ANDREW RAZEGHI BLOGS

The other day, the co-founder of one of the companies I am an investor in, asked me how I knew a particular person. I found myself having difficulty answering the question for one simple reason: I know the person rather well (and he knows me), but we have never met face-to-face. It got me thinking: what does it really mean to know a person in a world where everyone is only a few LinkedIn connections or Twitter followers apart? It seems the acquiantance is fast becoming an artifact of the past? And what are the implications of these emerging relationships on innovation?

In my work with start-ups and with corporate innovators, I’ve come to learn alot over the years; however what I’ve really come to appreciate are the strength of the relationships I’ve made and I’ve seen others make with those around them. I’m not talking about Twitter followers and Klout scores, rather I’m talking about the quality of the relationship that exists between two people.

While it goes without saying that we are hyper-connected today, I believe we are further apart in understanding what it takes to nurture great relationships - relationships that bear fruit for both individuals involved. Relationship-building seems to have taken a back seat to “follower building”. Just because someone follows you on a social network, does not mean they listen to you, act on your advice, or - frankly - care. Most social networks are like big, socially-awkward, Homecoming dances replete with wrist corsages and sky blue tuxedoes screaming out “love me, want me, hold me, please be my friend.” And, believe me, my tux is just as ugly as yours.  

So, here’s what I think we can all do in order to get back to the root of relationships, the backbone of successful innovation. It starts with an understanding of what innovation is and what it’s not.

The difference between creativity and innovation is simple. Creativity is a cognitive science. It’s about how you think. Innovation, on the other hand, is a social science. It’s about how you interact with others. While there are many creative people in this world (in fact, I’d argue everyone is creative in some capacity); there are fewer innovators (those who can apply the collective creativity of a group towards a shared vision to solve a problem).

Here are common mistakes I see people make (and ways you can work to correct them):

1) Wanting (vs Giving). A VC friend of mine, Matt McCall at New World Ventures, summarizes this nicely. To paraphrase Matt: “If the first time you meet me you are asking me for money, you’ll likely not get it.” Give before you get. You can give of your time, your knowledge, your own network, your skills, talents, sweat equity. Successful people like to help people. “Give and ye shall receive.”

2) Don’t Rush It. Because of the fact that we are so connected “technically”, we mistakenly believe that just because I can find a person quickly translates into developing a relationship as quickly. Humans simply don’t work that way. Don’t rush it. If you consider every person you meet as a transaction, that’s all it will ever be. Invest the time on the front-end to get to know a person. Listen to them. Find out what they are trying to achieve. Even the most successful people on the planet have dreams and aspirations yet unfulfilled. Find out what those are. Be interested in them. Who knows? Maybe you’re the person that can help them most?  

3) You Don’t Need a Reason to Connect. Every time you meet with someone, you don’t necessarily have to have an agenda. Sure, it seems unnatural to just want to “get together”, but frankly, friends don’t have agendas. In fact, I would argue the absence of an agenda is what makes the best friends. Try getting together with a person you want to meet “just because” you’d like to meet them. And, when you do, don’t ask for anything: no favors, no introductions, no money. Just talk.

4) Working With Time Constraints. My previous dean at Kellogg (Dipak Jain), like most CEOs, was always pressed for time, yet very valuable mentor to our students. So, in a creative way of finding time, Deepak would offer to meet with students on his drive home from the airport. They’d agree to pick him up and he’d agree to listen! He got a ride. They got advice. Win-win.

5) Avoid Gimmicks. Be Honest. I don’t mean to sound overly-simplistic here, but the old adage “if you want money ask for advice; if you want advice ask for money”, well, I’ve seen it go sideways a lot recently. A cliche out of control. Look, if you want money, ask for money. If you want advice, ask for advice. Investors (good investors) want to invest in great ideas and amibitous founders. It sounds good as a cliche, but frankly, it only makes the agenda part of the relationship that much more obvious.

6) Create Your Brand. Your personal brand is what people talk about when you’re not in the room. What do you want to be known for? (and not a “results-driven professional who fosters innovation and excellence”). Rather, what do you want people saying about you in very speicifc terms? Wouldn’t you rather be talked about by those you admire and those you mentor as a person who “made it happen” for them? (vs. a person who suggested that they make it happen?).

7) Let Them Win. If you want to deepen your relationships with others, do as my good friend, Chris Eastwood, an exec. at Time, Inc., often says: “Let them win.” Quit looking for all the holes in their argument. Quit trying to sound or look smarter than them. Let them win. Better yet, help them win.

Now, if someone can figure out a way to reinvent social networking with these principles in mind, move over Facebook.

Many know it, but few may know the reason it was written: to raise money. There is perhaps no greater testament to the power of words. Innovators, entrepreneurs, and dreamers, take note of your words (the story you are telling) the next time you need to convince someone to invest in you.  

The New Colossus

By Emma Lazarus, 1883

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
“Keep, ancient lands, your storied pomp!” cries she
With silent lips. “Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”

Think differently. It’s advice as useful to would-be innovators as swing differently is to golfers. Sure, if you’re having a rough day on the golf course, you may want to change-up your swing, but if you don’t know what’s wrong with your swing, how on earth would you know how to change it?

The fact is: we know how innovators think and so why not attempt to think like them? As it turns out, they don’t think “differently”. They think deliberately - in specific ways. Here’s how: 

1) Think Big Early. Vision is not what you see. It’s what you believe. You need to stretch your imagination because after you overlay the realities of the market, operational, and financial constraints, the idea you eventually introduce to market will be a fraction of your original aspiration. For example, Walt Disney’s original vision for his Florida park (orignally called “Project X”) was not a “thematic” vision. It was a “solution to the problems of our cities”. He was talking about schools, housing, healthcare, transportation, etc. Unfortunately he died before his vision was realized and we ended up with, EPCOT. Think big, early.  

2) Don’t innovate. Solve problems. Innovators don’t try to “be innovative”. They focus -obsessively-focus - on problems that need to be solved. Trying to innovate is like trying to be funny. It doesn’t work and often ends-up in well-deserved heckling from passersby. Enter stage left: the billion-dollar smokeless cigarrette, Gerber singles baby food for adults, and the Pontiac Aztec. Don’t hang innovation on the wall. Hang problems on the walls. Solve for those.

3) Innovation is not only about new products. Innovation is about finding a better way to do how you do what you do such that customers choose you. That could involve alternate distribution channels (e.g., NowSpots.com), new ways of pricing and/or capturing value (e.g., the freemium model), improved customer experiences (Giveforward.com), brand innovation (e.g., Virgin), new business models (Tap.Me, Inc.), better processes for driving costs out of production (e.g., Dell), etc. Think more holistically about “innovation”. It’s as much about the how as the what.

4) Pivot. Pivot does not mean “give up on the original idea”. Nor does pivot mean “move both feet”. What pivot is intended to help people do is to remain steadfast to the spirit of your idea while changing applications and perspectives. For example, the Honda Element was intended to be purchased by 20-somethings, but found success with baby boomers (thus jokingly referred to by teenagers as the Honda “Elderment”); group-dating website Ignighter was launched in the United States, but found growth in India; and - perhaps most famously, Groupon was originally The Point (the furthest thing from a group coupon website one could imagine). If what you set out to do is no longer working, be prepared to try alternate channels of distribution, target a new customer segment, change-up the underlying incentives offered, etc. Don’t give up, change-up.

5) Don’t invent, assemble. As it turns out, many great innovators don’t invent anything. They “design” the model or the system out of existing ideas. For example, Henry Ford did not invent the assembly line. He “assembled” it (pun intended). He took 3 existing concepts and - to quote Ford - “invented nothing new”. Concept 1: he came to Chicago and observed our meatpacking industry and asked: what if I did that in reverse? Rather than disassemble things (cows and pigs), I’ll put them together. Concept 2: he borrowed an idea from the firearms industyr (inter-changeable parts). Concept 3: he borrowed yet a third idea from the tobacco industry (continuous flow production). Put them together and “invented nothing new”. Don’t [only] invent, assemble.

6) Observe. Some of the best wisdom I’ve ever received was from Paul Orfalea (aka “Kinko”). “Andrew,” he said, “the problem with vision is that people see with their ears” (what other people say) and thus you need to learn to “listen with your eyes”. Observation is more powerful than conversation when it comes to innovation.

…okay, that’s it for now - gotta’ catch a flight! But if you want to learn more, pick-up a copy of my book, THE RIDDLE: Where Ideas Come From and How to Have Better Ones (Wiley). Or feel free to email me. andrew@andrewrazeghi.com. �

“We believe noble intentions should be checked periodically against results. We test the wisdom of retained earnings by assessing whether retention, over time, delivers at least $1 of market value for each $1 retained.” - from Warren Buffett’s letter to shareholders, 1984 Berkshire Hathaway Annual Report

In full disclosure, I am not a finance professor (nor do I play one on the Internet nor did I do particularly well in my undergraduate finance courses), but, if you ask me: if I were stranded on a desert island and allowed only one financial metric by which to measure the efficacy of a firm’s management, this is it:

Market Value Added = market value (equity and debt) - total capital

When all is said and done, it answers the question that really matters: How capable is management of “managing” given the risks inherent in the industry/category in which they compete and the capital investors bestow upon / entrust to them?

Fact is: as an investor, while I am interested in sales growth, earnings growth, TSR, etc., I am only intersted insofar that - at the end of the day - I get out more than I put in.

In the first year of our marriage, my wife and I had our first fight at, of all places, the grocery store. We fought over, of all things, sauce for making Asian stir fry.

She grabbed the thick, syrupy kind as I reached for the traditional soy sauce – the good stuff. That’s when the disagreement began.

There we were: she with her bottle and I with mine. “No, no, no,” I said as I pointed to her bottle, “not that stuff.” Holding up a bottle of Kikkoman’s finest, I continued defiantly, “This is what we need!” “That’s all you’re going to put on it,” she asked. “All?” I responded. “If by all you mean this is all you all you need to create a party in your tummy, than yes, this is all!”

The conversation quickly escalated. She began wondering who the hell she married and I the same and five minutes later we checked-out of the store with, you guessed it, both bottles and our egos squarely intact. Funny enough, even though we have been married for more than ten years, we still buy two bottles of Asian stir fry sauce - although we no longer argue over them. Why do people disagree over things as innocuous as condiments? It has to do with the way we were raised and, more importantly, what we were raised with.

We crave things that are familiar to us. And nothing is more familiar than family.

In an Australian study, McNair Ingenuity Research asked more than 600 people whether they used the same brands as their parents. The study focused specifically on eight product categories: soap, toothpaste, washing powder, coffee, cars, banks, insurance, and newspapers. The product most likely to stay with consumers throughout their lives: newspapers. Roughly 43 percent of consumers read the same newspapers as their parents. This isn’t all that surprising since there aren’t that many different newspapers distributed widely (independent of local rags). Toothpastes, banks, and coffee came in second where around 30 percent of respondents used the same brands as their parents. And nearly 20 percent of respondents drove the same cars as their parents (most consistently among men).

In spirt of the strong loyalty people have to products from their youth, all marketers search for opportunities to get people to switch brands. However, there are only two times in the life of a consumer when switching brands tends to occur: when people hit their early 30s (i.e., move in with their partners) and when parents become empty nesters (i.e., when their children move out).

In the former scenario – moving in with partners – the study found that the partner who does the shopping maintains their loyalty to their brands while the partner who does not is often forced to convert to “other brand.”

In the latter scenario – empty nesters seeking new brands - suggests that influence runs in both directions: parents influence kids purchasing decisions but so too do kids influence parents’ decisions. And so, you can imagine the energy that marketers expend to win over new customers at these important “life stages”. However, trying to break this cycle – to change what a person wants – is not the only opportunity to create new brand loyalties.

Marketers have a third option for wooing non-customers: don’t break-up the marriage between brands and people. Let loyalties remain in tact.

One marketer that has figured this out is the relative newcomer to the Australian retail banking industry: ING Direct. Rather than require that their banking customers switch banks, ING has devised initiatives to allow their customers to maintain their existing relationships – to “date other people” as it were when it comes to banking. According to ING Direct’s head of Marketing & Communications Amanda Houlihan, “Our research showed us that Australians are less inclined to change banks, which is why we don’t require them to.” As a result, “our customer base is growing at a rate of between 15,000 and 20,000 per month and in terms of demographics, they are from all age groups, all income brackets and all parts of the country.”

All too often, companies make the mistake of overzealous expectations. While it sounds good to own 100% of a market, the fact is, most consumers don’t want to give any company 100% of anything in their lives (unless they must). 

When designing your marketing strategy, consider how your new products, brand, and innovation pipeline exists within the larger context of your customers’ lives. Allow them to play with others. And use those relationships to prove your worth. 

Having competitors is the best thing for innovation. Encourage and invest in the category versus trying to protect it.

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- Andrew Razeghi (follow me on twitter @andrewrazeghi)

They got in. You dropped out.

They went to school. You went to work.

They learned. You earned.

And here we are today.

Today has been marked on calendars for decades. It is a day for which many parents have planned, saved, and hoped for since their children were born.

Today, idealists, disguised in black gowns and flat hats, will update their virtual avatars while a parade of perfect strangers - the famous, almost famous, and used-to-be-famous lend inspiration and wisdom upon those gathered.

There will be speeches. And speeches. And speeches.

There will be pomp. There will be circumstance. But most of all there will be mixed emotions.

Smiles will rise. Tears will fall.

The best years of life may have ended, but alas, a new beginning awaits; something greater, a commencement.

And so goes the uplifted words of the commencement speech.

To mark this occasion, new graduates will waltz to somber brass as their all-too-complicated-to-pronounce full names are read aloud to those who share those all-too-complicated-to-pronounce names.

These new graduates will pause to greet (many for the first and only times) those they have rebelled against for the greater part of four years. And when they do, they will shake their hands.

This is graduation day.

For you, however, today is just another Saturday; just another day in an otherwise misunderstood, but chosen and blessed life.

For you, school was something you entertained because, well, that’s what you were supposed to do. Get on the bus. Sit in class. Listen. Raise your hand. Answer the question. Take the test. Pass. Repeat as necessary for the greater part of 20 years and you too would have been here today, commencing.

For you, however, none of this made sense. Ever.

You talked when others listened. And they called you disruptive.

You asked when others answered and they assumed you were slow.

You got distracted when others focused and they sent you to the school nurse.

Your legs shook. Your mind raced. You didn’t fit in.

You are the entrepreneurs.

For you, there will be no commencement speech, no graduation party, and no tearful goodbyes.

For you there will be work.

There will be calls to make, orders to take, and products to ship.

There will be work.

There will be customers to meet, bills to pay, and floors to clean.

There will be work.

There will be investors to manage, employees to engage, and a family to feed.

There will be work.

There will be work.

There will be work.

But because of you, college graduates will have jobs.

Because of you, problems will be solved.

Because of you, we will have measures by which to mark our creativity.

Because of you, we will have cases to be written, books to be published, and buildings to be dedicated.

Because of you, we will have stories to tell college graduates on this day.

Because of you, today is a good day.

Because of you, tomorrow will be better.

And for that, thank you.

-Andrew Razeghi

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Rebels, misfits and mavericks. My country ’tis of thee. Nonconformists, dissenters and radicals. Sweet land of liberty. Free spirits, freethinkers and freeloaders. Of thee I sing. Who can’t but love a country whose demographic mix has changed vividly since its founding, yet whose behavior remains — more or less — the same? Case in point: Thomas Paine, America’s first spammer (circa 1776). He littered the new world with pamphlets advocating independence from Britain thereby denouncing his government. Fast forward a few hundred years — Paine’s a sanctified revolutionary hero. Ya’ gotta’ love it! 

It should therefore come as no surprise that this great nation is also home to Marion Barry — elected the mayor of our nation’s capital; caught on tape and convicted of drug use; and four years later, he dusted himself off, ran again and won. What a country! Of course, this is not a new phenomenon. We are a country of rule-breakers. It’s our thing. No doubt — a few short years from now — President Richard Nixon will be remembered more for “opening China” than closing blinds. Is it any wonder that only 20 percent of Americans own passports? Who would want to leave this place? 

Then there is this: There are an estimated 12 million illegal immigrants living in the United States and, according to the United Nations, the United States is second only to the United Kingdom in total number of asylum applications (with more than 60,000 applicants in 2003). Who can blame them? Where else can you express yourself so creatively? And once they get here, consider where they go: Vegas, baby! Sin City is the seventh fastest-growing city on the planet. At 5 percent average annual growth, move over Shanghai, aces are wild! If the United States were a modern-day corporation, we would praise its recruiting and retention strategy — particularly in a world where the average 18-34-year-old American spends only 2.9 years in a job before moving on to the next. Not only do we attract people, we can’t get them to leave. We are the loyalty experts. Although the nightly news may suggest that people hate us, the facts suggest something entirely different. It seems that people love us. While the dire conditions immigrants leave behind are often noted, consider — for a moment — what they are coming to — in droves. We must be doing something right. 

We must have a secret, but what is it? According to the National Centers for Disease Control and Prevention, more than 34 percent of American adults are overweight, thus accounting for more than 300,000 premature deaths each year. Throw in our hefty 15-year-old males (10 percent whom are obese) and we rank as the fifth chubbiest country on the planet, yet they still come. According to the Third International Mathematics and Science Study, the United States ranked 15th out of 16 nations on math tests. In physics, we confidently placed dead last, yet still they come. We are backstroking in a sea of debt (to the tune of $8 trillion, according to the Bureau of Public Debt), yet still they come. 

Roughly 42 percent of American households own a gun, resulting in 30,000 gun deaths each year. We are armed and dangerous, yet they still come. We have 1 lawyer for every 190 residents. We sue everybody for everything, yet they still come. We have the second-highest divorce rate on Earth (second only to Aruba), yet still they come. 

And, to make matters worse, we simply refuse to adopt the metric system. Yet, they still come. 

People around the world burn our flag, steal our music and desecrate our embassies, yet they still come. But why? What is our secret? What do we have that they want? It’s simple, really. The United States of America is the land of line dances and second chances. We are the land of hope — the land where my fathers died, land of the pilgrims’ pride. Our streets may not be paved with gold, but our hearts are. We are good. Each American — no matter color or creed — shares one thing in common: We are believers. We are the hopeful, the courageous and the creative. We believe that if our intentions are good and we work hard, we can make a difference. And so, we do. 

We have hope. Although we may not be the smartest, the fittest or the most globally conscious people on the planet, think about what our fast-food-cravin’-dope-smokin’-videogame-playin’ 15-year olds have grown up to achieve over the past 100 years (now that we’ve locked-up the 2 million most rambunctious Americans who crossed the line — giving us the highest prison population on Earth. Incidentally, China, with four times the number of people, is a distant second. At least China can’t take that away from us). In this sweet land of irony, think about what hope has done for America. Between 1901 and 2002, residents of the United States have been awarded more Nobel Prizes than anyone on the planet — 28 in economics; 49 in physiology or medicine; 40 in chemistry; 46 in physics; and 17 for peace. We follow only France in the Nobel Prize for Literature with 12. We are intellectually curious and endlessly creative. This is why they come. 

Since 1896, the United States has won more gold medals at the Olympic Games than any nation (with twice the number of gold medals as the “always a bridesmaid” second-place winner — the former-Soviet Union). We are competitive, willful, disciplined and confident. This is why they come. We give. And it’s not only the world’s two richest men who are global philanthropists (by the way, they too are Americans). More than 70 percent of American households give money to charitable organizations and some 60 percent volunteer their time. We care. This is why they come. Despite our shortcomings, they still come. They come to America because we believe in the capacity of the human spirit to achieve when no one else believes. We have hope. Hope is as central to the American ethic as apple pie and summertime. Hope is our comparative advantage. Hope is your advantage. 

Therefore, in celebration of this Memorial Day, take a chance. Do something crazy; something out of character. (Keep it legal, of course.) Start a business. Take a class. Go to Vegas. Teach. Whatever you do, use the unique gift granted to each and every American. Use hope. Promote it. Act silly. Dance without music. Change something for the better. Putting hope to work is perhaps the most American thing you can do. And then, from every mountainside, let freedom ring! �

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“On the first day of life there is nothing to remember and everything to hope.” - Aristotle