If your exit isn’t planned, your exit will be forced. I was forced into some unanticipated business exits because of 9/11, as were countless small businesses. Obviously, nobody could control 9/11, but it taught me to think more seriously about exit strategies, planned and unplanned. Bad exits can also come if the competition tramples over you or the wave moves away. If a bad exit comes, you and your partners need rules to govern that (see chapter 5, “Make the Rules, Live the Rules”); however, good exits need just as much planning.

Drafting an up-front exit strategy uses many of the same startup tools you’ve already employed. Keep in mind, though, that when you plan your business with your exit strategy up front, you aren’t just looking to break into the market. You’re looking to break in, and thinking about how to get out. In this way, one of my favorite exercises is competitive landscape mapping. This kind of mapping obviously gives you an idea of where to put your product in the market, but it also indicates how long and well you can operate and how you ought to exit.

I talked briefly about this model in chapter 3, “Power Tools.” Remember the gourmet root beer? In that example, we plotted out regions and price as we determined just how viable our market opportunity would be. In this chapter, we will plot products and price. Considering your competition, this is what they will be most interested in. Knowing where your competition stands tells you how to best use that for your exit. The energy expended up front gives you power at the end.

As you enter the market, diagram your competitors and the segments they play in. Are they high-cost providers? Low-cost? What breadth of service do they offer? By taking time to draw out the landscape and understand where you operate in relation to your competition, you can deliberately position your company to fit.

This little exercise will also tell you who will be in any fistfight you get into—or, if you play it right, which way you can turn to get away from the fight. The companies that your chosen space runs up against will be your most aggressive competitors. While competition helps them, they will, in some degree, want you out. Buying you might be a viable option. Definitely, the companies that border you are potential acquirers. If, you have a large gap, though, you’ll have a larger market opportunity, which means it could take you longer to have a high-dollar exit event.

Let’s consider a retailer in the outdoor market. We’ll use the vertical axis to plot competitors’ pricing. On the horizontal axis, we’ll label competitors’ specialization through the gamut of outdoor sporting equipment. You should have something that looks like this:

The next step is to identify the key players. Fill in your matrix so that you put these companies where they fit into the market. Make this accurate: bigger market shares need bigger circles. Go through each of the competitors in the context of your competition. Map the coverage and look for the gaps. For example:

• Wal-Mart is a low-cost, low-quality provider that competes mostly in the camper, trailer, and family camping sections.
• Outdoor World competes in the camper and trailer market, but they are a higher-quality, higher cost provider, so you place them in the top left quadrant.
• Sportsman’s Warehouse competes in the family camping and hunting markets, and pushes into the hiking markets, covering a fairly large area. They are a mid-range to higher-cost provider.
• Back Country provides online, mid-range cost, focusing on higher quality but primarily the hiking and high-altitude market.
• REI is very high quality, focusing primarily on the camping, hiking, and climbing market.
• Kirkham’s competes directly with REI but at a much lower cost.

Your matrix is shaping up nicely. It should look something like this by now:

Now that you have the landscape drawn out, examine the holes. Where are the overlaps? Can you compete at potential intersections? The larger the hole, the bigger the opportunity; however, it will take more effort to fill and more time to build to an exit event. If your venture fills a smaller opening, one of two things will happen—one, competitors at your borders could try to acquire you; or, two, they will strike aggressively and
cross the line to compete in your space.

My personality fits best with small holes. I like to fill them and plan for quick-liquidity exit events. In fact, the map we drew above is one that Ron and I used right before we acquired Campman.com. We chose to fill a small hole right at the intersection of Back Country, Sportsman’s Warehouse, and Kirkham’s. We were able to sell the company within a year.

The area you choose to enter determines what type of exit you will have. If we had tried to go nose-to-nose with Wal-Mart, we would have been stomped flat. It takes far more money and time for that kind of fight than what I was willing to invest. I learned a long time ago that you have to look for the niche and fill the space. That brings success.

Porter’s Points – Map It

• Consider your competitive landscape map not only in terms of your potential market presence, but your potential market absence—that is, determine at the outset how you are going to go out.
• Don’t take on the big market players at the heart of their empires. Look for a niche where a few smaller players overlap and build up to a sale.
• Keep in mind all the possible variables in your competitive landscape map. Location may be important for some, but don’t forget product, price, and quality.

Today we begin the last chapter of Bootstrap Business, No Exit Strategy.  Rich teaches the importance of knowing what type of exit you want, decided when you first start your business.

In business, one of the first things you need to do is plan the last thing you need to do. No, Rich isn’t going to talk about your last will and testament; what he will talk about is your exit strategy. In your venture, what’s the endgame? How do you want this bright idea of yours to play out? It’s a given that you need to plan the beginning of your venture; in fact, some entrepreneurs are so good at planning the beginning that they forget either to get to work or to remember that it will have an end. The thing is, if you don’t create an exit strategy, the market will
do it for you.

How you want to exit determines how you start. Are you looking at an asset sale in two years? Do you want to create a dynasty? Maybe you are hoping for a cash-out event to a competitor. With any of these options, you don’t need a crystal ball. You just need to make a choice. As market variables change, you may change your strategy along with them. There is no guarantee you’ll get exactly what you want, but knowing where you want to end up points you in the right direction.

Don’t lie awake at night strategizing step-by-step exit plans. Set a goal, make rules, and get back to work. Understanding your exit will help guide you in building, organizing, and establishing your business. Run your venture well—and when the curtain falls, know which side of the stage you’re going to exit on!

In a competitive environment, it’s important to know how to out-value your competition. I’ve discovered that one of the best ways is to reduce your transactional costs. While producing motherboards at Mitsubishi Electric, we went through a phase when customers wanted, more than ever, the latest technology possible. Mitsubishi knew that in order to be competitive, it had to either keep up with the latest technology or find another niche. We also found that if we did it right, we could reduce our costs and undermine the competition.

At the time, specialty equipment such as medical devices, gaming machines and ATMs faced a problem with the motherboards used in their machines. Federal regulations mandated that an entire machine be approved through an often 12- or 18-month process before it could be used. In the sector that Mitsubishi and its competitors dealt with, keeping up with the latest technology meant a constant swapping in and out of motherboard components. (Obviously, that made us money.)

But these sectors—medicine, gaming, and banking— could not simply swap out a motherboard. For example, any changes at all in an X-ray machine required that the whole product be re-approved. Twelve-month delays for every innovation obviously would not work. As a result, these industries had taken to hiring their own teams of engineers to build motherboards that were more stable. They did not meet the performance of outside motherboards, but there seemed to be no other way to meet the need for stability.

This is where we came in with Mitsubishi. Seeing an opportunity, we began producing a line of motherboards that would outperform the ones these industries had created while still providing the needed stability that kept the approval process from having to be repeated.

Suddenly, these industries were able to cut their transactional costs by laying off engineers and opting for better-performing motherboards in their equipment. At the same time, Mitsubishi could optimize its profit by entering an arena where we could undercut the cost of a 10-person engineer team but make a massive profit relative to the other motherboard sectors we were engaged in. By reducing transactional costs and improving the product and product environment, this one sector opened up a profitable new market.

An even clearer example comes from my 2001 trek through the Himalayas. While hiking in Nepal, I met a young man from the village of Namche Bazaar. Some time before, he had decided to try breaking into the Internet market in his village. Nestled high in the beautiful, snow-capped Himalayas, Namche Bazaar is a frequent traveling stop for trekkers. As hikers pass through this village, it is their last chance to check email, make a quick call home, or get in touch with business contacts.

For a long time, the only telephone option was through expensive satellite communications. So, while trekkers could touch base with home, it was at a cost of several dollars a minute. Doing so took a small fortune, but given that this was the only option, nobody questioned the price—until this young man set up his Internet café.

His desire to break into the Internet market had led him to the United States, where he quickly landed a job at McDonald’s. Saving as much money as he could, he eventually bought four used desktop computers that he brought back to Nepal. Once there, he had to hike up the Himalayas to Namche Bazaar with his computers strapped to his back.

I met him after he had set up shop. His resolve and tenacity had given him a toehold in the Internet café business, but it had also whetted his appetite for something more. You see, while in the U.S., he had learned about Voice-Over IP technology. This piqued his interest as a cheaper option than satellite phone calls (and he knew would expand the potential of his business plan), but he did not know how to set it up. He asked if I did—and I did.

I helped this young man set up his VOIP phone call business and, suddenly, he had not just a toe, but his whole foot, leg, arm, and body thrown right into the middle of the market. The high cost of satellite communication meant that his competitors could not drop their prices without losing their profit margin; for him, though, VOIP cost mere cents each minute. By charging little more than a dollar a minute to the trekkers, his profit margin was insanely higher than his competitors’, and the price tag to the trekkers was insanely lower. Considering the low average daily wage in Nepal, this was almost like me renting out my restroom for five hundred dollars an hour!

I am certain it was harder for him to reduce costs and thereby increase margins than it will be for you. Still, if you do your prep work to cut your transactional costs, you will be able to reduce, improve, and profit.

There are thousands of ways to reduce. Whether through applying technology, finding your niche, or just behaving small (see chapter 14), you can find a way to reduce your transactional costs without traveling the world and hiking the Himalayas. If you can do it cheaper than the competition and protect that price-enabling innovation, you will have flexibility with pricing, marketing strategies, and customer relationships. You simply need to be aware of the competition, the customer’s wants and needs, and the best use of your imagination.

When you do all of this, you will be far more profitable, acquire more customers, and outpace your competition. Dance with the devil for the judges and the audience, yes; but, most important, dance with the devil for yourself and your business.

Porter’s Points – Reduce and Improve

• In order to respond to your competition, examine product innovation, longevity, and quality, as well as associated services, legal and technical requirements, and market trends for places where you can start cutting. Reduce your transactional costs by cutting out the middleman.
• Don’t just cut costs. When you scale something back, take the opportunity to improve the product, the marketing, and all other aspects of your reduction. When you can hit a market niche with lower costs to you, be sure to hit it with the highest profit margin that you can.

Now is a good time to pull out the model we talked about in “Power Tools.” You remember: the Competitive Matrix Model. Draw a matrix comparing your and the competition’s price, products, and cost. Where do your competitors map to? How about you? Are you right on top of them, or are you in one of the gaps in the market? This exercise will show you how likely you are to be in their crosshairs, how aggressive you need to be with pricing, whether or not you can ride in their wake, and how much you need to compete or cooperate.

I don’t know if Ray Noorda at Novell coined this one or not, but the first time I ever heard the word “co-opetition” was from his mouth. The idea is exactly how it sounds: compete, but cooperate. Competitive relationships can and should be fun, lively, and challenging. Hate relationships (like those unfortunately existing between many competitors) are not a place you want to go. Haters are annoying. They just waste energy.

The amount of energy you can expend in a fit of anger or jealousy can be significant, and even if it was motivated by an idea that popped into your head, that idea is usually gone once the tirade is over. New developments inspired by competitive camaraderie are often longer lasting and more respected. Some try to argue the value of a good dose of angry, negative competition, but it is just a short-lived dead end.

As much as you would like to engage in “coopetition,” you still need to know when your customers or affiliates don’t feel the same way. Some years ago, Ron experienced the tip of this negatively competitive iceberg when caught between two companies that seemed to love hating each other. Here is how he learned about hateful competition:

While employed at a large software company in the early ’90s, I had the direct responsibility to sponsor a customer feedback forum. The forum was held at a location that was neutral to all our customers, as we wanted uninfluenced and uninhibited feedback on how we were doing as a service organization. These customers made up our Customer Advisory Council, and their input was critical to our success. In many cases, they had spent millions of dollars on our software and services. They were highly respected in their particular markets and industries.

About midway through the first day of meetings, break time came around. One of our customers, a representative from a worldwide manufacturer and distributor of soft drinks, made his way to the refreshment table. I was standing nearby, visiting with another customer, when I heard a loud expletive. Turning my head to see what was up, he locked on my eyes and exclaimed something to the effect of, “I see our competitor’s products all over this table, but not a single one of ours. Would someone like to explain to me why the %&*@ that is and what the %*#& I’m supposed to drink?!”

Not knowing the intensity of the competition had led us to commit a cardinal sin. As soon as our customers returned to the meetings, we cleaned out every bit of his competitor’s products and replaced them with his company’s brands.

This kind of competition is abundant. You need to do your homework to be sure that you know what kind of competition to expect. Don’t believe it? Well, of a hundred more that I could pen, here comes another example of a rivalry so intense that the companies did stupid, self-defeating things. Once again, it comes from Ron’s bank of stories. Read it, believe that competition can get brutal, and resolve to do better.

When Ron was building the professional services team for a startup software company, his field sales engineer (FSE) was invited to present at a large hardware and software business based in Texas. He was equipped with the latest laptop technology—albeit from a competing hardware manufacturer—and was prepared to give a sterling presentation. This was a presentation that was important not just for the startup company, but for the long-term IT strategy of the Texas company as well.

The FSE was invited into the conference room and settled in for the presentation. One of the potential client’s high-ranking employees watched the FSE set up for the meeting—laptop out, wires hooked to the projector, everything ready for the dog-and-pony show. The employee waited until the presentation was ready to begin and then stood up, walked around the table, stopped in front of the engineer, and told him to unwire
his laptop, pick it up, and follow him.

He led the FSE out of the room and into the hallway. There he “invited” him to stow his laptop in his bag and hand it to him. He then walked the laptop over to an administrative assistant and instructed her to return the laptop to the FSE after the meeting. Returning to the engineer, he said, “Don’t ever come into our complex again with our competitor’s laptops or any of their products. You will do the presentation without our competitor’s gear or not at all. What’s it going to be?”

Never underestimate or misunderstand how your competitor feels about you. You need to know the appropriate amount of sharing and communicating to do. If you can stay away from this kind of brutality, it will be better for all of you. In some cases, however, it’s best to leave the relationship alone completely. If you run up against negative competition, don’t touch it. This is for the good of both companies and anyone
else foolish enough to wander into the crossfire.

Porter’s Points – Know Your Competition

• After you draw up your Competitive Matrix Model, determine when and how best to approach each of your competitors and then do it. “Co-opetition” does not always mean that you cuddle up with everyone in your market. Be especially careful with the timing of your market entry.
• For those competitors who react harshly to your friendly overtures, figure out how best to observe their work from a distance and then stay away. As a startup, the last thing you need is for an established business to come gunning for you.
• Whenever you interact with competitors or customers, think through every detail— technology, refreshments, location, and especially culture. If there is anything that could offend, eliminate it. In such situations, it’s much easier to be a friend up front than to ask forgiveness later.

Think for a moment about your business idea— product, services, market, scope. Now create a list of all the competitors that occupy the same space. Did you write any names down? If so, you are further along than many first-time entrepreneurs. Lots of novice entrepreneurs don’t recognize the value of this type of list. They don’t understand the power that comes from knowing about who’s out there for them to go head-to-head with.

Make a concerted effort to create your list. Search online. Go to the mall. Attend conferences or seminars dealing with your market space. Pay attention to advertising you see throughout the day—commercials, newspaper and magazine ads, billboards, anything.

List in hand, it’s time to get to know the guys across the street. What are they doing right? What are they doing wrong? Who are they selling to? Who is their biggest customer? What is their best-selling product? This may require a little espionage. Go stand in line at one of their stores. Eat their food! Call the companies and engage their administrative assistant in an informational conversation. Tell them that you’re doing research and ask about the company’s goals, mottos, and customers. You will be amazed at what you can find out by asking the right questions to the right people.

Open up a line of communication with the owners of the company. Take them out to lunch and have an honest conversation. Make sure you approach this from the right angle, though. For instance, you could say, “I admire you company’s history. I’m interested in a similar industry, and as someone just starting, I wanted to know if I could ask you a few questions.” This comes across much better than, “Tell me what you guys do, because I plan to leave you in the dust in six months’ time.” Be polite and ask honest questions. You’ll get answers.

Just because you know this information about your competitors, you do not necessarily need to model their businesses’ look, feel, and function. If you see weaknesses, for example, you certainly don’t want to let them slide into your company. Don’t just look for holes, though; there may be a thing or two you find valuable and decide to borrow. We’ll go back to Schoolhouse Rock! and affirm that, indeed, “knowledge is power!” Specifically, it is the power to emulate the good, improve the bad, and sail past your competitor on the dance floor.

Porter’s Points – Do Your Homework

• In the planning stage, list all aspects of your business that might run up against competition. Starting with Internet searches and moving into actual legwork (malls, phone books, industry directories, etc.), make a list of all your competitors.
• Draft a series of questions and talking points to use when approaching your competitors’ administrative assistant, managers, and owners. Don’t put them in the awkward position of disclosing proprietary information, but focus instead on their product ideas, customer relationships, advertising techniques, and other useful information.
• Always be courteous when courting your competitors. Don’t push if they refuse some answers. If it really is important, you can find out some other way.

Whatever the competitive landscape in your market, you must accept it as the only landscape worth traversing. Competition can become the lifeblood of your business, inspiring change, freshness, and innovation. Ignoring your competitors, by contrast, will drain the life out of you—often without you even knowing it.

Where do you and your competition stand? If, upon concluding your market analysis, you find that you have no competitors, think twice about your business idea. Why isn’t anyone else doing it? Are you really so smart that no one else could have possibly come up with the same idea? Dig deeper. Perhaps someone has already tried your idea and it didn’t fly. Be cautious and intelligent about when you enter what landscape. If you dive in anyway and then get asked to tango on a trampoline, it’s hard to back down.

One drawback to entering a sparse environment of competition is the need for a longer, more expensive ramp-up phase. You have to break your own trail. You will have no competitor to help you advertise your product. There will not be an established channel of marketing and consumption specific to your brand-spanking-new idea. Building new channels and pioneering marketing campaigns can be done, but you need to recognize the associated costs.

On the other hand, having a competitor or two gives you access to banks of information. You will not likely get direct access to your competitors’ databases of customers, cost structures, or product development secrets, but for every company you compete with, you will find administrative assistants, other customer facing employees, and both happy and dissatisfied customers—all who will be willing to talk.

Most people are excited to chat about what they do. They like to brag about their company’s innovative products and who their big-name customers are. Use this knowledge to build a better mousetrap. What about your competitors’ product or service is broken? How can you take advantage of what has already been done? Being willing to follow the lead is often more profitable than leading out.

This concept fits with the section on “abundance mentality” found in chapter 12, “The Heart and Head of the Entrepreneur.” Recognize—and, if necessary, make yourself understand—that there is plenty to go around. At times, it’s even a good move to let your competitors get to market first to make the mistakes for you. Learn from those mistakes and clean up! This is the idea of drafting—like how geese draft off the ones in front, or how the second- and third-place race cars draft off the leader.

Our latest venture places us in the highly competitive and rapidly changing online search engine world. This market is complex enough that no one individual or company can keep up with the ever-changing landscape. Success requires a level of openness and sharing within the industry brain trust. There are several individuals in our industry that thrive on discovering amazing new strategies. We directly benefit from drafting off the learning and creativity of our competitors.

You too can take the more profitable tack of learning from other companies’ mistakes and taking a more profitable slice of the pie. Some argue that beating everybody else to market is absolutely critical. If you are going to get to the market first, simply prepare yourself to adjust, improve, and change as your competitors begin to poke into your market share.

Porter’s Points – Competition Is Good

• If nobody is in your market, ask yourself if there really is a demand for your product. Is the demand sufficient to give life to your business? How will you create a market that doesn’t exist? What other products and services can you offer? Do some careful investigation before diving headfirst into an empty pool.
• The way to your competitors’ customers is through the employees who interact with the customers and through the customers themselves. Contact these people and ask them about what they do. Take careful notes on how you can improve.
• Reread the section on having an “abundance mentality” from chapter 12. Really commit yourself to believe that the market is big enough for you and the competition. Let others test the waters a little, and always, always learn from your and their mistakes. Use those mistakes to look for openings and then take them!

Chapter 18 of Bootstrap Business begins today with not-so-common advice:  Dance with the devil!

As a teenager, I played on a football team in Flagstaff, Arizona. Once, we played an away game against a team that didn’t seem at all motivated. The game turned out to be an easy win, and one of my teammates quipped, “I bet if we hadn’t shown up, they still would have lost!” He didn’t know how true his statement was. In order to truly test yourself and your new business idea, you need competition; you can’t win without it.

Several years ago, Rich and I both worked for Novell, a networking company that at one point controlled 80-plus percent of the market. In other words, it had no competition. Then Novell became complacent. And when the serious competition did show up, the company was far from prepared to take it on.

Most people are timid about interacting with competitors; even worse, many business owners think that they don’t have or even want any competition. If you use it to your advantage, competition keeps you hungry, honest, and forward-moving.

As the saying goes, “High tides float all boats.” When your competitors advertise their products, your business benefits from getting the byproduct of unexpected marketing. If you’ve positioned yourself correctly, when people look for your competitor’s product, they will likely also find yours. More than just benefiting from happy accidents, though, you must know your competitors’ strategies, their position in your market, and their weaknesses. Competition is a healthy part of the entrepreneur’s diet.

Rich thrives on embracing and enjoying competition. It shows up in all aspects of his life—from golf to work to siblings. He has mastered how to let it keep him sharp and focused. He also knows that when you dance with the devil of competition, even one misstep will allow it to dance all over you. You may think that you are dancing the tango only to suddenly watch your competitors cha-cha on by. You want to win, but you cannot win unless you compete and do it well.

Many people shy away from accountability because of fear. Fear of what? The unknown outcome of what is on the other side of accepting accountability.

Back in the days of the early Roman Empire, when prisoners were captured and forced to fight to their death, the fighters would often be given a choice. They could either face the lions or walk through the big red door. Almost every single prisoner chose to face the lions. Why? Because of uncertainty and fear of the unknown. The unknown is often worse than the known, no matter what the “unknown” might turn out to be. What was behind the big red door? Freedom.

In the words of Eleanor Roosevelt:

“You gain strength, courage and confidence by every experience in which you really stop to look fear in the face. You are able to say to yourself, ‘I have lived through this horror. I can take the next thing that comes along.’ You must do the thing you think you cannot do.”

You can’t allow yourself to be bullied away from venturing into the unknown simply because you fear the accountability that will result. It is tough and it is scary, but accountability often is what stands between you and freedom. Sometimes the curve ball will curve, and sometimes it’ll hit you smack in the nose. Either way, savor the accountability resulting from your choice to “stay in.”

Porter’s Points – The Big Red Door

• Don’t let fear of the unknown keep you from accepting accountability.
• Make a list of the reasons you want to become an entrepreneur. As you review your list, analyze the trade-offs. Is what you want a fair exchange for the amount of accountability you are willing to assume?

Have you ever found yourself trying to deflect accountability? If you’re honest with yourself, you will likely answer, “Yes, I have.” And the fact is, it never feels good. The first time you slink around accountability, your conscience seems to shout back at you, “Not good!”

And yet the more you shrink from it, the easier it becomes. The voice inside gets softer and softer until you fool yourself into thinking that not being accountable is okay—or, worse yet, that you’re doing all that could be expected of you. The result is that you replace the exhilarating sensation of accountability with the uninspiring sense of apathy. As a business owner and leader, you must not allow yourself to be fooled. You must learn how to be accountable yourself and how to hold your employees, partners, and vendors accountable.

One of my favorite, real-life examples of taking personal accountability comes out of the aviation industry. This story depicts one CEO who stayed in, took the curve ball on the nose, and exemplified accountability to self, company, stockholders, and customers.

In February of 1999 David Neeleman founded JetBlue Airways with the intent “to bring humanity back to air travel.” Further elaborating on its commitment to customer service, Neeleman later said,

It’s a new kind of low-fare airline. JetBlue will offer wider seats, more legroom, and more overhead storage space than any other airline in its class and, with 24 channels of live in-flight television, you’ll never have to miss your favorite show on the road. What’s more, our aircraft are some of the world’s quietest, most emission-friendly passenger jets.

In an ad specific to the citizens of New York City, he committed to the following:

We want to be New York’s new low-fare, hometown airline. JetBlue will bring to the city a superior product…

What happened on and around February 14, 2007, was anything but a sweetheart customer service story. Here are a few less-than-stellar low points, as reported by a variety of news agencies:

• Over 500 JetBlue passengers were stranded on the tarmac at John F. Kennedy International Airport for six-plus hours.
• During the ensuing six-day meltdown, over 1,000 JetBlue flights were canceled.
• By that Sunday, hundreds of bags belonging to JetBlue customers who had checked into flights that were eventually canceled were stacked outside JetBlue’s Baggage Services office.
• Hundreds of JetBlue flights were delayed. Passengers were frustrated and shocked by the extent of the delays

Bringing humanity back to the air travel?  The business impact was, to say the least, expensive. The company’s stock fell five percent. During ensuing interviews, Neeleman acknowledged weaknesses in the company’s communications and flight reservation system and vowed to invest the millions of dollars necessary to bring the airline up to speed.

Put yourself in Neeleman’s shoes. What would you have done as the CEO in this situation? Do you send the public relations folks in to handle the mess? Does the VP of customer service get called upon to shield you from the wrath of the irate customers? Do you ignore the fiasco and hope it goes away? Do you point fingers at operations and lop off a few heads along the way?

Here’s what David Neeleman did;

Dear JetBlue Customers,

We are sorry and embarrassed. But most of all, we are deeply sorry.

Last week was the worst operational week in JetBlue’s seven-year history. Many of you were either stranded, delayed or had flights canceled following the severe winter ice storm in the Northeast. The storm disrupted the movement of aircraft, and, more importantly, disrupted the movement of JetBlue’s pilot and in-flight crewmembers who were depending on those planes to get them to the airports where they were scheduled to serve you. With the busy President’s Day weekend upon us, rebooking opportunities were scarce and hold times at 1-800-JETBLUE were unusually long or not even available, further hindering our recovery efforts.

Words cannot express how truly sorry we are for the anxiety, frustration and inconvenience that you, your family, friends and colleagues experienced. This is especially saddening because JetBlue was founded on the promise of bringing humanity back to air travel, and making the experience of flying happier and easier for everyone who chooses to fly with us. We know we failed to deliver on this promise last week.

We are committed to you, our valued customers, and are taking immediate corrective steps to regain your confidence in us. We have begun putting a comprehensive plan in place to provide better and more timely information to you, more tools and resources for our crewmembers and improved procedures for handling operational difficulties. Most importantly, we have published the JetBlue Airways Customer Bill of Rights—our official commitment to you of how we will handle operational interruptions going forward—including details of compensation. We invite you to learn more at jetblue.com/promise.

You deserved better – a lot better – from us last week and we let you down. Nothing is more important than regaining your trust and all of us here hope you will give us the opportunity to once again welcome you onboard and provide you the positive JetBlue Experience you have come to expect from us.

Sincerely,
David Neeleman
Founder and CEO

And, to top it off, Neeleman followed up his heartfelt apology with pocket-felt actions. He announced what he estimated would cost between twenty and thirty million dollars to revamp procedures for handling interruptions in service. Before the month was out JetBlue Airways voluntarily offered forty million dollars in refunds and vouchers to impacted passengers and gave wings to JetBlue’s “Customer Bill of Rights.”

We’re going to offer something that no other airline will offer customers… We’re going to be held accountable with laser beam focus… we want to do it because it’s the right thing to do.

Now that is accountability. No hiding, no transparency, not waffling, no pointing fingers—just plain old refreshing, effective, personal accountability. Thank you, David Neeleman!

Porter’s Points – You Are Accountable

• The first time you shoulder accountability, it may seem difficult. But the more you accept it, the easier it becomes to accept.
• Stay in and, if necessary, take the curve ball on the nose.
• Be accountable—and then some. Exceed what those you are accountable to expect from you.

Today we begin Chapter 17 of Bootstrap Business, Embrace Accountability.

Why do you want to be an entrepreneur? If you answered, “To be my own boss,” or “to be able to do things my way,” that’s okay, but you need to remember that this kind of freedom comes with a price. In short, personal ownership equals personal accountability. Accountability means not affixing blame and finding solutions instead. It is doing the right thing because it’s the right thing. It is taking ownership of your choices and all of the resulting consequences. There’s no “pick and choose” here.

I am—and Rich is—fascinated by people who, without concern for the outcome, just do the right thing. I am also intrigued by those who, in an effort to avoid being held accountable, do whatever (right or wrong) it takes to avoid accountability. It is our belief that many people choose to not be accountable because they fear the unknown. If you fear accountability, it follows that you will fear entrepreneurship.

In the beginning, entrepreneurship can seem like a deep, dark pit of accountability. There aren’t very many sure bets to be had when starting your own venture, but there is always this one: for better or for worse, you are responsible for whatever happens. Among the things you’ll put on the line are your money, your reputation, and your motivation. Some, after embarking on their own entrepreneurial journey, look accountability in the face and turn tail and run back to the comfortable, secure corporate world.

For some, accountability is an acquired taste. To really enjoy it, you must learn to trust yourself, your judgment, your partners, and your venture. When you get the mixture just right, it can be quite sweet, even exhilarating. You’ll learn to savor the thrill of making decisions and standing behind them, knowing that you’re personally accountable. You might just decide you wouldn’t have it any other way.

The tendency for far too many individuals is to avoid accountability rather than embrace it. Following are some examples of avoiding and embracing accountability Rich and I have witnessed during our personal experience in the corporate world. As you review these, consider which side of the ledger you find yourself on. What about your employees? What about your vendors or partners? Do you avoid or embrace accountability? What about those you rely on? Here’s the bottom line: make accountability personal to you and those  you deal with. Here are some clear indicators that will help you identify when accountability is being embraced and when it’s not.

Avoiding Accountability

1. “That’s not my job.”
2. “I can’t find anything to do.”
3. “Why do we need a self-improvement class at work?”
4. “When is upper management going to get it right?”
5. “I’ve been working here a year, and I still don’t have a job description – what am I supposed to be doing anyway?”
6. “Whose stupid idea was this team-building activity?”
7. And even: “No, don’t bother me about that until tomorrow. I go home too soon to worry about it right now.

Embracing Accountability

1. “I’d love to help, what do you need me to do?”
2. “I did it because it needed doing.”
3. “I’m glad the company is providing us the opportunity to learn and apply self-improvement techniques.”
4. “Maybe upper management hasn’t made the right choice because they don’t have enough data. How can we help them get that data?”
5. “No, I don’t have a job description. I’ve just observed and determined where we needed help and jumped in.”
6. “Yes, I’d love to participate in a team-building activity!”

I remember a great teaching moment that occurred at one of my son’s baseball games. Jory was in the batter’s box, waiting for the pitch. The pitcher let the ball go, and it headed straight for Jory’s head. Jory thought, “curve ball,” and stayed in the box. At the last second, the ball didn’t curve! He took the ball in the face, which broke his nose. As my son and I sat in the emergency room, I tried to make him feel better, “That was a really good job, son.” Jory, peering at me quizzically, remarked, “Dad, I got hit in the face with the ball!” “Yeah,” I told him. “But you stayed in the box!”

Accountability can sometimes feel like a curve ball to the face. Or, more accurately, a failed curve ball. It might hurt, but the satisfaction of “staying in” is far greater than the fleeting feeling of safety as you jump out of the way of accountability.

Just as a house has a foundation, so does a company. The foundation of yours will be built at the beginning, through actions and words. What you do, from day one, will have a profound effect on the direction the culture takes. How you communicate—from mission statements to your casual conversations—will as well. You need both to build your culture, but you also need to build it right. Make sure that what you say and do on the outside is rooted in ethics and moral business principles inside.

If you build a foundation for a one-story rambler, it’s hard to then build a three-story English Tudor estate, so establish your foundations with forethought. When WordPerfect was a new startup company, its executives built a rewards system into their culture. As a perk, they would give all their employees all of the soda and popsicles they could possibly consume. When employees had been with the company a certain length of time, they qualified for even greater rewards. After a series of successful years, WordPerfect actually sent the entire company to Hawaii together—with spouses and partners!

As you can imagine, people loved that aspect of the WordPerfect culture and a high sense of company loyalty ensued. However, not long after, the company ran into financial difficulties that required a little belt tightening. The free soda and popsicles disappeared. The trips to Hawaii were replaced with free movie tickets.

Many employees who had enjoyed WordPerfect’s culture for so long did not like the sudden change. The changes in the company’s fiscal policies were easy to make—management simply cut out the perks it couldn’t afford. But changing the cultural expectations of the employees was far more difficult. The employees had bought into a culture of free soda pop and popsicles, and those perks were at the heart of why many were there. When this aspect of the culture disappeared, loyalty to WordPerfect diminished.

The past several years, I’ve had occasion to work very closely with Google. A stroll through its campus reveals the company’s perks policy: employees and visitors enjoy free Naked Juice (usually five dollars a drink), unlimited candy (dental hygienists everywhere love this aspect of the Google culture), as well as free breakfast, lunch, and dinner made by chefs flown in from exotic locations. I wonder what is going to happen to the Naked Juice and flying chefs the first quarter Google misses its number?

Don’t get me wrong. We stock our fridge and shelves with lunches and snacks. I love rewards systems. But our perks come from Costco. Whatever perks you provide, you want to make sure employees are buying into the goals of the company, not just the goodies. If employees are invested in their work and the planned outcomes, they’ll understand if a time comes when everyone needs to tighten their belts. They will feel involved and appreciated not because of gifts and food, but because they understand their contribution to the company culture and they feel vested in the success that grows out of that culture.

Writing and living a mission statement can sometimes help with this aspect of instilling your culture into your company. Writing mission statements was the big hype of the early ’90s. Everyone had a mission statement, including me. Companies displayed theirs someplace conspicuous, proud to be motivating their employees and serving their customers. Even so, no matter how great the words, those statements need to be backed up by what your company actually does. Mission statements are only hype if nobody internalizes them. You and your team must internalize them by following them. Words are nothing without actions.

Action establishes culture. Unfortunately, inaction does as well. If you don’t provide the leadership to create your culture, someone else will. If you don’t act, the culture will define itself based on the dominant personalities of those on your team. Greatness needs direction. Writing down and sharing goals is a good place to start, but you must take the lead and establish your culture through your daily actions and interactions.

Porter’s Points – Build it Right

• Your cultural foundation is established early and pretty much stays put, unless you get hit with an earthquake. Make sure your foundation is built on the traditions, values, and ethical practices you choose. You might be able to  build a buzz with popsicles, but you wouldn’t build a house that way.
• Words are a tool to reinforce your actions. Don’t think that writing a mission statement makes a culture. It can help, but don’t write what you’re not willing to live. Once you write it, live it, and help others do the same.
• Include a rewards system as part of your culture, but be careful of creating expectations that can’t be sustained through lean times. Also remember that rewards are no substitute for a solid, leadership-centered culture.

One of my favorite authors is Stephen R. Covey. In a book he writes with A. Roger Merrill, First Things First, he teaches that all humans are born with an innate drive to fulfill four basic needs:

• To live
• To love
• To learn
• To leave a legacy

You must understand and address those needs as part of building your business. Each one will contribute to the culture you develop, as well as to the way your company accepts your leadership. For those of us who have peeled the layers back, it is evident that “leaving a legacy”—mattering—should be the primary focus. Make a difference. Do something that impacts more than just self. Establish worthy aspirations. Establish a culture that allows people to matter.

Not many years ago, I attended Ray Noorda’s funeral. Ray was the man who took Novell, a failing startup with 17 employees, and transformed it into to a computer giant. Novell eventually employed more than twelve thousand people and transformed an entire valley in Utah into a veritable techno-hub. Ray is known in the technology industry as the “father of network computing.” This is a fair assessment, but he was much more than this. He generated thousands of high-paying technology jobs, spawned numerous small businesses, and—of most consequence to me— set a leadership model that enabled young leaders to emerge. As one of those, I have tried, in many ways, to emulate his leadership style.

Ray was a multimillionaire who drove a pickup truck, lived in the same modest home until he died, and was often seen wandering into someone else’s meetings to sample the snacks. As heads turned to see who was moseying in late, Ray would pleasantly say, “Hi, folks. Got anything good to eat here?” He was down-to-earth and his values were real. “Make a real contribution” was not just a mantra for Ray. He mattered, and established
a culture that allowed others to matter as well.

Ray created stories. He did not establish the culture at Novell by lecturing or mandating but rather by making a point to drop by offices after hours and on Saturdays to visit with whoever was in. He would park himself on our desks to see how we were doing, talk shop, and inspire us. Stories that originated with him started in one cubicle would circulate like wildfire. He gave us all the impression that we could add to the Novell culture, and that it belonged to all of us. He took time to educate and inspire us personally through both his interactions and his stories. We learned from him how to behave, what we stood for, and what was expected of us.

Ray’s legacy ranges from larger-than-life examples of business fervor to amusing situational anecdotes. I was present for one of my favorite stories, which took place between Ray and my mentor, Dr. Peter Horne. Dr. Horne had flown in from London for a meeting with Ray and others, and things got started with some small talk. Ray casually mentioned his love for skiing, adding the aside, “But only on Tuesdays.” Dr. Horne, with his proper English accent, asked “Why only on Tuesdays?” Ray responded, “Because Tuesdays are Senior Citizen Day, and I ski for half price.”

Without fanfare or self-aggrandizement, Ray set the tone of the meeting, establishing the fiscally conservative nature of Novell and laying the foundation for a strong and productive relationship between Novell and Dr. Horne for years to come. This was Ray’s way: understated but clear, light but appropriate. I love and appreciate everything that I learned from him.

At Ray’s funeral, the speakers gave outstanding eulogies, attempting to sum up several of his key beliefs. Ray wove these into the very fabric of Novell and, of course, his own life. Following are the characteristics I made note of during the service:

• Believe and trust in people.
• We all have a responsibility in life. Be faithful to it.
• Customers first, employees second, shareholders third.
• Be unassuming.
• Listen, especially with your heart.
• Practice integrity.
• Be loyal.
• Be true to your own core beliefs, but recognize the need to compromise within parameters that don’t violate those beliefs.
• Respect the individual, not the title.
• Marriage is ordained of God, and is your first priority in life.
• Practice fiscal responsibility.
• Take care of your health.
• Willingly forgive others’ mistakes and shortcomings.
• Retain your dignity, no matter the circumstances.
• Give something back.

Ray never put together a PowerPoint on these principles. He didn’t make posters or require us to attend “Company Culture” development workshops. He simply lived and shared what mattered most to him and expected us to internalize similar principles. Ray knew the culture he wanted, and he owned his responsibility to create it.

In owning your company culture, remember that your culture has to work for you. Each company is different, and what might be appropriate for a marketing company could be outrageously unsuitable for an accounting firm. Your culture is about the way your office is laid out, the perks and fun things you do together, and the values you embrace.

Whatever your culture, communicate it. You must be the one to start your own legacy and stand up for what you want to see happen. As an entrepreneur, you have the freedom to pick and choose and develop whatever you want your culture to be. Don’t succumb to laziness or insecurity and simply live and let live. Your culture is your Holy Grail, and you have the power to pursue it and make it your own.

Porter’s Points – You Own the Culture

• People don’t learn company culture from lectures and meetings. You create your culture by what you do. Map out how you want your company to act, and start acting that way yourself.
• Everybody wants, somehow, to matter. Show your team that they matter to you and to the company’s objectives. You must balance your administrative duties with your need to lead.
• How do you want to be remembered? You determine that memory by your every action.

As explained in chapter 16 of Bootstrap Business, the culture of your business is as important as the legendary Holy Grail, and it’s up to you – the business owner – to create it!

Countless crusaders spent their lives in search of the Holy Grail, a mythical object of deeply spiritual significance. What came of their quest? Did they ever find the Grail? Well, no, but their lives changed, and they left a legacy—some good, some bad. Long after deals are done, contracts are completed, and companies are closed, you and your team will be bound together by the experiences you shared. For good or ill, you will remember what you learned and how it felt.

Your company culture is your Holy Grail. Establish it right from the start. Rich alluded to the function of your culture in the last chapter, but understanding why and how you are to establish your culture warrants its own space. You build your culture because it is your responsibility. You must, for the long-term success of your endeavor, establish a durable, viable culture. As you commemorate the great actions of the past, you help create a vibrant legacy that wins loyalty to your company and enhances the effectiveness of your work.

As it goes in life, so it goes in business: the most infectious method of teaching and passing on your culture is by example. You must create the culture within your company because if you do not, someone else will. That someone else could be anyone, right down to the depressing engineer whose daily complaints bring everyone down.

Influential leaders have not been influential by accident. Leaders leave legacies built on their actions and the stories that grow out of those actions. Gandhi walked across India, millions followed, and their boycott of salt brought the British government to its knees. Winston Churchill ordered that theaters remain open despite Nazi bombing. George Washington galloped into a firestorm of lead, emerging with his cape riddled with bullet holes and his person unharmed. Mother Teresa labored in Calcutta and other poverty stricken areas to minimize suffering with love and care until her own death. Great acts of leadership do not happen by accident.

While your culture is your responsibility, you have additional resources at your disposal. If your company has been around for a while, you have already created part of your legacy. Past successes fuel future achievements. If, on the other hand, you are just starting out, there are plenty of names and faces to look to. Decide on values, rules, and attitudes. Make sure you enter the business world with a boom and hire employees who match. That’s the way the masters do it, and that’s the way that Rich does it. He doesn’t just do it, though—he has fun with it!

I once worked for a large company that was engaged in some serious internal warfare. Someone had decided to house the sales team next to the engineering team. The engineers, listening in on sales calls with customers, insisted that the sales team was nothing but a bunch of liars. The software wouldn’t do what sales said it would. The engineers knew it because they had written the software. But the sales team retorted that the engineers were out of touch and needed to write the software that the customer wanted instead of their regular “useless junk.”

The contention between the two teams caused a rift that hindered the entire company’s ability to ride the wave we were on. The company eventually failed. There were multiple reasons, but one key reason would have been incredibly easy to fix: office layout. The engineering team never should have been sitting next to the sales team in the first place. Maybe the sales reps were lying, or maybe they were just stretching the truth; either way, the engineers would have been better equipped to deal with back-end troubleshooting than with up-front sales tactics.

One system that has succeeded for me is to structure the office layout in terms of the flow of the business. In the example above, a better solution would have been to place the product management team between sales and engineering, playing the buffer role and helping maintain the balance between customer demands and engineering realities. The technical support team should sit as a branch of the engineering team, yet be accessible to sales. The engineers work best when kept away from all distractions. In our office, we find it helps to place engineers in the back of the building, close to food and drink. We make life comfortable for them; as a result, they are more productive. Your admin, of course, should be your first line of defense between the world and your company. Anyone wanting to talk to you or anyone else should go through the admin to get there.

Maybe it’s trivial, but I have one last note concerning the layout and structure of your office. Make certain your teams have the most up-to-date and comfortable gear possible. If this is out of the realm of the probable, then give them the best of what you’ve got. This small act instills respect and helps them value the company.

One of the best immediate supervisors I ever worked with was a dynamic man named Rob Allred. Rob managed a team of about twenty-five employees, all housed in an open office environment consisting of one large, cement room. Most of the team was using tattered, uncomfortable rolling chairs. One afternoon, a shipment of brand new chairs arrived. Everyone clamored noisily to claim their prize. Even Rob joined the crowd to make sure he got one. Every man for himself!

I watched as everyone set up their chairs and tried them out. I noticed Rob sit down on his chair, settle in, and give it a bit of a test drive. All of a sudden, he got this concerned look on his face. He got up and proceeded to go to each of his employees and check out their new chair. He went around the room, finally discovering a team member, Robyn, who had not shared in the spoils. Without hesitation, Rob grabbed his catch and wheeled it over to Robyn, exchanging it for her old clunker. Because of these types of acts, Rob was deeply trusted and appreciated. No matter the situation, his team knew he had their best interests at heart.

Porter’s Points – The Lay of the Land

• The physical location of each employee matters. Eavesdropping happens; don’t let it stop your company’s progress. Separate engineering from sales and use other teams as buffers. Even encourage your admin to float around a little to keep the peace.
• Admins do not belong in the back offices. Put your admin up front for an effective first impression. Engineers, however, do. Put them in the back and let them work.
• As far as possible, ensure your team has comfortable, up-to-date equipment. Whether chairs or computers, make a big deal out of it. Little things make office work exciting; executive attention to little things builds unity and trust.

Once you’ve built your team using the right questions, an exacting interview process, the testing phase, and immersion in company culture, get out of their way and let them do their work. Micromanaging does not equate to leadership. If you are going to oversee every detail, save yourself the time and energy it takes to hire employees and just do the job yourself. You go for that eighty-hour work-week. One of the greatest values you will get out of building the right team is the added strength they bring in having what you don’t have. They will find solutions you may have missed. They will help you succeed. And, from time to time, they will save your bacon!

While at Mitsubishi Electric, I managed a highly effective team that was working on winning a significant deal. We had labored long hours for several weeks (including several sleepless nights). The CEO of our target company was a guy by the name of Peter V., a tough, hard-nosed businessman. I flew to the target company’s headquarters and won the contract—a great payoff for my team and their hard, smart work. On the return flight home, I composed an email to send to my team and the executive management of Mitsubishi.

The email outlined our cost structure in detail, delineated how things would work going forward, and showed a great margin—in short, it opened wide the deal’s kimono. It just so happened that many of the Mitsubishi executive team members were named Peter. So I began adding the Peters from my address book one after the other. Upon landing and getting a connection, I let the email fly. At 5:00 a.m. the next morning, my well-deserved snooze was disturbed by Peter M., a member of the Mitsubishi executive team who had received the email.

“Rich, congratulations on getting the deal! By the way, who is Peter V.?”

I mumbled through sleepy eyes and hazy thoughts, “He’s the CEO of the company who awarded us the deal. Why?”

Peter M., “Do you realize that you copied him on the email outlining our exact margins, costs, how well we came out, and how you just gave him a good, all-around spanking?”

All of a sudden, my kimono was hanging wide open. In a panic, I bypassed the shower, breakfast, and family, and broke land speed records to get to the office. I waited dejectedly, slumped in my chair, anticipating my team’s arrival.

As they filtered in, they were intrigued by my disheveled appearance and began asking questions. After giving them an update on our precarious situation, my admin called an emergency meeting. Here’s how it looked that fateful morning.

We had a room called the “War Room,” so designated because it was the place my team met to do all the heavy lifting. I stood in front of my colleagues and explained what had happened. It felt like there was no recovery possible. I couldn’t muster a single idea. The team began brain-storming. Shawn, an incredible executive admin, put a call in to Peter V.’s executive admin to test the waters.

“Hello, Sarah, this is Shawn. How are you today? Rich was hoping to have a conversation with Peter. What is his status?”

Sarah responded: “He is on a flight right now to Las Vegas.” Good sign!

Shawn continued: “How is he at checking his email?”

“He’s religious. The second he touches down he’ll go to the hotel and check his email before anything else.”

“What time will he land?”

“I think he lands about twelve-thirty our time, so it should be at about one o’clock that he’ll get his emails.”

Shawn got off the phone and reported: four hours until Peter V. was able to check his email. One of the members of the team, Dave, said, “I’m really good friends with Jim, the IT guy at Peter V.’s company. I could call him and tell him that there is an inappropriate email that has gone through, and see if he’ll erase it. It’s risky, but better than doing nothing.”

The team sat musing, and tried to expand on the new idea. “Well, what emotions are involved in this? What needs to happen to get the response we want?”

Everyone started naming emotions: fear, frustration, greed. Someone suggested confusion—if we could simply create enough confusion.

Finally, someone suggested that I send 100 emails with the same title but nothing in it so it looked like spam.

“Whoa, that might work—and while we’re at it, let’s add a little fear!” I chirped.

We finally decided that everyone in the office would send 200 emails to all of their contacts in the target company with meaningless titles and bits of information. We ended up dumping something like 5,000 emails to the target company in a matter of one minute. It wasn’t two minutes before Jim called Dave and asked: “We just got 5,000 emails, what’s going on?” Dave responded, “Whatever you do, delete every email you got from us in the last 24 hours. If you don’t, a virus will mail itself to every address in your company’s database.” Jim did just that!

Nightmare solved. Bacon saved. Lesson learned.

Surround yourself with people you trust and let them use their skills.

Porter’s Points – The Power of Team

• Trust and empower your team to make decisions and take actions for the good of your company. Give them problems and let them come to you with solutions, always looking to make them stretch a little more than last time.
• Do not punish mistakes that are made in an attempt to contribute. Take ten minutes to cool down if something blows up, then go back and make it a learning experience and not a tirade.
• In times of crisis, let your team save you. If you haven’t empowered them before, though, they may have trouble treading water themselves. The power of team comes as you regularly involve the players, so give them practice.