People generate the most value and are your greatest asset when running a business.  Our society runs on knowledge and information.  We are not a bunch of cogs lined up to push metal through a machine in order to output something better on the other side.  Even these types of jobs now require knowledge to operate these intricate computers and technology. 

Did you know that the unemployment rate for college educated individuals is less than 5%?   Compare that to the average unemployment rate of 9-10% or the 14% or more unemployment rate for those with a high school education or less.  Today’s economy needs knowledgeable workers, and they are a rare find.  We are searching for knowledgeable workers to fill roles in software architecture, business analysis, and software solution sales and have discovered they are not easy positions to fill.

We utilize a 13-step process, which includes a three hour CIDS interview from Topgrading.  CIDS stands for Chronological In-Depth Structured interview and looks at a candidate’s history starting from his or her education and going through each job position, identifying highs and lows along with strengths and weaknesses.  This gets to the meat of what a person was hired to accomplish and how they do in that role as confirmed by the person to whom they report. 

Even with this detailed process, we don’t always get it right.  Like software, people are very complex and don’t necessarily gel well together.  Getting it right from a technical perspective may not mean we have it right from a cultural perspective.  I hear war stories and have even experienced it myself.  When business cultures clash, all parties involved suffer.

As a leader, I must stay focused and be willing to endure because I believe the most important role of the leader is to bring the right team together.  As Jim Collins says in Good to Great, “Get the right people on the bus, and then with the right people figure out where you are going.” 

What do you do to make sure you have the right people on the bus?  

As I travel around the world, I listen to people talk and read the local papers to get a feel for how others view the global economy.  It is interesting to try and see the world from their perspective.  It seems that many people are just looking for their economies to get better and waiting for leaders to do something about it.

As I discussed in my last blog, I have a different point of view on changing the world.  I see it as you, the individual, who holds the responsibility to change the world. Great leaders simply provide the mindset and inspiration for you to do so.  They also create an environment that is conducive to allowing the common man to make a difference.

I left the US, traveled to the Netherlands, made my way around Germany and have now landed in our office in India.  People everywhere, not just in the US, are out of work due to a global recession.  As I write this, global markets are down 3-5% in one day, with negative outlooks.  This is an accumulation of governments worldwide trying to solve problems by spending money in an effort to create jobs.  It’s not government that creates jobs, that in turn change the world, it’s the entrepreneur. 

This concept is supported in a soon to be released book called The Coming Jobs War by Jim Clifton, the Chairman of Gallup.  One of our project managers here at Efficience, Mike Nelson, sent me an article that discusses the book.   In the article he quotes, and I agree that “Nobody is quite sure where jobs come from.We know how chickens are hatched, but not jobs.”

Clifton also discusses how job growth comes from new companies, 95% of that being within their first year, and the rest from small to medium sized businesses growing and becoming great companies.  A key point that most people don’t understand is that existing big business doesn’t create jobs.  NONE of the new jobs come from them.

He goes on to say “Here is something that almost nobody knows.  These all-important start-ups and shoot-ups don’t occur because of new legislation, new rules, more free money or any other government tweaking.  They occur during moments of unusually high inspiration.  They are created by Americans seeking the great American dream.  Freedom.”

Think about leaders of our past that created inspiration in others.  Abraham Lincoln, in the first paragraph of the Gettysburg Address, said “…dedicated to the proposition that all men are created equal” and in the last sentence said “…that government of the people, by the people and for the people shall not parish from the earth.”  This inspired a nation to continue the fight to stay together and end enslavement. Sir Winston Churchill’s comments inspired England to rise up and stand its ground against Hitler.  Gandhi inspired India to rise up without force for its freedom from England.

In business, Lee Lacocca inspired the people of Chrysler to rise up out of the bankruptcy and become one of the top 3 auto giants in the world.  Bill Gates inspired technology enthusiasts around the world to start businesses.  Ronald Reagan reduced the friction of government and inspired a nation to unleash entrepreneurs in the mass. 

Let us hope for more inspiring leaders like these so that entrepreneurs around the world can continue to do their thing: create jobs.

Many people say they are happiest when they are creating.  Maybe it’s because we are made in the likeness of our creator and are doing what comes naturally.  Just like an artist or musician, entrepreneurs are creating and bringing things to life, out into the world and the marketplace to solve problems.

I’ve spent the last few days in Asheville, NC on an EO Forum retreat with my long time Knoxville Forum.  Asheville is known for its community of artistic people, and like artists and musicians, we like to be in places that stimulate us to create.  Many of us know that being in environments like the islands or the mountains stimulate us to create, but do we know why?

One of the reasons is negative ions.  These are invisible molecules that are generated in abundance around beaches, waterfalls, and mountain environments.  What they do is stimulate the brain with higher oxygen and blood flow, which in turn can provide that boost that we may be looking to generate.

Our Forum went on a zip line tour called Navitat high up in the mountains.  Over a 3 hour period we climbed, harnessed, zipped and repelled through the most picturesque mountain environment.  Why do we do this? One reason is to get us out and experiencing new things that allow us to connect and bond, which opens us up to sharing at a deeper level.  Another reason is that new experiences create new awareness.   New awareness can open the way for more synapse connections in the brain, once more stimulating new ideas and new ways of thinking. 

EO events and gatherings are about exposing people to places and thought processes that they have not experienced before.  What we like to call once in a lifetime experiences.  These past few days have been a creative stimulant for me.

I am constantly trying to open myself up to new things, experiences and environments that will encourage my own creativity.  What are you doing that will open you up to discovering that next brak through solution or idea? 

This week when I was reading about all the trouble that Netflix is experiencing with their pricing, it got me thinking about all of their success and how they got their start.  Did you know that back in 2000, Netflix founder Reed Hastings went to Blockbuster and proposed running an online brand for them?  They laughed at him, so he went out on his own.  Now look at all that has transpired.  Blockbuster is going sneakers up, while Netflix has become the single largest source of web traffic in North America this year.

How the tables turn, wouldn’t you say?!  It’s fun to see the little guy with the big idea get brushed off by the big corporation, then go on to dominate or even wipe out that very corporation that blew him off.   Repeatedly in my career I’ve seen changes in technology push out the well established businesses that wouldn’t evolve with the new technology.  Consider for a moment the evolution of music: from the LP to the 8 Track Tape, then on to the cassette, the CD and now the mp3.  Take a look around, it’s everywhere.  When was the last time you had to use a pay phone?  How many books did you download on Amazon instead of buying from Borders?

So why is it that these well established businesses can’t (or won’t) grasp this and get on board with new age technology?  Technology is a game changer and they’re simply not playing?  Do they lack the competency, the strategy, are they blind, complacent or just plain unaware?  Do you think you’re immune to it?

Back in my investment days I thought about this often as businesses described by those same adjectives failed to progress into the new age. Surprisingly, however, it was also happening to businesses filled with smart, competent, strategic and visionary people. 

In the late 90’s Clayton Christensen published a a book called The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.  He talked about how even good business practices, like focusing on the best customers and investing in technology, can’t prevent new technology entrants from sneaking up on you.  The reason is that new technologies are rejected from your best customers, and if you’re listening to them, you reject them, too.

In addition, when you’re a big guy in the market, in order to grow your business you have to have things that are meaningful in real dollars.  If a new location can make you $20M in new revenue, it won’t make that big of a difference if you’re already doing $20B in annual revenue.

So how do we prevent it from happening to us?

To begin with, listening to your customer’s is good, but excessive customer focus distracts a company from looking at new markets and products/services of the future.  Unless becoming the next Blockbuster or Borders is the objective, paying attention to where all the attention is going is something to consider.

In my next blog I will get into more detail on the rules that Christensen discussed on how managers can know when to listen to customers and when to invest in what might be a low payoff technology now, but could potentially turn into your core business.

Back in mid May I attended the Fortune Leadership Summit.  A fellow EO member named Marc Ostrofsky also attended the event, and although he was not a scheduled speaker, he did take a few minutes to speak to all of us.

Marc has a successful background in entrepreneurial start-ups, with his current portfolio of online businesses generating over 75 million a year.  When he got on stage, he talked about making money online and the vast opportunities available.  One story that he told literally made my jaw drop.

He told the story of a guy who had made a YouTube video on how to jump higher (yes, the vertical leap).  He posted it up just for fun.  The number of hits it received was enormous, so he took it town and built an e-commerce site with educational material, such as videos on how to jump higher.  Users can subscribe to the videos via a monthly payment plan.  Marc said that this guy made over a million dollars last year, with over 7,000 people subscribed and paying $9.95/mo.

Marc told us of a few other stories that are portrayed in his new book called Get Rich Click!.  I just saw a report in this last Saturday’s Wall Street Journal that popularity of his book is growing quickly, up 814% for the week.  What is so fascinating about his story and his book is that it’s an entrepreneur’s utopia of ideas to start making money.  The title of one of his topics is “The Riches ARE in the Niches…$5 Million a Year Selling Cuff Links Online!” 

What’s awesome is when you look at it from the niche perspective.  Think about those areas of life that we are passionate about (discussed in my last blog), which can usually unfold some niche opportunity to scale and sell something that we know and love.  In some cases you don’t even have to invest capital, make a product, buy inventory, or ship anything…you can have others handle that while you simply bring in the customers and maintain a portion of the profit.

There was a great example in the book about a couple of kids that were really into bike riding with their dad.  Tires being the most important gear in this sport, their dad ordered bike tires from a UK specialty shop in just enough quantity for their bike club.  When they came in a color that no one liked, he offered the kids the option to get rid of them (in quantities of 10) and just pay him the cost of $30 per tire.  The kids set up an ebay store and sold the tires for $35 each.  They made a $50 profit, then turned around and ordered more and sold them as well.  This happened back in 2002 when they were only 10 and 12 years old.  They now own BikeTiresDirect.com, and generate over $8 Million a year in sales.  WOW!

We are in an age of opportunity that is unprecedented in our history.  Never before could you start a business with so little, and reach so many customers so easily with the help of the internet.  There is nothing standing in our way, so what are you doing to get started?  Personally, my team just released a beta version of a software tool called Sluice (Join the beta users community) that is built to simplify requirements gathering and collaboration for projects, and we hope to sell thousands.  

What is your passion, which leads to your niche, which leads you to profits…which will lead you to financial freedom???

I’m a news junkie, and lately there have been an overwhelming number of reports on inflation.   Whether on TV or in the paper, it seems every day I hear about prices going up…but is that really what inflation is? 

My 20 years in the economic and investment world have taught me a lot about inflation.  Early on I did a lot of reading, but it took some time for the true mechanics of inflation to really sink in.  My goal is to share my thoughts with you on this subject as simply as possible, because I feel like understanding this matter is essential to maximizing strategy and ongoing profitability.

Generally, when you hear the term “inflation” in the news, it’s associated with rising prices.  Rising prices is actually the result of inflation, not inflation itself.   Let me explain this with a little history lesson:

 Back in the Roman days, the government, like all governments, wanted to spend more money.  They faced the same issues we do today, where they would raise taxes to have money to spend, but they could only raise them so much before the people would revolt.  In order to keep to their agendas, they got creative and found other ways to get money from the people, outside of raising taxes.

In those days, money was made of real gold and silver since there was no printing press.  What they did was take coins in and clip them. This means that they would secretly skim the edges off of each coin and mold it back together to make new coins, thus creating more money.  Merchants began to notice that some coins being used for purchases were smaller, having less silver or gold, and thus were worth less.  To compensate, they would increase the cost of their items to offset the lower value of the smaller coins.

THUS THE INFAMOUS RISING OF PRICES OCCURRED! 

If that makes any sense to you, then you now understand what inflation really is…an increase in the AMOUNT OF MONEY in circulation, not rising prices, which is the result.  According to the basic law of supply and demand, we all know that when we have a lot of something, it becomes less valuable.  When the dollar you have is suddenly worth less than a dollar, business will demand more of it to compensate.

In today’s society, the government doesn’t have to clip coins; they just print more money based supposedly on the value of gold.  When we print more money than the value of our gold, it causes the inflation effect.  A business’s profitability will erode quickly if it can’t adjust to money becoming less valuable.  There are several concerns as to the financial effect of inflation, but awareness of what is happening is the first step to learning to how deal with it.

Richard Maybury gives the history and simplest explanation of inflation I have ever seen in his book Whatever Happened to Penny Candy?