steve” (Mr. Ballmer of Microsoft) provocatively said something cynical that did not at all sound so very unreasonable to me: “What does Apple want with a device on the cell-phone market that does not even have keys and with which you cannot even call someone?”. Well, Steve Jobs simply ignored this and was proved correct.

I think this is not the common business rule. In fact, it is a rather special case. Consequently, if you are a “normal founder”, you should take a really close look at the market. It is just too daring to start on a market you, as a young university graduate, cannot really know. You should at least know it a little bit.

This means you have to learn and work towards understanding your target market. Regardless of all enthusiasm and euphoria, you usually cannot be a success unless you learned the market in your target segment and understand its workings. There is no other way of being able to judge if your own idea actually has a chance of survival. More often than not, it is still rather unfinished and, like a rock in the river as it makes its way down the stream, receives its final polish before it will become one or several nice round pebbles.

The best solution when it comes to “learning about the market” is trying it yourself! But this will cost time and energy. There can be setbacks and disappointments, all of which you will have to be able to tolerate.

Learning, too, is expensive and costs energy! You can often learn more comfortably “sponsored by others”, for instance as an employee. And unfortunately, the proverb about “learning years not being master years” is also true when you found a company and learn a market.

Consequently, my recommendation to founders of a start-up enterprise might be
“Spend some time as employees in your target area. And when the moment comes and you feel you have learned enough, get under way!”

In retrospective, I must say that I, too, did exactly this. I learned all the technology and competence about projects at Siemens – and I learned how to do business at Softlab.

RMD
(Translated by EG)

Roland Dürre
Saturday September 6th, 2014

Start Up (7) – Business Decisions – Betting on the Future!?

Well – if you are perfectly honest, you must admit that business decisions, in particular, are always betting on the future!

After all: all decisions have a factor of uncertainty. And they must be relevant. This is the very definition of a decision. Consequently, every business decision, including the founding of an enterprise, is a bet. Basically, the founder of an enterprise bets on how his development will be judged on a huge market.

True entrepreneurs will bet with their own money. They put their own work, their own capital and their own knowledge into the scale. Once in a while, they will also bet for their existence – and occasionally they lose the bet.

For managers who have been employed (such as the directors of DAX enterprises), it is a bit easier – they bet with other people’s money. This might well work – as long as they remain “upright merchants”. Except that is what they forget too often. Would you like me to give you a few names?

Why don’t we start a brain game and bet on a beautiful business: soccer? Who is going to be German Champion in 2014/2015. We will probably win if we say FC Bayern.

Now let us make it harder. Let us bet on what the statistics will say at the end of the season. Or maybe the results of individual match days, the goal shooters, how the actual matches will be played…

🙂 And I bet that almost all bets will be wrong.

Now you will protest: stop, because we spectators cannot do anything about it. Whereas an entrepreneur can influence procedures and shape his company.

OK, so let us do the same betting again. Now you are no longer just spectators, but players. Imagine you as a team of founders are both the players and coaches of a league team. And I will leave it simple: You will only have to bet on your own matches, that is: those where your own players are active. Well, that should work, shouldn’t it? Except…?

How much influence do you actually have – both in life and in soccer? Can you really influence the bets and along with them the decisions? As you can see, this stupid betting on the future is all but a guarantee for success.

Consequently, here is what I recommend:

If you are a start-up, don’t start with the very big bets. Instead, start small. As I always repeat: totally agile. In this way, you will develop a chain of small “dynamic bets” and will always just bet on the next step ahead.

Now you might reply: but there are the huge successes we get to read about every day. Did not someone bet well there?

Actually: one will always bet correctly. He is the winner.

Like in the SpVgg Unterhaching “VIP Lounge”. I have been watching the lottery there for years. The guests, and I gladly count myself one of them, bet on the results of the day.
And although there are nowhere near as many participants as probably with the FC Bayern, I remember only once that the betting contest had no winner. That was years ago in the second league – and at the time the SpVgg won 7:0 against Saarbrücken. Yet, the poor Hachingers still had to leave the league at the end of the season.

As I said: one will always be the winner. And “The winner takes it all”. But how many play and how many win!?

RMD
(Translated by EG)

Roland Dürre
Sunday August 31st, 2014

Start-up (6) – Founders Need Goals?

Columbus had a goal. And some modern knowledge. He decided to assume the earth was a ball. Consequently, he reasoned that there must be a way to India sailing west on water. That would definitely have been a huge advantage, because it would have saved all ships the unpleasant and time-consuming way around Africa.

🙂 Well, as we all know, the Suez Canal did not yet exist at the time.

But then he discovered America and – in accordance with his idea – called the people he found Indians.

🙂 However, the Panama Canal did not exist either, which means that the way to India via the new America would have been even longer.

Basically, we can say that Columbus was way off his mark …

And yet he became a famous man. Some say he changed the world. This is not what I believe: I am sure another sailor would have had the same idea a few years later, which would then have led to the discovery of the new continent. But perhaps such a different sailor would have realized a little earlier that his assumption was wrong and then the Indians would not be called Indians.

It must be the goal of an enterprise to develop business. But then, this is a rather weak goal. After all, it is more like something that goes without saying. To me, this sounds a lot like “every human being should have the goal of getting enough to eat!”.

I think you should take a closer look at the word “goal”, instead of determining your goals too easily. You will find a polemic article about this topic in my entrepreneur’s diary (Unternehmertagebuch eine Polemik ). It is about “strong” and “healthy” goals. Also, you have to differentiate between the term “goal” and other terms, such as “intention” or “success”.

For instance, if I define as my “goal” to work until 8 p.m. instead of 6 p.m. in order to catch up on all the work that has accumulated, then this is not a goal. It is a (perhaps laudable) intention.

And especially in businesses, I keep discovering goals such as “next year, we want to increase our turnover by one million Euros”. As I see it, these are intentions, rather than goals. And there is a huge difference, even linguistically, between “intending to do something” and “setting a goal”. Perhaps this note will make you a little more sober with respect to (often very rhetorically) expressed goals.

”We want to be a success!” – might well sound nice as a goal. But, naturally, this, too, is not a goal. And I do not mean because it is so banal. Instead, you want to remember that “success” is a very individual thing. Consequently, the first thing you have to clarify is what exactly your own and very individual success criteria are. And why they are so important for you. And how you can come to a mutual agreement in your team. Then you could formulate as your goal – both individually and as a team – that none of the formulated success criteria must be neglected and that you wish to finally live up to the criteria as a team by, maybe, 80 %.

Now I will write about the profane goals. A much-loved goal often formulated by business leaders is: “We want to become the leaders of the market (if possible world-wide)”. Or. “We will manage to come up with a USP (unique selling preposition)”. Because we assume that said USP will carry us through the market on wings.

Except that now the market is constantly changing at high speed. And how am I supposed to create a static USP that can be of long duration in a highly dynamic system? How is anybody supposed to describe a goal and set criteria along which to define one’s destination if the coordinates of the market are constantly fluctuating? And besides, my product and enterprise should always take this permanent change as a mark of orientation. If you see it under this light, goals can easily turn against yourself and become a massive liability.

”Healthy goals” will inevitably always be “flexible goals”. But how to explain this to an old-fashioned manager whose only definition of reality is facts, plans and numeric input?

Please do not misunderstand:


I am actually very much in favour of such extreme goals as “becoming the market leader” or “developing a USP”. Except that both the markets and the USB-s are very dynamic. Consequently, the right and constructive goals must constantly change with the surroundings. We arrive at the so-called “moving targets”.

This means that a goal can only look constructive if the goal – along with the assumptions the goal is based on – are constantly under scrutiny and permanently adapted to the never-ending changes in our world. To me, it seems extremely difficult to get a grip on these challenges with instruments and tools. You will easily end up in the situation of the poor hare of the fairy tale: “The Hare and the Hedgehog”.

Perhaps it is time to again remember “entrepreneurial intuition”? I am sure this is also a dangerous path, but perhaps it is no worse than the alternatives.
And you should always keep in mind that, even if you reach your goal exactly like planned, this is still far from a guarantee for your success. The results you achieved through reaching your goal will probably not be as optimal as they looked when you first defined the goal. Consequently, reaching your goal will have far less value than you had initially assumed.

The worst case is that reaching your goals actually is detrimental or even fatal. Because your surroundings have changed completely. There are many examples for enterprises where the great goal was achieved and shortly afterwards they had to liquidate. You only have to think hard!

Let me finish this article, too, with one of my very attackable comparisons:
”Entrepreneurial Life” is something you can understand like a Sailing Trip (Segeltörn). Together with many others, you steer a ship. It crosses in the winds, survives many calamities and eventually reaches the harbour, regardless of all the challenges. A true entrepreneur should be very careful not to fall victim to “thinking in terms of the Titanic” and then end like the Titanic.

RMD
(Translated by EG)

Roland Dürre
Wednesday August 27th, 2014

Start-up (5) – Coincidence as a Founder

As a third type of foundations, after the “pragmatic” and “mass-produced” ones, you could name the “founding through coincidence” or at least “with the assistance of some coincidence”. Just like, if you have a detective story, the culprit is often found by “superintendent coincidence”, the founding of a company is also often fathered by a coincidence, or at least it determines success or failure.

For instance a chemist discovers a new paste with particularly much power and develops a very special glue based on it. An innkeeper fills one of his barrels with something that should go elsewhere and you get a new drink. A computer scientist creates a new app in order to make his own life easier. He shows it to his pals and they say: “Wow, we also want this”. Another computer scientist develops some software to better communicate with his friends about girls. …

What would have become of Microsoft if IBM had not been sent by coincidence?
🙂 small and soft?

What would have become of google? The founders had written a “crawler” in order to download interesting internet pages overnight and store them, because at the time, “www” was short for “wait, wait, wait“. However, nobody was interested in this new function, because, after all, “surfing” is a dynamic process. 
Consequently, the two guys thought about what they could do with their “crawler”. And then they used it to build a fantastic search engine which, thanks to its simple “page rank”, can even weigh and structure the pages. 
People (including Wolf and me) liked this – except that the Google founders did not earn any money with it, either. Which is why we all asked how long the nice google will live.

And then the google people came up with the idea to offer “adverts” on their search engine. As far as I know, the two founders had never intended to do that. But in times of crisis, the “ultima ratio” sometimes forces you to actually try something you were not going to try. And then the turnover through marketing adverts grew in dinensions they had never dreamed of and lo and behold: they became a real success.

What would have happened if I had never met Wolf Geldmacher? Would I have started early retirement as a frustrated Siemens employee five years ago?

As I see it, a successful founding always has three sources:

  • The pragmatic behaviour with the clear business goal.
  • Once in a while special measures in order to promote business.
  • And coincidence, which, when all is said and done, will decide whether you are a success, both on a small and huge scale.

And coincidence, which, when all is said and done, will decide whether you are a success, both on a small and huge scale.

🙂 Consequently, every founder also needs a little luck. And you can certainly enter endless dispute about whether fortune really favours the brave.

RMD
(Translated by EG)

Roland Dürre
Saturday August 23rd, 2014

Start-up (4) – The Mass-Produced Enterprise.

In installment four of my start-up series, I will, after having introduced the “pragmatic foundations”, now describe the second category: “Mass-Produced Enterprises”. Because wherever someone talks “the founding of an enterprise”, he usually means the “mass-produced” foundation process.

For your information: at some time in the 1990, some banks and enterprise counsellors found out that you can easily make a lot of money if you specialize on the establishment of enterprise by young founders. It was no problem at all to quickly get the full support of politics (new jobs) and economy (new business). Patterns from the USA that looked successful were enthusiastically embraced. The country needs new and young firms. Without the slightest scruples, managers and bankers who were no longer wanted, along with would-be counsellors, declared themselves business angels. Politics gave money and many big concerns contributed with other donations, often with the camouflaged goal of winning the ”war of talents“.

Business plan contests were created and monetary prizes were offered. At the universities, activities for promoting and speeding up foundations, such as “UnternehmerTUM” at Munich Technical University (TUM) were established. The university curricula were extended to include founders’ courses, once in a while they even went so far as to offer counselling and coaching seminars. The Free State of Bavaria, especially under Herrn Stoiber, gave more financial subsidies than ever and initiated more activities and infra structures, such as BICCnet.

All of a sudden, entrepreneurship had become chic. On big partiers, the “young entrepreneurs”, wearing their new business suits, met, consuming small sandwiches and beer and listening to great presentations. Nice video recordings propagated a new young generation of founders. And they all wanted to establish a new enterprise, only waiting for the great business idea to present itself …

Regardless of all the effort, the success of all these great events is minimal. Suddenly, the “pragmatic establishment of an enterprise” I introduced in instalment one no longer plays a role in public – regardless of the fact that it still works quite well. At least in our sector, I know quite a few small enterprises that were started successfully and very pragmatically during the last 20 years without the founders ever having attended a business plan contest or a founders’ lecture. Statistics tell their own story – but apparently nobody in the “founding scene” is interested.

Well, so far my criticism. Basically, the “mass-produced enterprise” is all about considerably speeding up the development of an enterprise. For instance because you wish to quickly fill the gap of a technological niche you identified or because you want to take quick advantage of a chance on the market. Usually, you need a lot of money for this kind of thing, because, after all, you want to develop the enterprise very quickly and very professionally. As a general rule, the founder does not have this kind of money.

Consequently, he needs someone to give him the money, for instance as “venture capital”.

Before you know what hit you, such enterprises will start making the interests of the money lenders, rather than those of the entrepreneurs – as would be normal for a “pragmatic founding” -, their top priority. As a general rule, your “pragmatic founder” will plan for his entire life. Handing the firm on to the next generation is actually quite common, too. Usually, the “exit” is not planned.

With the “mass-produced enterprise”, the shareholders plan the timely sale or the entry into the stock market (IPO), of course including a very high profit. With every round of financing, the share of the founders backed by their own capital decreases. Simultaneously, the influence of the money lenders will increase. The remaining motivation for the founders and often also for the employees is the remaining shares of the enterprise, or formerly also often the share option.

I know several persons who actually became quite rich in this way. Companies like IXOS or Norcom are only two examples. At one time, they were right at the top, the founders had made good money – and then the spiral went downwards. These are precisely the few lucky cases the Venture Capital enterprises thrive on.

During this process, most of the investments will be lost. Others will reach their goal without serious damage being inflicted. I know several such cases: here in Unterhaching, we had sub-let some office space to the Xignal AG. Their strength was the capacity to develop extremely fast. Regardless, the financing negotiations seemed to get harder and harder. One day, however, they managed to sell – to the National Semiconductors. After this company was also sold, Xignal was liquidated.

I also know some smaller success stories of synthetically created enterprises: a friend of mine actually managed to find two attractive technological gaps while establishing one company. He certainly made a lot of profit with his options.

Yet the “mass-produced enterprise” reminds me in a disastrous way of a functional and Taylorist way of thinking – which today is outdated. They want to determine success up front, define precise goals and then construct the means towards those goals with instruments of the classic business world. The missing capital is supposed to be supplied by Venture Capital enterprises or federal funding programs.

And basically, this is exactly what the product developers of the big enterprises, too, do. Except that the enthusiasm, creativity and lack of experience of the young founders is supposed to manage what even the enterprises cannot do, regardless of all their many advantages such as money, employees, knowledge of the market, brand, sales and marketing. …
Incidentally, the entire business model of Venture Capital enterprises is one I would seriously question. Doesn’t it sound a little like the lottery, with the motto: let us buy lots of lottery tickets, break the jackpot and then buy many more lottery tickets? Except what to do if you never break the jackpot? …

There might be another reason why “mass-production” does not work in Europe. As often, everybody was full of admiration for what they did in the USA. The reason was that everybody said how hard it is to get capital for foundations in Europe (an assumption that might well be questionable).

And thus, the US of A became our big model in this sector, as well. You just (blindly) imitate what they show you. Nobody ever tries to find out if the US system would fit Europe. The success of young American enterprises, such as Amazon, Apple, Dell, Ebay, Facebook, Google, Microsoft, Oracle, Tesla and many more is too glamorous. Compared to the European “Old Bulls”, such as (still) Siemens, these enterprises are extremely young.

And if you take a close look at all those enterprises I just mentioned, you will discover that all these firms actually were not “mass produced” during their first years of existence. Instead, the history of their founding was always rather exciting and strongly influenced by pragmatism and coincidences.

However, the situation in Europe differs hugely from that in the USA. The many languages and the strong regionalization in Europe necessitate a founding culture that is totally different from what the alleged success pattern dictates. As I see it, the “regionalization” is actually an aspect that might also be a huge entrepreneurial chance. As an example, I would like to cite Sina Trinkwalder and her @manomama, and recommend her great book “You Have to Create your Own Miracles” as a nice appeal for regionalization.

And, of course, even after more than two decades of intense trying and Business Plan Contests, there is not a single German Start-Up which could hold a torch to Google & Co. Zalando, too, is just the copy of an American pattern created by modern alchemists who claim to have found the formula for making gold out of iron. However, such formulas will always attract people who give you money, thus permitting you to start new projects.

But why don’t you take a more critical look at the results (turnover, results, value of the enterprise) and look at how much money has already gone down the drain? And then let us remember all the bankruptcies after the turn of the millennium: it gives you an increasing suspicion that the system will not work.

Let me finish with an example that clarifies why founding an enterprise along the lines of mass production is difficult. It is the story of Dr. Frankenstein. He wants to create a human being and manages to create a monster.

After all, an enterprise is, above all, a social system. As such, it has more similarities with a biological being than with a machine you can control and determine. A machine that gets input and delivers output, thus making the shareholders rich.

RMD
(Translated by EG)

Roland Dürre
Wednesday August 20th, 2014

Start-up (3) – The Pragmatic Way Toward Foundation

Let me try to categorize start-up situations of enterprises in a model-like way.

You get three “types of foundations”:

  • The pragmatic establishment of an enterprise.
  • An enterprise being constructed in mass-production.
  • The foundation with the help of “entrepreneurial coincidence”.

In this article, I will only write about the first of these types (pragmatic). Instalments 4 (mass-production) and 5 (coincidence) will follow later.
More often than not, the first step towards the pragmatic foundation of an enterprise is the move from a job as a regular employee to free-lancing. I know only very few persons who, in our sector, start as free-lancers directly after having finished their university education. Most of them already worked as regular employees, because turning free-lance successfully usually calls for a certain degree of technological and other competence, as well as a good reputation at least in one field of expertise.

Incidentally, the situation for free-lancers on the market gets harder and harder due to the legal restrictions, as well. This is truly a pity, because it also makes the pragmatic path via this interim step harder to follow. It is high time for our legislation to come up with a sensible freelance model on top of the regular employee model. But I am afraid we are not going to live to see this happening. Besides, it is not really what this article is about.

As I see it, the “pragmatic” foundation of an enterprise is the normal case. It also seems to be the most successful. There are numerous examples where, for instance, roofers, coachbuilders, cooks, carpenters, toolmakers…, became self-employed in exactly this way through very logical steps.

If such craftsmen turn self-employed and establish their own company, this is mostly done totally without making a huge fuss about it. They need neither much ado about the foundation, nor innovative “super ideas”. Now you might counter: “we understand this, but this can only be done in the service sector”.

Well: not true! There are many examples of craftsman’s companies where the start was with absolutely innovative product ideas – and then they became a huge success. Especially in the sectors Bikes and Outdoor, I discovered quite a few success stories during the last few years.

The married couple Rohloff started with very innovative bike chains – and later built the legendary Rohloff gearshift, the SON (Schmidt original dynamo hub), the Ortlieb bags and many more innovative products originated with very pragmatic foundations.
My carpenter from Southern Bavaria, too, who started out with his own carpentry as a totally “normal service provider”, simply made his own dog-house a long time ago. He liked it so much that he advertised it on the internet. It became the one of his products with the biggest marge. He can produce it “in between” in moderate numbers.

I know a roofer who founded a small, very normal roofing company. His son extended it to become an enterprise in the second generation. It became the world-wide market leader for special buildings with particularly demanding roof constructions, such as sky-scrapers, mosques, theatres, etc.

And you can believe me that I could come up with an endlessly long list of more examples. In fact, it comes as a surprise (or maybe not) that so few craftsmen ever apply to participate in the business plan contests. After all, for those craftsmen it seems to be a logical conclusion to establish their own firms. Rooted in their competence and know-how, based on a calculation of incoming and outgoing money that is short and easy to understand, without a complex business plan, let alone having to participate in a contest. Of course, once in a while, when – later on – they develop expensive products, they also take advantage of federal promotion programs.

As I see it, the development of software, the establishment and the running of a firm with IT infra-structure and managing IF projects, is also “only” craftsmanship. Actually, “software development as craftsmanship” is now an accepted technical term.

Consequently, most of the enterprise foundations in the IT sector are craftsmen’s and thus very pragmatic foundations. As a general rule, they always write good success stories for several years.

I need to warn you against the “ultimate solution idea” as it is often presented to me during business plan contests. Some of those who present them are really lunatics. I actually feel more pity for them than anything else.

More often than not, the “great idea” is actually not at all singularly innovative. And too often, you will read a telling sentence like this one in the business plans:

“We will probably need most of the required capital for sales and marketing. We assume that we will have to come up with a sum somewhere in the seven-digit range up front”.

This is when I ask myself why the would-be entrepreneurs did not come up with a product or service that the market actually needs? Also: is the magic formula “sales and marketing” really the solution? And how exactly will it look?
The majority of contestants in business plan contests are IT based business ideas (“we will write an app”) and projects in the pharmaceutical sector (“we will create a miracle medicine against this or that illness”). Or else some people want to start big instead of trying out small. Which would be the pragmatic approach. And if an idea gets positive feedback on the market, a realistic financing would also be more likely. A financing where you do not sell your enterprise before you actually have it.

In one business contest where I was among the jurors, a “pragmatic founder” of an IT enterprise was presenting. He was an expert for Androids and Unix. Yet the only reason why he presented at the contest was because he had applied and registered a long time ago and found it a matter of good manners to then also attend. He was an Android expert and simply sold his know-how. As a basis, he had made his own Android Built. At the time of presentation, his enterprise already had more than 50 employees in various countries. The majority of his customers were Asian high-tech enterprises looking for Android and Unix based solutions for their hardware of the “internet of objects”.

Craftsmen or “pragmatic founders” are a rarity in the “big foundation business”. Perhaps they have no time to participate in a business contest? Or maybe they do not see any positive effect in it? It is quite remarkable that those entrepreneurs who were a success in the last 30, 20, 10, 5 or even 2 years never wrote a big business plan. Nor did they ever participate in a contest. Still (or maybe this is why) they were a success.

So my advice for young founders is to be very pragmatic. Do not write a huge business plan. Instead, use your common sense, courage and joy to establish your business and trust in a reasonable cost calculation. Be courageous and have no fear.

And do not participate in contests. It is better to use the time you would spend there and find friends and partners. If, however, this phase is already behind you and you have, for instance, already guaranteed a certain income for a certain span of time, then I would advise you to quickly turn towards the business on the pragmatic path.

In my next article, you will read about how I feel about “foundations as mass-production”.

RMD
(Translated by EG)