Guru Red Manifesto

What is the Guru Red Manifesto?

The Guru Red Manifesto is a collection of 52 practical truths I have assembled over a twenty-five-year career as an American entrepreneur. Little nuggets of wisdom I've picked-up from competing on the front lines of entrepreneurship. These truths resonate with me. They may not with you. Whether you agree or disagree I invite you to post your comments and experiences. The primary purpose of putting up this blog is to encourage a spirited debate. If you need a copy of Guru Red you can grab a free PDF at Seth Godin's ChangeThis web site. Seth has developed an ingenius distribution platform for manifesto's. Guru Red was in one of the first batches they published.

The Guru Red Back Story

My entrepreneurial career began back in the early 80's at the age of 26. Skip Roberts a computer scientist and myself raised $1 million of venture funding via an R&D limited partnership and launched Dynaquest - an early artificial intelligence pioneer. The success of Dynaquest was profiled by more than 300 print and broadcast outlets including the New York Times, Chicago Tribune, Inc., Venture, Fortune and a profile in the Wall Street Journal. We were among the first multi-millionaires created by the original PC boom. It was during this time that I began collecting my thoughts, observations and ideas in a journal. Since then I have executed hundreds of campaigns, engagements, transactions and financings in 38 different industries and now have a stack of 30 some journals documenting my successes and failures as an entrepreneur. During the mid-nineties I began to share some of these observations with partners, clients and employees. At first informally in meetings and conversations. Later in the form of an on-line journal, then as a website and finally as a PDF. The observations were rough, and described four basic entrepreneurial traits... agility, assertiveness, cohesiveness and subtlety. The observations were practical in nature, generated by the heat and friction of frontline entrepreneurialship. These are not politically correct niceties, nor are they ivory tower proclamations. Some of the observations were written during the tension of turnarounds and the terror of bankruptcy, while others resulted from the euphoria of closing a major deal or completing a large transaction.

Guru Red Receives an Unexpected Launch

Guru Red received an unexpected launch back in March 2004 from Heath Row at Fast Company. I am a coordinator for Fast Company's Company of Friends network in San Francisco. Heath asked for coordinators to send him "lessons learned" from the dot com era. I sent him a draft of Guru Red. Several weeks later Heath mentioned Guru Red in his blog and my email lit up. There was a visceral reaction to the "truths". People either hated it or loved it. The Guru Red web site received 3000 hits and more than 100 people requested there own PDF copy all from a short blog entry. Seth Godin, best-selling author and originator of Permission Marketing was one of those requesting a PDF. About this time Seth was developing a new information distribution platform specifically for manifestos called ChangeThis. Seth's vision for ChangeThis is to challenge the way ideas are created and spread. I received a phone call from Seth asking if I might be interested in Guru Red being distributed via ChangeThis. Of course I said yes. He was also nice enough to recommend his book agent Karen Watts of Lark Productions who is currently presenting a Guru Red book proposal to several publishers.

Guru Red Mobilizations

Small and medium-sized enterprises confronted with stagnating growth and organizational drift should consider a Guru Red Mobilization. A Guru Red Mobilization is designed to rewire enterprise DNA creating an operating doctrine focused on agility, assertiveness, cohesiveness and subtlety. What is an operating doctrine? An operating doctrine is a body of principles or truths that enable the execution of strategy and accomplishment of mission.

Guru Red Mobilizations customize the Guru Red Manifesto to your operating environment. At the end of the mobilization you have your own version of Guru Red that can be used to activate your troops! The Mobilization Weekends are conducted off-site and make a great opening or closing event for planning sessions, sales meetings or other executive retreats. Below is a sample agenda:

PRE-HEAT - PREPARATION
01. Telephone Interview
02. Prioritize truths and Mobilization Goals
03. Customize Mobilization Agenda
04. Distribution of Participant Preparation Packets

Day One

07:30am :: Check-in
07:45am :: Welcome | Agenda | Objectives of the Mobilizations
08:00am :: Briefing - Intro to Maneuver Theory - Agility, Assertiveness, Cohesiveness, Subtlety
10:30am :: Break
10:45am :: Presentation of the 52 "Truths".
12:30pm :: Lunch
01.00pm :: Define Mission + Strategy
01:30pm :: Discuss and Debate the 52 "Truths"
05:00pm :: Dinner Break

Day Two

09:00am :: Draft Customized "Truths"
10:00am :: Break
12:30pm :: Lunch
01:00pm :: Finalize Customized "Truths"
05:00pm :: Summary and Closing.

DELIVERABLES AND MATERIALS
The format is an excellent catalyst for challenging traditional operating doctrine. Participants will learn the practical business applications of maneuver theory and take back a powerful new operating doctrine and supporting rules of engagement. Each participant leaves with more than 500 pages of background documents, 250 power point slides plus a pocket-library of strategy books - Sun Tzu's Art of War, Miyomoto Musashi's The Book of Five Rings, and WarFighting by the United States Marine Corp.

COST, FORMAT AND SCHEDULING
The Mobilizations are held off-site. The cost of the Mobilization is $9,950. Additionally, the Mobilization client is responsible for all travel, lodging and production expenses.

Each Mobilization is limited to a single enterprise and a maximum of 5 attendees. Mobilization fee must be paid in full 14-days prior to the date.

Reserve your workshop date by calling 415.457.8449.

Subscribe to the Guru Red Newsletter

I will be weekly selecting one "truth" from the Guru Red Manifesto and discussing the experience or the inspiration that led to the "truth" in an e-mail newsletter and here in the blog. Click here to send me an e-mail to be added to the free newsletter. My privacy policy is simple. Your e-mail address will not be shared with anyone.

Truth #1: Do Not IPO

#1: STRUCTURE. Do not IPO

Public corporations are competitive albatrosses. Investment bankers, attorneys, accountants, VCs, Wall Street and the SEC are the only ones who really benefit from an IPO. The burden of public reporting overhead, the necessity to disclose competitively sensitive data, the operating restrictions mandated by quarterly performance horizons, the need to serve shareholders rather than competitive excellence, and the loss of discrete maneuverability all add up to extreme disadvantage. There are other ways to raise capital that do not create the competitive disadvantages inherent in a publicly-traded enterprise.

BACKGROUND: In the past I had the opportunity to take two of my companies public. I declined both times. As an advisor I have worked with many publicly-traded enterprises over the past ten years. Including several chasing the Internet bubble. And I have had the opportunity to work up-close and very personal with the investment bankers, venture capitalists, analysts and PR agencies fueling the IPO engine.

Telling American corporations not to IPO is like telling a parent not to send a child to college. For many entrepreneuers, going public is the ultimate achievement. The potential riches and recognition of an IPO are very seductive to a cash-strapped, over-worked and underpaid entrepreneur.

This "truth" was placed first on the Guru Red list for a reason. I believe that Wall Street today is the single largest negative influence on American capitalism. Yes, I understand that IPO's have made some entrepreneurs rich. Yes, I understand that publicly-traded securities fund acquisitions. Yes, I understand that depositing a $100 million check in the bank account of a debt-ridden enterprise has short term therapeutic benefits. But in my opnion none of these advantages outweigh all of the disadvantages of running a post-Enron publicly-traded enterprise.

What is your opinion?

Truth #2: Do not take money from a stranger.

This rule is in the same category as never taking candy from a stranger. Never build a business plan around the necessity to raise venture capital from outside investors. The first thing they do, even with a minority investment, is take contractual control of all key decisions. Instead, use customer money to finance your business. Design ”pay as you go” business models using customer deposits or advances. Use price discounts, exclusivities, and other tactics to entice alpha/beta customers to purchase. Run your business model for your customers - not investors.

BACKGROUND: I have raised several tens of millions of dollars for my enterprises over the past 25 years using an R&D limited partnership. traditional venture capital, fixed and revolving debt and customer and partner money.

Back in 1982 we raised $1 million for our start-up which was developing an expert system to advise small businesses on the right computer to buy. We used an R&D limited partnership because our technology was based upon artificial intelligence and because we couldn't get traditional venture capital to invest in us.

Our start-up was located on the south side of Chicago, I was a sales guy from the steel biz, and my partner was a computer science professor from Governors State University. Not exactly what the Silicon Valley - Route 128 VC's were looking for. Chicago was, and still is, a city the big time VC's fly over in order to get from one coast to the other.

We developed the technology, it worked, and we launched with a fair amount success. Now the big time VC's came-a-calling. We were invited to present our business plan to a prestigious gathering of VC's at a conference in Monterey, CA. There were 20 or so other start-ups all looking for money. Each of us had 2 minutes to get up and pitch our business plan.

We worked on our pitch for two months. We honed our business model and strategies in order to make us competitive with the other presenters. Back then, as now, the big time VC's ran in packs. They invested in the same deals and looked for the same deal dynamics. So we found ourselves evolving our plan to match the plans that the VC's were investing in.

We gave our pitch. It was well received and we then entertained several VC's interested in investing. They each pitched us on their funds and how they operate. Including how many board seats they would hold and the process they used to manage their portfolio companies. Over the next several years I would hear this pitch and go through this process many times over.

Two things I observed over this time:

1. We created our plans and operated our business on the basis of what we thought the VC's and investment bankers wanted... not necessarily what we thought was right. This rarely resulted in anything good.

2. We spent a significant amount of time catering to our investors and raising capital. Which was time we could of spent building our business and catering to our customers.

Did the investors/bankers add enough value to compensate for these drawbacks? No. Absolutely not. We would have been better served staying small and growing organically.

What is your experience? What are your thoughts?

Truth #32: Keep Secrets

All CEOs need an office with four walls, a ceiling, and a door that locks. Trying to manage a global enterprise out of an open cubicle is reckless and inefficient. There are daily conversations on issues ranging from pricing to employee evaluations, competitive conflicts, customer problems and cash flow crises that should be private. Open door policies should not be encouraged, especially unscheduled drop-ins or employees going around their superiors with an axe to grind. Open book policies should be replaced with “need to know” policies. Maintain secrecy in compiling plans and evaluating results. Ambiguity and subtlety are necessary ingredients for operational success.

BACKGROUND: There is a need for privacy in every enterprise. Many activities within the enterprise are
competitively sensitive and should not be open for all to see or share. I am continually surprised by how many sophisticated CEO's and executives continue to operate with open book - open door policies.

For the first part of my career I attempted to run with an open book - open door policy. Yes, there were some advantages. I developed many close relationships with my employees and when times were good sharing numbers with all employees was a morale booster.

But I had three situations in quick succession which caused me to change my open policy. First, I had a sales rep take my customer list with her to a competitor and begin poaching accounts. Second, I had to deal with a nasty union negotiation and my shop steward - who was free to come into my open office at any time - began taking information and conversations out of context and using it as negotiating leverage. Third, a bidding strategy for a major prospect was inadvertently shared with a relative by a sales clerk. The relative worked for the competitor and we lost the deal.

I was also growing weary of the need to lead two lives. With an open office everybody sees the bosses face and his emotional state. If I was pissed or frustrated I couldn't show it. I was holding meetings and conversations off-site and in the evenings on topics like terminations, cash flow problems, lawsuits etc. because my office didn't allow me the privacy to have these conversations.

I'm not advocating a locked down sterile operating environment. What I am advocating is a realistic policy on privacy and secrecy which respects the competitive needs of the enterprise and the operating requirements of senior management.

What are your thoughts?

Truth #4: The Customer Is Not Your Friend

The customer is not always right. The relationship between customer and vendor by definition is built on tension. Tension characterized by the customer who wants to minimize price. And the vendor who wants to maximize price. These are conflicting objectives. Customer-centric strategies that focus on delighting the customer ignore the economic realities of delivering this strategy. This does not mean that you do not listen to your customer or respond to customer needs. It means the customer voice is one of several voices that need to be reconciled. Any customer strategy first and foremost must begin with the objective of maximizing short-term profit. It is not possible to lead a sales force schooled in delight and collaboration into a market share battle demanding tension and confrontation.

BACKGROUND

I recently completed an engagement with Gramicci the outdoor clothing producer. Gramicci got it's start back in the mid-eighties by producing a pair of climbing pants that nobody had requested. The pants were ugly, available in one color and wildly inconsistent in sizing and quality.

But hardcore climbers loved the new pants because they addressed all the issues climbers had with shorts and pants available at the time. It wasn't until the climbers saw somebody else wearing the new Gramicci pants that they saw the utility and the real beauty in the design and started buying. Gramicci would go on to revolutionize the casual wear category with it's unorthodox style.

Rob Rodin former CEO of Marshall Industries the billion dollar distribution business and former client, wrote a book in the late nineties titled Free, Perfect and Now. The thesis of Rob's book being that if you ask a customer what they want they will tell you - I want it free, I want it perfect and I want it now. A mantra that Rob heard over and over from his customers when he asked them how he could better serve them.

Whats my point? Listening to the customer is but one of many voices that you need to listen to. Most real innovations in business come through the vision of an entrepreneur who sees an opportunity that nobody else can visualize.

Winning and maintaining a customer relationship is an intense competitive conflict between you, the customer, and the competition. Quite often the most difficult competitive conflict is the one between you and your customer.

What are your thoughts?

Truth #31: Stay off the radar screen.

There are few good reasons for an enterprise to seek high levels of visibility. Bad news is more newsworthy than good news. Over an extended period of time, most high visibility companies will generate more lines of bad print than good. And all the while your are providing competitive intelligence to existing and potential competitors. Unless your business model or industry requires high visibility, keep your business to yourself. Your strategy and tactics should not be divulged to anyone. Maintaining secrecy while developing plans and executing strategy is paramount to most successful initiatives. Keep the books closed and your intentions ambiguous. Confide in a small circle of compatriots. Do not publish wins and losses. Do not tell the enemy how much ammunition you have left.

BACKGROUND

Back in the late 80's I was negotiating with one of the large Japanese trading firms. I had been to Tokyo several times and I always found my Japanese hosts to be well prepared - at times uncannily prepared for our negotiations. They seemed to anticipate my every move - and had well constructed arguments to every objection I raised. Further, they had gone to great lengths to understand the American way of doing business. I on the other hand was not nearly as well-prepared and went over to Japan assuming they would do business my way. The American way. Boy was I wrong.

As it turns out my Japanese hosts had gone to great lengths to background my company, me, my executives... even my family. They knew where I went to college, my GPA, the marital status of my parents, the name of my boy and where he went school. Additionally they knew all of my company's creditors, how much money owed to each creditor, threatened lawsuits, etc. More chilling to me was the fact that they also knew my pricing strategy for key accounts, my operating plan for the next three months and my cash flow projections for the next 12 months.

I found out about this after a sympathetic employee showed me my dossier on a late night train ride back to Tokyo. He had been my escort on a day trip to tour facilities at a manufacturing concern part of our negotiations. As it turned out my friend was secretly rooting for me to win on the premise that I might offer him a position in America. He spoke excellent English and proceeded to walk me through
the process Japanese trading companies go through in order to profile potential partners. A lot of what he explained to me was illegal in America. But totally acceptable in Japan.

The dossier itself was a work of art. I couldn't read any of it so my friend interpreted for me. The way they had collected and assimilated the information fascinated me. As it turned out their primary source of information were my own employees. Several late night drunken Houston forays paid for by my prospective Japanese partners had really been intelligence gathering sorties. My arrogance dangerously fueled by an equal measure of naivete had allowed the Japanese to play me like a fiddle. I wouldn't let that happen again.

Truth #6 Do Not Market

Do not market. Campaign. Reconcile current competency with current opportunity. Maneuver your forces. Exploit center of gravity. Calibrate time, space and energy. Combine segregated sales and marketing functions into an integrated campaigning function. Replace soft selling metrics like satisfaction, delight, recall and impressions with hard campaigning metrics like objectives, revenue and margin. Build revenue engines and not marketing organizations. Focus on speeding up cycle time. Develop and amplify competitive instincts. Utilize logos, ads, commercials, trade shows, etc., as ammunition and weaponry, not as artistic expressions or award opportunities

BACKGROUND

Recently I met with a very angry CEO of a mid-size enterprise software firm in Silicon Valley. His marketing organization had developed and launched an “awareness” initiative consisting of direct mail, banner ads, TV and radio spots, trade ads, a PR blitz and a customer loyalty push. The initiative was
conceived by his marketing organization with support from a brand consultancy and a PR agency.

At the end of six months the initiative had received multiple, prestigious awards for creativity and customer intimacy. The PR agency had collected hundreds of press clippings, mentions, and articles. An awareness study showed a 20% increase in brand awareness. But revenues did not increase. His pipeline did not increase. The quota carrying sales reps did not hit their quotas. The CEO missed his revenue targets. And his CFO had to tap an emergency credit line to fund a cash flow gap.

One of the key tactics advocated by his marketing director was a change in their sales culture from selling to building relationships. The sales force was literally told to stop doing deals and start building relationships. They obeyed and the deals stopped. Aggravating the CEO’s state of mind was an article in his industry trade journal which profiled his company’s awareness initiative. His marketing director was interviewed at length about their “successful” initiatve as evidenced by all of the awards, clippings,
mentions and awareness. The marketing director then resigned and went to work for the brand consultancy.

Anybody else seen this happen?

Truth #7 Generate revenue today.

Generate revenue today. You have to make a penny before you can pinch a penny. Revenue is the lifeblood of the enterprise. The dumbest move made is cutting marketing and sales budgets when faced with an industry downturn. Way too many CEOs take revenue generation and customer relationships for granted. Generating revenue is a risky, unpredictable exercise that cannot be planned or programmed with accuracy or consistency. Generating revenue is an exploitative, opportunistic exercise that demands superior competitive maneuvering in order to survive and thrive. Every “click” of value-add revenue must be sold for two “clicks” of operating margin. Resources spent on long term branding and awareness campaigns are wasted unless they are tied directly and measurably to immediate and short term revenue generation initiatives.

BACKGROUND

In 1999 I was visiting a company recently acquired by a client. I was there to assess the integration synergies between the two sales and marketing organizations. The company, which was more than 75 years old had stopped growing and put itself up for sale in order to cash out the equity holders. I sat down with the CEO of the company and outlined the purpose of my visit. My first request was to meet with the head of sales. He looked at me perplexed and said:

"hmmmm, we don't have anybody in charge of sales, but we do have Carol my VP of partner relationships (not her real name), she's responisble for all of our partner initiatives".

I told him that I would like to start with Carol then.

My first and only meeting with Carol was pretty rocky. I was simply trying to diagram their sales process and had hoped that Carol could give me the information. Instead I got an interesting lecture on sales. Carol told me that:

"first, we don't have customers or clients we have partners. Second, we do not sell. Selling is a dirty word. Instead of selling we collaborate with partners for whom we try and grow their business. Third, we do not have sales reps, sales managers or a vp of sales. We have me and as I said my job is to grow the business of our partners."

I could sense that I had hit a nerve with Carol and that I probably wasn't going to get the information I needed. I decided to try one more question which was:

"who is responsible for asking for the order?"

Once again I was foiled by Carol who lectured me further that:

"nobody should ever ask for an order. This was not civilized and puts our partner in an uncomfortable position."

She concluded with:

"our partners award us business based upon how well we perform for our partner. There is no reason to ask for the order."

With this I politely moved on to other topics.

Carol's company had been in the doldrums for several years. One of the reasons why my client had purchased the company had been their benign approach to business development. The reason I highlight this experience is because it was perhaps the single greatest violation of my generate revenue today rule.

A continuing theme you will get from me is my opinion that the sales and marketing suite needs more competitive instincts and fewer nurturing instincts. See the problem with Carol's approach was that while she was sitting back and waiting for her partners to reward her with business her competition was in there ransacking her marketshare.

Don't get me wrong, helping to grow a customers business is important. And yes if you do that well then there is a good chance the customer will reward you with more business as long as everything else you offer is competitive (there's that nasty word again!). BUT this is where I get extreme heartburn. I want my sales force focusing on growing my business NOT my customers business. If my sales force brings in a deal where I'm required to sacrifice my business in order to grow my customers business I say no. Actually I say no F@#KING way.

Most of my experience has been gained with start-ups and turnarounds where you don't have the luxury of sitting back and waiting for a customer to give you business. Or waiting for a customer delight strategy to actually deliver sustainable loyalty. Or waiting for a branding campaign to actually generate incremental revenues. Come to think of it, I have yet to see any of these initiatives pay off in larger more established enterprises with the resources to be patient. Which brings me back to the essense of this truth... every single day you should be focused on those efforts that will bring in revenue today. Not tomorrow. What is focused? 80% of your time and resources should be focused on today.

What are your thoughts?

Truth #9 Know How to Fight.

Quality is the key route to increasing market share. Market leaders tend to share several key characteristics: They tend to have higher quality than their competitors. They compete on quality not price. They tend to benefit from unique proprietary rights such as copyrights, distinctive trademarks, patents, and trade secrets. These proprietary rights provide them with unique sources of quality. “Quality” amounts to no more than delivering those products and services customers most want. This type of quality is NOT the conformance to the specifications type of quality that most engineers focus on, but is instead conformance to customer wants of the type most marketers focus on. They neednʼt be of particularly high quality just superior to that of your competitors. Donʼt buy market share with low prices. This is self-defeating and capital intensive. The value of what you gain is eaten up by its cost of acquisition.

BACKGROUND

Never sell on price! Never sell on price!! Never sell on price!!! The only time selling on price is acceptable is if it is part of an overall strategy with a credible end game resulting in pricing power. The Justice Department is filled with attorneys who have decided that consumers have rights granted to them by the United States constitution to never-ending price discounting. The word competitiveness has become interchangable with the word cheap. As if the only way to compete is on price.

Back in the day a sales rep was ashamed if he left any money on the table. When you won a large account the first thing the sales manager asked was where was the other guy? How much dough did you leave on the table? Yes, I know some of you reading this will consider the notion of trying to raise price, as quaint or out-of-touch. But my point here is simply the fact that monolithic competitive strategy based upon selling the lowest price continues to decimate global industries.

The key to long term sustainable market share is quality. Not Tiffany or Rolls Royce quality, but good stuff, that works well and creates an emotional bond with the customer. Steve Jobs at Apple Computer is one entrepreneur who understands this. The niche he has crafted for Apple is strong, vibrant and continues to grow. Customers love Apple products. His Ipod strategy is perhaps one of the most ingenious product launches ever. Why is Jobs so succesfull? Not because he listens to customers. But because he instinctively understands what works. And what sells. See Steve designs stuff he wants.

I have long railed against CPA's and lawyers in the executive suite because of their lack of vision. Law school and most MBA programs breed the Steve Jobs out of the system. What you end up with collectively can be found in the executive suites of major airlines who never really figured out how to run an unregulated industry.

Consider this...every time you introduce a new feature or service you should raise price. Alternatively, if you can't get more money for an improvement should you offer it anyways and eat the cost? Or, better yet, what do you do when your idiot competition continues to give away the store? Even as their margins erode, bank accounts drain and credit lines evaporate?