the “innocent lies” of aspiring entrepreneurs… ! bruno wattenbergh the lies of the new...

The lies of the new entrepreneurs by Bruno Wattenbergh ©

1

The “innocent lies” of aspiring entrepreneurs… !

Bruno Wattenbergh


2

Bruno M. Wattenbergh

Who am I to talk to you on this

topic ?

• COO of the Brussels Enterprise Agency

• Chairman of the Brussels Guarantee Fund

• Independent Board member

• Daily economic chronicle on BelRtl (radio)

• Creator of the reality TV show “Starter!”

• Professor of entrepreneurship and strategy (Solvay Brussels School of Economic & Management, Ichec, …)

• Master in Business Innovation TiasNimbas (NL)

• Certificate Strategy & Innovation @ MIT Sloan

• Entrepreneurship Development Program @ MIT Sloan

• Advanced Degree in Management @ Ichec - Master in Labor Science @ ULB - Bachelor in Business Administration @ EUB


3

You said “innocent lies”?

• Almost all aspiring entrepreneurs make exactly the same mistakes … and often lie … to themselves!

• … but anyone can learn to be an entrepreneur : there are rules … methods, … and a process … that reduces the risk of failure … So these lies must be “addressed” ASAP !


4

Why these “innocent lies” ?

• Being an entrepreneur is all about changing the world and becoming someone else …

• … thinking & acting outside the box …• Entrepreneurial practice has also changed … as has

the world … we do not do business today the way we used to do it yesterday !

• Finally, we do not really have an entrepreneurial culture … and schools are slow to pick up on the importance of nurturing future entrepreneurs …


5

You said “cognitive dissonance” ?• “Cognitive dissonances”:

– Léon Festinger: The individual in the presence of cognitions (knowledge, opinions or beliefs on the environment, oneself or own behaviour) and which seem incompatible with each other create an unpleasant state of tension.

– Method of reducing cognitive dissonance: This means that the individual will implement unconscious strategies to restore cognitive balance. These strategies are called “method of reducing cognitive dissonance”.

– Rationalisation process: One of the strategies to reduce cognitive dissonance is to modify one’s beliefs, attitudes and knowledge to bring them into line with new cognition. This strategy is known as the “rationalisation process”.


6

You said “cognitive dissonance”?

Darwin on

“Cognitive dissonances”:

– “When, during my research, I discover elements that tend to disprove my working hypotheses, I make an immediate note of them .. Because these are the ones I forget easily!”


7

You said “rational”?

• Setting up in business is fundamentally an irrational act! • A 100% rational person would without a doubt never

set up in business! • The “traditional management” methods are adapted to

a stable environment … • How to succeed the juggling act of injecting rationality

and managing ambiguity and uncertainty?• Without falling in the false security of the theoretical &

rigid Business Plan … ?


8

Lie n°1: “My idea is just fantastic.”

• Yes, so what? • An idea has no or almost no value …• Everyone has ideas all the time …• A valuable idea is an idea that is tested, validated, put into

figures, put into chronological perspective, operable with a good chance of success… then we can speak of an “entrepreneurial opportunity”.

• Until you have gone through the process of transforming the entrepreneurial idea into an entrepreneurial opportunity … this idea cannot be fantastic… or in any case no one can shout it from the rooftops!


9

Lie n°2 : “I can’t talk about my idea in case someone steals it.”

• No problem … keep it to yourself !• Once again, an idea has no value until it is “worked & shared/compared”

(see previous lie).• If, simply by mentioning it, someone may copy it and make money from

it, then anyone will be able to copy the idea ... tomorrow or the day after tomorrow!

• It also suggests that the aspiring entrepreneur is in love with his idea and will therefore find it difficult to accept positive or negative criticism.

• A lot of people will then spend years with their idea without ever transforming it into a company or product.

• Asking for an NDA from a coach/investor, how do you expect them to manage their activities: they see dozens of projects a week and have without a doubt seen 5 ideas like yours over the past few months?


10

Lie n°3 : “I have the best product on the market.”

• The “best product" is an expression that means NOTHING!• The best product for what / who? Which customer segment?• With what characteristics: performance, security, access,

service, user experience, personalised, ...?• At what price? With which business model?• With what related services: access, after-sales service, related

service, …? • There are hundreds of customer segments with different

needs ... someone who says "I have the best product on the market" has probably not made strategic choices and/or does not know the market (entrepreneur’s homework not done?)!


11

Lie n°4 : “I don’t have any competitors: no one does what I do!”• More often than not, these words reflect once again a love of the

product that prevents them from seeing the competition.

• 99 times out of a 100 it means that the entrepreneur has not made its analysis and market segmentation homeworks.

• Bad news, competitors are not the only problem, there are also alternatives that consume the budget of consumers who are potential customers!

• If they are right, then it is probably in a niche market where they are on their own or almost, and the demand is probably low!

• Finally, if this is true, it will prevent their investors (coach) from analysing and understanding the appeal of a market (size, growth, etc.), the positioning of the competition, from analysing the accounts of competitors.


12

Lie n°5: “I’ve conducted a market study: it confirms that my

company will be a success.”

• What market research? 95 times out of a 100, a costly and uninteresting theoretical – macro – study conducted exclusively on the internet and without any direct confrontation with the customer!

• In the best case, a quantitative study (questionnaire on the Internet), often unsuitable for a startup with questions asked without prior identification of the assumptions to deny / confirm.

• An attempt to seduce and reassure ... not to challenge testing the key assumptions of the business plan → danger!

• Becoming an entrepreneur is not a theoretical dissertation … it’s a contact sport talk to customer ASAP !


13

Lie n°6: “This/my market is huge: I just need to take 1% of the

market share to hit the jackpot !”

• If the market is so large and growing:- It is automatically coveted by powerful and effective existing players!

- It attracts a large number of entrants!- It is probably too late for a "small player" on a shoestring

→ look rather for a sub-segment that matches your skills and resources!• If you say this, you probably have not done your homework by

identifying smaller markets with specific needs that you are able to satisfy: a niche that is small enough so that you do not have too much competition and large enough to be profitable, and if possible a niche with growth potential for you to grow along with the niche (Example of New Tree).


14

Lie n°7: “My turnover forecasts are conservative but very

promising.”

• It's a trap element of business plan: too low, these sales will not attract enough investors and bankers, too high it will immediately be discounted by financiers. So "objectify" & "test"!

• Why "conservative"? Just tell me how you will generate sales, what are your assumptions and how you tested / validated them?

• Too often we are faced with a "process of spontaneous generation of turnover" whose final amount is dictated by the Excel spreadsheet of the financial plan!

• But where is the sales generation process? What is it? Can you describe it? How was it drawn up?

• Was a test performed? If not, why?


15

Lie n°8 : “I’m protected because I’ve filed patents/licences”

• Yeah, so? Patents are generally not yet validated and anyway, you don’t really have the money behind you to sue those who could possibly copy them!

• If you insist too much on patents, it becomes suspicious: is that the only value of the company?

• The value of a startup is not so much in the patents but in the capacity of a structure and a project to create value with and around these patents.

• Rather explain how these patents would prevent competitors from selling to your customers?


16

Lie n°9: “Major competitors are too slow or I have a first mover

advantage”.

• The "first mover advantage" is rarely tested in the real world: - Take a look at the "cross the chasm" and "S curve" concepts!

• Rarely a radical innovation emerges from a market leader ... especially because of the risks (you are the one who takes those!) ... But it is often a major company that takes over the project when it becomes juicy and it has been validated!

• If your project is not innovative ... and you are the first on this concept, ask yourself questions honestly to understand why other companies have not ventured into this area!

• Also ask yourself about the possible reactions of competitors ...

• Do not forget the customer! ...… !


17

Lie n°10: “My financial plan is pessimistic”

• Oh, and why is that?• No need to be pessimistic!• What the coach or investor is looking for is:

- A detailed plan explaining to them in detail the dynamics of the costs and revenues- The description of basic assumptions, how they were fixed

- Plan B if they are not achieved- Tests to confirm the basic assumptions (a test is

better than a business plan to assess the risk of an entrepreneurial project).


18

Lie n°11: “Analysts say that my market will take off seriously in 10

years’ time.”

• These projections rarely turn out to be true!• This time horizon is of no interest to any of your

stakeholders • Financiers (investors, business angels, banks) will

focus not so much on the size of the market, but on the share of it that you are able to go capture.

• Rather explain your strategy to gain market shares and quantify the cost of acquiring them.


19

Lie n°12 : “Our sales strategy is based on the use of Facebook

and the Internet”

• As if there was a way of selling using Facebook & Internet ...!

• Of course, there are E-Commerce activities, but for others, Facebook & Internet do not magically solve all the business issues ...

• Reading this in a business plan is to think immediately that the aspiring entrepreneur has not sought or found their distribution channel.

• This does not mean that Facebook & Internet should not be used to back up the sales policy or to foster a useful interaction with the consumer ...


20

Lie n°13: “There are plenty of customers interested in my

product/service and who are just waiting for me to launch it”

• What does interested actually mean?• Have you ever sold or tried to sell?• Do you have letters of intent?• Have you ever talked price?• Are these interested people:

- Customers (paying) → B2C

- Users

- Distributors → BEB• Which marketing tests have demonstrated the "Proof of

Business“?

The lies of the new entrepreneur by Bruno Wattenbergh ©

21

Lie n°14: “I prefer doing it myself rather than entrusting it to

someone else”

• Why doing it alone is suspicious:- In a test phase why do it yourself and suffer the constraints of learning curves and fixed costs?- During start-up, what are the reasons for doing things yourself as the risks and stakes are so high?Have you tried to build partnerships?- If so, why did they fail to get off the ground?- If not, are you a loner who wants to do everything alone?


22

Lie n°15: “I prefer starting out on my own”

• The "loners" never create nice big entrepreneurial adventures!• Why do you prefer to start out on your own? Is this

deliberate? ...• Have you tried to build alliances?• Do you talk about your project?• If so, what conclusions do you draw on your leadership on the

risks associated with your project, your ability to identify problems early enough and find solutions?

• What are the impacts on you and your project from this go it alone strategy?


23

Lie n°16: “Our first customer will be profitable”

• It is almost impossible for your first customer to be profitable ... and it is not even necessary! ...

• If you say / think that this first customer is profitable, you probably have no idea of the cost of acquiring your first customers! ...

• Your first customer is rather a test validating a range of parameters and assumptions of your business plan: time and process of the sales cycle, customer feedback, use of the product /service, price sensitivity, perceived value, delivery of value, payment term ...

• You must study your first customer through the eyes of an anthropologist, a sociologist, a psychologist: act of purchase, use, comment, ... and adapt your offer!


24

You said “lies by omission”?

1. The formation of turnover?

2. The customer acquisition cost?

3. The duration of the sales cycle?

4. The person who will sign the contract (B2B) ?

5. The capacity to produce – deliver?

6. The quantification of the value proposition?

25

Lie by omission n°1: “The formation of the turnover”

• Sales policy: – vaguely described in the Business Plan ...!

– little detail in the Financial Plan ...: a box in an Excel spreadsheet ... often without a formula ….!

• Absence or low sales, advertising and marketing costs in the Financial Plan ...!

• Linear growth in turnover in the Financial Plan without threshold effects and no increase in fixed or variable costs, and this as from the first day!

• Process of spontaneous generation of revenue!The lies of the new entrepreneurs by Bruno

Wattenbergh ©

26

Lie by omission n°2: “The customer acquisition cost”

• Already described above ... and in the "Lie by Omission No. 1" ...• Process of spontaneous customer generation ... without

necessarily a strategy, marketing, advertising and sales force costs ...

• Determination of turnover as for "borrowing" to balance the income statement!

• While the determination of the acquisition price can prompt the aspiring entrepreneur to profoundly change its strategy: all strategic options are not "assumable" financially. After a correct estimate of the cost of acquiring the customer, an entrepreneur may decide to move from a B2C to a B2B strategy.


27

Lie by omission n°3: “The duration of the sales cycle”

• Just as aspiring entrepreneurs are reluctant to talk to potential customers, they are even more reluctant to test their business process and simulate sales.

• Results:- They often begin by selling to the wrong partner (B2B or B2C) ...- They discover configuration problems of their offer during selling ...: superfluous elements, lack of certain elements related service ...- They underestimate the length of the decision-making process ...!

• This type of error has a significant impact on the financing needs of the company.


Lie by omission n°4: “The person who will sign the contract”

• In B2B and even in B2C, the end user, even if he pays and may be called a consumer, is not necessarily the customer (the person who signs the order):- Example of Pepsi-Cola- Example of Curtius.- Example of Spotfire.

• Whoever signs the contract must be the one who has the power of decision and the one with the biggest problem (or unmet need).

• The economic feasibility test makes it possible to confirm the identity of the so-called DMU (Decision Unit Maker).

The lies of the new entrepreneurs by Bruno Wattenbergh © 28

29

Lie by omission n°5: “The capacity to produce and deliver”

• A business plan is not guaranteed to produce or deliver the product ...

• More so ... if you do everything yourself ...• Making prototypes, pre-production lines, makes it possible

to test the technical feasibility "Proof of Concept" ...• ... but also to have a product to compare with potential

customers to make "Proof of Business!“• Based on the results, if they are not conclusive for example,

the option to outsource or conclude strategic partnerships can be a contingency strategy.


30

Lie by omission n°6: “Quantifying the value proposition”

• Saying "I am the best in this market," but being unable to prove it.

• If we identify a specific market, with a corresponding offer, if we look for competitors and alternatives, it is possible to identify a set of criteria/values for each of the offers on the market. By weighting each of these criteria it is possible to compare offers ... (graph) ...... And possibly quantify the actual value for the customer!

• Advantage: it facilitates the positioning and sale of the product → concept of return on investment!


31

Conclusions ?• Be aware of the risk of cognitive dissonance ...• Do not start out on your own ... Look for someone to

contradict you!• Surround yourself with people you trust with experience in

entrepreneurship ...• Get out of your office: Entrepreneurship is a contact sport ...- Meet as many potential customers, distributors, experts as

possible, expose them your project, note their reactions ...- Meet up with technical experts, talk with them, ask them

many questions, take note of their reactions ...


32

Conclusions (2) ?• Test everything that can be tested, from production to

sales ... with a minimum of fixed costs ...: do not invest or borrow when the tests are inconclusive

• Do not be afraid to perform sales tests with an MVP (Minimum Viable Product - minimalist product) even if you cannot deliver ...

• Forget the quantitative tests, focus on qualitative interviews ...

• If you conduct quantitative tests, determine well in advance what you want to refute and confirm (this also applies to the qualitative interviews).


33

Conclusions (3) ?• Your first sales are life size tests: play at being an

ethnologist, sociologist and anthropologist to understand how the customer decided how to use the product /service and what he thinks!

• Your first sales are laboratories that are part of the development process!

• The risky journey does not stop at the first sale, but you can greatly reduce the risk if you use the launch phase properly to figure out what to change quickly.

• Changing your mind is not dishonourable ...• The paradox of the Business Plan vs. Test ...


34

Conclusions (4) ?• How to seriously evaluate sales?• In fact, no aspiring entrepreneur can forecast sales, let

alone when the product is innovative.• The best solution is to have letters of intent or firm orders

(the best startup funding is the customer).• Provide reasonable and supportable assumptions, in line

with the target market, your value proposition and existing competition.

• Unravel the Excel formulas in line with the assumptions to understand the financial revenue model and reassure them both about your logic and your managerial skills.


35

Do not hesitate to call 1819 !

Are you setting up in business in the Brussels Region, are you an entrepreneur and are you looking for information?Save time: contact 1819 by phone or visit www.1819.be


36

Good luck, entrepreneurship is one of the last great accessible adventures

And don’t forget …


the “innocent lies” of aspiring entrepreneurs… ! bruno wattenbergh the lies of the new...

Documents

new entrepreneurs

innocent lies

aspiring entrepreneurs

future entrepreneurs

candidats entrepreneurs

bruno wattenberghthe

new cognition

cognitive balance