On a recent flight, I watched Howard Schultz describing how he built Starbucks. Here are a few lessons from the series that fit the unicorn profile (Bootstrap to Billions from www.dileeprao.com).
#1. Learn to sell. Sales was the most common skill of unicorn-entrepreneurs. Unicorn-entrepreneurs may be technical wizards like Gates and Zuckerberg, but they knew how to sell, whether in person or online like Joe Martin. Schultz’s first job was in sales, and cold calling for leads at Xerox taught him how to shake off rejections and sell himself.
#2. Be the smart mover, not the first mover. Instead of launching a startup, he bought a successful coffee bean business and improved it by pivoting to the concept of the coffee bar he saw in Italy. Schultz suggests that the odds are against the first mover, or “pioneer,” and he is right, and in favor of the disrupter. Most billion-dollar entrepreneurs disrupted an old, established industry by using an emerging trend or technology (Nothing Ventured Everything Gained.
#3. Understand your industry. One of the most important lessons that Schultz notes is to study your competitors, understand their strengths and weaknesses and improve on them. Schultz developed a guidebook on his direct and indirect competitors.
#4. Focus. Focus is important, especially at the start. Sam Walton focused on rural America before expanding. Bezos focused on books before expanding. Schultz suggests that CEOs cannot chase too many things and should set priorities.
#5. Price high. Schultz points out that companies need to offer benefits and show value to customers in order to charge more than competitors. This means offering significant differentiation and knowing how to sell the benefits at the higher price.
#6. Be finance smart. Schultz suggests many strategies to be finance smart, including:
· Understand unit economics, which means the investment and returns.
· Know what investors want and do your best to give it to them. Under-promise and over-deliver. He especially recommends making your projections reasonable so that you reach them, especially in the early stages of a business (first year) and thus build credibility.
· Track your business. Schultz also recommends tracking your business numbers continuously so that the monthly and quarterly numbers are not a surprise.
#7. Find the right investors. Schultz suggests finding investors who share your values, including looking at a business from a long-term perspective. Also understand how your investors would react if things do not go right. Schultz only used equity to reduce and raised more than needed but notes that he did not obsess about control. This can be a risky move for entrepreneurs because whoever controls the venture can fire the entrepreneur to “improve” management or grab the wealth created. Jobs was fired from Apple. He just turned out to be Apple’s savior and one of the greatest entrepreneurs of the past half century.
#8. Be a leader, not a manager. Perhaps his most important rule was to be a leader. Help people to be “larger than themselves.” This point can be especially important in a people-oriented business-like Starbucks, where the customer experience is based overwhelmingly on the employee rather than on technology.
#9. There is no reverse gear in life. Many people in their 60s use the phrase, “could have, would have, should have” to lament about their life. It is a phrase that aptly describes dreams unfulfilled – often because of self-doubt. Schultz points out that everyone has self-doubts but suggests that you may want to take a calculated risk without letting fear of failure stop you. This has to be your decision based on your passion, and no one else can tell you if starting a venture is right for you.
MY TAKE: Schultz followed the profile of the unicorn-entrepreneur. Although he bought Starbucks, rather than start a venture like other unicorn-entrepreneurs, he bought the right foundation and pivoted to a unicorn platform with his remarkable insight about imitating the idea for a coffee bar from Italy. His key lessons are worth noting.