Entrepreneur Association of Tokyo
Seminar Summary - Mike Alfant
2004 02 03
Keeping Six Feet of Water Above Your Head
Mr. Mike Alfant
February 2004
Mike shared what he believes are the most important aspects of successful entrepreneurship.
"Several aspects are important and several are critical," he says, "but there are a few that really make the difference between success and failure." The area he focused on for EA-Tokyo was leadership.
When he looks at entrepreneurship and entrepreneurial ventures, he considers 4 things:
First - capability of the management of the company to lead the company and take it forward. "I feel very strongly that the right team can run any company and can make any venture successful. It really all comes down to the team." he says.
Second - ability of a company to manage cash flow.
"To large companies, cash flow is a very abstract notion. It has to do with basically accounting entries. It's never about making payroll."
Third - quality of the product or service.
Fourth - relationships the company maintains with other firms that are in its sphere of influence - customers, vendors, business partners, etc. and the nature of those relationships.
"In Japan, the temptation is for small companies to try to do too much," Mike explains. "I strongly encourage entrepreneurs to look for very strong business partner relationships. It's good to be good at one thing but you are not going to be good at everything." Often these types of partnerships in Japan are not win-win situations, he cautions.
Mike offers clear advice. "With small companies you basically need to have people-partnership relationships with as many companies as you can that are peripheral to your space so that you can provide the same level of products and services to your clients that some of the larger companies can provide."
Mike also believes the way we treat vendors, such as landlords, people who we buy computers from, etc. is a critical issue. "I've seen this happen with some entrepreneurs, when you come out of a difficult customer situation and the first thing you do is for someone to take it out on. You don't want to take it out on your staff or your significant other, so normally what you say is, "OK, which vendor can I beat up? I'm angry and I need to yell at somebody." Taking your frustrations out on your vendors is a bad move and not very constructive, he says. "You need to set an example both internally and externally and treat your vendors the way you want to be treated."
Identifying Good Leaders - "Who's going to steer my Ship?"
So, you have started your venture and are watching it grow. How do you identify good leaders?
Mike breaks this process down into sets of characteristics that good leaders possess. (In no particular order):
● Good leaders need to be completely conversant with and have a thorough and deep understanding of the strategy of the company and the operational and tactical means by which that strategy will be implemented. Communication skills are paramount. In addition to understanding what the strategy is and the tactics and operational guidelines for which those strategies will be met, good leaders need to be able to communicate that information both internally and externally.
● Good leaders need to be able to motivate people. "At the end of the day I think it is very hard to motivate another individual who is not motivated themselves. What it really comes down to is establishing a pattern of making substantially correct judgment calls over a long period of time such that people will be willing to follow you without thinking of too much detail. That's how you motivate people in an entrepreneurial venture in my opinion."
● Flexibility, mental and emotional agility. As a leader in an entrepreneurial venture, you will be faced with obstacles on a continual basis. When these obstacles occur, good leaders are able to adapt, improvise and overcome these obstacles. They are not fixated into static patterns of thoughts. They do not have a lot of ego invested in methods or manners of doing things and they are very achievement oriented.
● Character aspects to leadership: Loyalty, integrity, honor, commitment. "These are indispensable."
Questions:
Individualism isn't necessarily accepted in Japan. It is more a group process. How do you mix in leadership and how do you advocate leadership in a cultural context?
Mike: "I don't think entrepreneurial ventures can be consensus-based initiatives. There has got to be a person who has the authority and who is the final decision-maker." In his experience, Japanese leaders are the ones who are best able to finesse large groups of people into a consensus situation. "They are able to manage a group into reaching some consensus, which is very inconsistent with an entrepreneurial situation. Especially in the early stage start-up, you don't generally have the luxury of having a lot of time convincing people to do things. You just have got to get things done. One of the things I find difficult working with Japanese entrepreneurs is a reluctance to make decisions which they feel will be either unpopular or not well received by the larger body of employees." he says.
You still face the situation where you have multicultural teams. How do you reconcile the different communication skills in these teams?
Mike: "It is important not to discriminate at all. One very important thing is not to be seen to be favoring any particular group. Another area is the untapped resource here of Japanese women. There is basically a shortage of opportunities for Japanese women in large and small Japanese companies. I think it is foolish to basically take 50% of the population and say "We are not going to exploit that as an opportunity for our company and for those people." Likewise I think it is silly for companies to say "We will only accept fluent or native Japanese speakers." They have just cut off 99.5% of the world's population as potential hires."
Mike believes the most commodified skill set in Japan is the Japanese language. "For me, when you are looking for the right kinds of people with the right qualifications to be leaders, and you say "I'm going to collapse my universe from 6 billion potential candidates down to 120 million potential candidates, - to me that is crazy, it makes no sense whatsoever."
Corporate Culture
"One important consideration for all entrepreneurs is that the corporate culture of your company is of your own character and personality. That's what matters. By just walking through an office and seeing what people are doing and how they are doing it, I think I know what the character and personality of the leadership of that company is. It is a top-down thing. Entrepreneurs create their company in their own image. It is like raising children." Mike says. Maintaining a distance with Staff "when is 'too close' close enough?
"Often people say to me, 'What was the most difficult thing when you did this company or that company?', and what they are always expecting to hear is, 'I had a really tough time raising money,' or 'It was really hard to build a Japanese sales force,' etc. These are givens. To me, the hardest thing has always been the fact that the people are people you have an affinity and an attraction for. But as a CEO or founder of a company, you need to maintain a distance, and maintaining that distance is the single hardest thing in running and starting businesses." Keeping that distance and having the emotional energy to do that for years was an unexpected reality for Mike. "It's really debilitating - it just drains you after a while. But you have to do it. If you are starting a company from scratch, you can't be friends with everyone in the company." he says.
Until his company's staff level reached 100, Mike wanted to meet everyone who was undergoing the interview process. "When the number reached 130-140, all of a sudden people were afraid to come and talk to me. One of the biggest problems is that people keep secrets from you. So you are constantly going around trying to find information and bits of data. When we were six people, staff would call you up at 3am in the morning from the police station in Roppongi asking to be picked up. Some of the guys and gals who were in in the early stages, still maintained that level of closeness. Half of them became advocates for the rest of the employees." he says.
Q: How did you go about recruiting staff?
"One rule we had was we never used head-hunters. Never. In an entrepreneurial venture, you cannot afford to be paying 30-35% of someone's salary to an outside firm. We hired about 140 people but we had gone through probably another 200 who had come and gone. Now if we had paid an average of $20-30,000 per person for that many people, we would not have had a business any more. We would never have gotten off the ground; we would never have grown anywhere near where we did. We didn't use head-hunters basically because we weren't able to afford them."
So how did he go about recruiting good staff?
"We developed our own internal recruiting and HR process to compensate for that." Mike explains. "We would physically send staff to different countries specifically to recruit and bring people back. Additionally we were very aggressive on the Net with newsgroups and our website which were very forward in saying to people, 'come work for us.' We also tended to get a lot of people coming to work for us who were periphially related to us." Another method used was hiring University graduates. "These kids are smart, they are really smart and they work hard." he says.
Entrepreneurs need to project absolute confidence
Regarding role models, Mike believes, it is difficult to just look at somebody as a role model and say "I want to emulate that person." "I actually think that is a way of setting standards that are very difficult to achieve. And so you tend to be less confident than you need to be. So to me, one of the things that entrepreneurs need to do is to project absolute confidence. And I think it is difficult to project that unless you've got it, and it takes a while to get but at some point, it's the "I have got nothing left to lose and so I'm completely confidant because I have no choice." Absolute confidence inspires people, customers especially."
Critical assessment is Important
"I think it is important to really be self-critical and to let your senior people be critical of you and for you to be critical of them. I think it is a huge mistake where there is a 'feel-good' situation where you are trying to engender a non-confrontational environment. For me, productive confrontation is important. Self-audit is important. Critical assessment by others in the core group is important."
On building a team to Grow your Business
Mike believes it is important to build a team around you that has a consistent set of values and also is at a similar point in the socio-economic curve to you -similar age group, similar background, and similar family situation. "Because then a lot of the decisions you make will be consistent with what everyone else is thinking." he says.
On another tack, one mistake a lot of entrepreneurs make is hiring people who know what they know, instead of hiring people who know what they don't know.
Decision-making to reinforce Success
When agonizing over a decision, Mike's default decision was, 'reinforce success and starve failure'. "I think large companies tend to pour resources into failing initiatives. ie: 'We are really screwing up in this project, so let's put all our best guys on it.' My predisposition would be, 'This project is hopeless. Let's forget it. But, we've got a breakthrough over here so let's exploit it. Let's put all our best people onto it and take it forward. "What you are really trying to do is to create something that will transcend your own capabilities and your own imagination."
Managing cash flow - "If you can't manage cash flow, you can't run a business."
Short term greed is bad and doesn't lead you down the path you need to be on to build a successful venture. Long term greed does. "Managing cashflow is such a core aspect of running a business. If you don't have the cash to meet your operational requirements, then the business closes. It's all about cashflow, and if you understand that then you put enough emphasis on generating cashflow such that you meet the businesses operational cashflow requirements. If you can't manage cash flow, you can't run a business - that's the bottom line. And you need to get ahead of that curve very early in the game. Managing cashflow has to be intuitive, natural and part of your character. If it's not, it's going to be miserable for you as an entrepreneur."
Insulating your employees from it is critical, he says. "One of the worst things that can happen in an entrepreneurial venture is when all of your employees are worrying about cashflow. That's the kiss of death. This is the worst thing that employees can be thinking about. You need to differentiate tactics from the strategy. To me, long term greed is strategy. Cashflow is tactics."
Text: Jonathon Walsh
For comments and suggestions: businessgrow@hotmail.com |
