Succeeding as an entrepreneur requires both a dream and a bit of solid determination. While those two ingredients are a part of any journey to the top, start-up businesses also require detailed knowledge of the market in which they hope to succeed. One common flaw is the thought that success can only be attained through growth in every area of the business. Andy Kessler, author and entrepreneur, provides 13 rules to test one’s entrepreneurial mettle in his book “Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs.” In this interview, he discusses where start-ups lose their way and why job displacement can be a good thing.
This book does an excellent job of answering the question of why some start-ups are successful and others crash and burn. Where do most start-ups get bogged down?
Most start-ups get bogged down on picking the market that they’re going to attack. There are a lot of great ideas, and many of them are viable but often not big enough and not grand enough to go and create a sustainable business. What I did with this book, ‘Eat People,’ which I wrote for entrepreneurs and for job seekers and even for investors, is write about how to find the next big thing.
The rule that provides the book’s title, ‘Eat People,’ is a problem for so many companies. When a company starts to grow, the automatic response is to keep adding people. Why is this a mistake?
It comes down to productivity. It’s partly internal productivity, trying to do more with less people in your company and trying to automate tasks and using information technology, which gets cheaper and cheaper every year with servers and storage and mobile devices. It can displace a lot of workers that you may have hired in the past, whether it was secretaries or administrative assistants. But even sales and marketing organizations are being replaced by search engine optimization and the like.
But it’s also a point or two for markets to go and attack. Just look in the last decade or so at jobs that have disappeared, from telephone operators to travel agents to bank tellers to stockbrokers to stock traders, all displaced by technology. So, not only can entrepreneurs use this rule inside their companies but they can use it as a filter to go and attack existing jobs. If you can find markets and you can go out there and eat people, you can go and disrupt a lot of those jobs, then I think you’re really on to something.
One key piece of advice in the book is for companies to get horizontal. How can someone in an organization convince other leaders of the necessity to leave vertical in the rearview?
IBM did everything from designing chips to wrapping plastic around it to writing code to sales and service. IBM did everything. The PC business took that model out at the knees.
What I think you have to do is say, ‘Am I duplicating a sales and distribution organization that my competitors have already created?’ If you have world-class technology and patent protection, copyright protection and other protection that you need, why not just go into licensing mode rather than hiring all these sales and marketing people? It’s really business development staff and a lot of engineers to maintain and move forward that technology, but I license it to everyone in the space. So, instead of having 15 percent market share in a market, I might have 95 percent market share of my sliver and all of my former competitors are now customers that are paying me license fees. You end up with a much higher margin business and a much more profitable company. It’s really hard to pull off, but if you do, I think you’re onto grabbing a tiger by the tail.
Eat People: and Other Unapologetic Rules for Game-Changing Entrepreneurs
By Andy Kessler
Portfolio ©2011, 256 pages, $25.95
About the book: “Eat People” is a rule book for entrepreneurs, investors and potential business partners. It helps people test their ideas to ensure that they won’t just enter a market, they’ll dominate it.
The author: Andy Kessler was co-founder and president of Velocity Capital Management, an investment firm that provided funding for private and public technology and communications companies. He left the hedge fund business to become an author. He is a contributor to the Wall Street Journal and has written for Wired, Forbes, The Weekly Standard and The American Spectator.
Why you should read it: Kessler’s expertise in evaluating entrepreneurs and their ideas is well established. He claims to have evaluated Facebook founder Mark Zuckerberg and Dell founder Michael Dell before they became big names in the technology sphere. Kessler’s straightforward delivery of his rules for entrepreneurs removes the guesswork that can bog down the path to progress.
Why it’s different: Kessler’s book forces readers into a more honest evaluation of their ideas. While much of the literature today suggests entering areas such as sustainability and efficiency, Kessler holds the belief that these are limitations placed on entrepreneurs. His argument is that businesses should strive to make the “pie” of the global economy as big as possible. Sustainability, according to Kessler, implies limiting a business to reallocation of what already exists. It’s a rarely heard take on today’s market that will intrigue many readers.
Can’t miss: “Be Soylent — Eat People.” As he indicated in his interview with Smart Business, Kessler puts the highest price tag on productivity. With that in mind, this chapter helps companies discover how to achieve rapid growth without carrying the baggage of added cost in the form of extra employees. This chapter, and much of Kessler’s book, suggests that people will never be the more cost-effective option when compared to technology. Readers will learn the secrets of culling the human herd and parlaying the results into market domination.
To share or not to share: With its radical approach to entrepreneurial ax-swinging, “Eat People” has secrets that executives will not want their competitors to learn. This is a book to keep within reaching distance but away from the prying eyes of others.
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