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Beware the hand that helps you

Beware the hand that helps you

Watching, as three very different entrepreneurs shared the secrets of their success on the Holmes programme, I was stuck by two issues on which they were pretty much unanimous: Their number one reason for success was “hard work”, and they believed educational qualifications made little difference to their ability to succeed.

Watching, as three very different entrepreneurs shared the secrets of their success on the Holmes programme, I was stuck by two issues on which they were pretty much unanimous: Their number one reason for success was “hard work”, and they believed educational qualifications made little difference to their ability to succeed. This is not new, but it got me thinking. Most people would see hard work as a key to success -- although it is more about persistence, having the tenacity to stick to an objective through thick and thin, and usually over a longer period than they had originally imagined. However, if hard work is the main reason for success we should be seeing more results in the number of local IT companies succeeding on world markets.

For me, working hard is not the main issue; it is knowing what to do to achieve success. And here is the problem: How does the average Kiwi IT entrepreneur with a great idea know what to do to succeed? Our current education system does not seem to be helping much. So to whom can he or she turn?

I feel sorry for the young entrepreneur of today. Being a rather more mature entrepreneur myself, I find myself surrounded by grey heads and networks of readily available advice. At least three others working within my company hold a level of entrepreneurial and business development experience similar to mine. We have all successfully built a company -- at least once -- and still we realise that there is much we don’t know this time around. Help is also plentiful for those just starting out -- the difference is, for a virgin entrepreneur it is very difficult to tell the “helpful” from the “harmful”.

Free assistance -- network groups and published information -- is like the internet itself -- potentially helpful, but buyer beware: quality cannot be guaranteed. It is likely that there is some unique aspect to what you are doing and yesterday’s rules may no longer apply. A free mentor who invests time in you because he or she can see value in what you are doing is possibly the best assistance of all -- but that kind of help is hard to find as and when you need it.

That leaves the kind of assistance that only money can buy.

I usually issue an “approach with caution” warning when dealing with a firm of professional advisers. They rarely have direct experience in starting up or building IT companies. Although they may have worked for IT companies, it is difficult for them to empathise with a start-up when they are cocooned in a corporate shell. While they can help with formal accounting issues and are a necessity for dealing with offshore taxation issues, it is easy to spend money out of all proportion to the value it brings at a particular stage in the company’s growth. This applies especially to patent attorneys and other brand protection lawyers.

We are generally told that patenting or some form of legal protection for your IP is imperative. Many entrepreneurs spend large sums of money to do so without realising that it might be a complete waste. A patent is only as valuable as your ability to defend it in court, and to do this will almost certainly require deep pockets. Unfortunately our justice system favours the wealthy and you may need to summon up millions of dollars if you are to stand a chance against a large corporation. As an expert witness I experienced the system first-hand in what appeared to be a cut and dried case. I discovered the difference a $600 per hour QC can make in a courtroom. If you lose a case you really don’t want to be on the receiving end of the other party’s costs -- which in the case I was involved with were nudging $2 million.

Software developers in particular should carefully consider the value of going for a patent. There is a growing debate about the merits of “method” patenting because of its vulnerability to challenges. In an article headed, “Tread with caution”, the World Patent and Trademark News warns software companies of “the heightened risk of forfeiture for business method patents”. In my opinion you would be far better off putting the money, time and effort into getting your product to market to enjoy whatever technological advantage it has.

Other consultants, including those who advise on business development and on taking your product offshore, come in a range of categories. I have identified four main types.

First, you have the genuine success story. Someone who has reached a stage in their career where they have genuinely achieved and you now seek a better challenge by working for yourself as a consultant. These people are generally available only for a short time, typically becoming increasingly involved in the interests of a client they then adopt as their next fulltime career move. If you find one of these -- grab them while you can.

Second, there is the consultant who is in the business of fabricating his own personality. He will have been a senior executive in a number of impressive-sounding organisations but usually for relatively short periods. In the first year his image carries him through but in the second year his lack of substance becomes apparent and he moves on. Between jobs he “consults”.

Third, there are those who consult but don’t have any more experience than you do. They are typically young, but not necessarily. They can certainly “talk the talk” but have never “walked the walk”. In other words they are big on theory, have lots of qualifications but very little real-life experience to match. In many instances, as a hands-on business manager, you may well have already exceeded their ability to help you advance your enterprise any further.

Fourth, there is the dangerous kind – the dodgy consultant. You often can’t really determine whether these people are good, bad or indifferent until it is too late. They often originate from outside of New Zealand or are returned Kiwis with seemingly immense international experience. Their objective is clearly to impress. I have noticed that an American accent or a former title of vice-president does wonders for the credibility of an individual in the eyes of the cargo-cult Kiwi. They will blind you with tales of their achievements and impressive examples of their triumphs in the markets you are trying to enter. Unfortunately, if it sounds too good to be true, and often it is.

In reality if the same consultant fronted for a corporate job his ability and track record would be quickly found out. How? Well corporates approach employing senior executives quite differently to the way most of us employ a consultant. Not only do the businesses undertake verbal reference tests but they have extensive international networks of contacts to tap into and a range of psychological and other testing at their fingertips. Too many of us approach employing a consultant as you would select any other service provider -- as opposed to a critical member of your team.

This is not a new story but I feel it is worth repeating because I have recently been running into cases where a fledgling IT company (and sometimes not so fledgling) has engaged with someone, or some firm, and suffered badly from false expectations. A person (or firm) can appear to have an impressive track record, look very smooth and professional and have money to invest, but this doesn’t mean they are not the consulting equivalent of Typhoid Mary. As the saying goes: “Those that can, do; those that can’t, consult.”

When considering using a consultant I make three key recommendations:

1. Look closely at their track record. You are looking for tangible results and an understatement of their ability as opposed to “talking the talk”. Contact the companies they say they have worked for and/or helped.

2. Try to check out their ex-partners. You are looking for someone with whom you can form a close relationship. Look for past examples of the same thing. I was once referred to a relationship from 30 years ago, bypassing other partnerships in more recent times. Why? You want to establish that the consultant has personal attributes that you can work with. It doesn’t matter how long they have been consulting -- check.

3. Use your own networks. Guys like me who have been in the game a long time hear the same names circulating time and time again with question marks over their performance. Often it is more critical to listen to what is not said about a person, than what is said. You don’t need the most professional consultant – you need the most effective.

John Blackham is a well known Auckland entrepreneur developing his own software solutions. Contact Blackham at ajb@xsol.com.

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