In my last article on Valuing Innovation, I shared the first five of ten lessons for entrepreneurs and business leaders that I learned during my career at both Amazon Web Services (AWS) and EMC.
Now, I’d like to share the second half of that list – the last five lessons that I learned, and that I feel can be truly useful for any business leader looking to grow their company.
My last five lessons are:
Skip debt unless debt is your business
There are many different ways to finance and grow your business. But one of the most popular and least advantageous way is to use debt.
Do not fund your business with debt. If you do, your overriding decisions will be paying off debt and not servicing your customers. You’ll be beholden to your debt suppliers and not your customer needs. This is a surefire way to set your business up for failure.
Boring cash flow can fund tremendous innovation – learn how to build both
If the choice is to take on debt or use cash flow and grow profitably – use the cash flow approach.
Many organizations have boring sources of cash flow. Take Amazon, for example. There was billions from Amazon’s retail business that was smartly reinvested into the business to fund AWS. Today, AWS margin contribution exceeds Amazon Retail’s margin contribution by multiples. In this instance, existing cash flow funded new services and capabilities, and those new services and capabilities helped to open new revenue streams for the company.
If you’re going to craft a company of enduring value, you need cash flow engines to drive new capabilities. Use available cash to fund new and interesting business ideas, take more swings at the bat and deliver new and agile capabilities instead of simply resting on your laurels. Some of the new business lines may look – or even be – crazy. But if you fund them right, you won’t be in trouble if they don’t pan out. This is the secret to Amazon Enterprise and it is misunderstood by a lot of observers.
Learn how to discount cash flow and value at risk at the same speed others blink
You need to learn to operate in a decision time frame that is faster than your contemporaries and way faster than your other market competitors.
It’s essential to have the technical skill for valuing a potential investment and limiting the collision domain of risk.
Most fights are won before they start – you do not have a glass jaw
Balance rhetoric and the kinetic. Both produce outcomes in surprising ways. Be able to argue your point when you’re in the room, and also be able to argue your point when you’re out of the room.
You need to be open to others challenging your idea, but you also need to be able and capable of defending it. If you can defend and convince people, you’ll build your coalition and aggregate the people needed to help move your idea forward.
Be sure to argue with data and not emotion. Craft your decision points and arguments with data and paint a clear picture on why your idea is most beneficial.
Find a way to help other people and then learn how to add leverage to it for scale
Identify customer challenges, pain points and problems, and then build capabilities that people want and need to help them overcome their largest challenges. Find a targeted community of end users and then service that customer base.
Once you’ve done that, go back and do it all over again. Help a customer, help a community, develop end users capability and then rinse and repeat
Agree with my lessons? Disagree completely? Leave a comment and let me know.
At BellVista, Tim helps build technology companies, and believes that growth comes from doing the right thing for customers.
During his career, he has the opportunity to have run businesses from pre-revenue to over $1B annually. As a owner of market creation and expansion programs, his work has generated value on the top and bottom lines at each business stage from incubation (0-$10M), growth ($10M-$50M), expansion ($50M-$200M), geographic leader ($200M-$400M) and global market provider ($500M-$2B+) through organic operations, acquisitions and restructures.