Insights from an Irreverent Innovator
Wit and wisdom in equal parts seasoned Guy Kawasaki’s keynote talk on the intersection between technology and social science
at EMTM’s 20th anniversary symposium on May 22nd.
Kawasaki discussed the business utility of Twitter and parallels between venture capital and hotornot.com, and explored the
recession’s hidden values for entrepreneurs. Kawasaki, a Silicon Valley venture capitalist and columnist for Entrepreneur
Magazine, is a former Apple Fellow. The most recent of Kawasaki’s nine books is Reality Check: The Irreverent Guide
to Outsmarting, Outmanaging and Outmarketing Your Competition. Kawasaki is managing director of Garage Technology
Ventures, a venture capital firm specializing in high technology start-up firms and has recently launched
news aggregation website that functions like a virtual magazine rack.
Delivering on his reputation for sharing useful, jargon-skewering business advice that makes you laugh out loud, Kawasaki
told the near-capacity crowd of EMTM alumni, students and faculty gathered that Friday before Memorial Day weekend:
“I am in awe that you’re either so dedicated to entrepreneurship and innovation, or you’re so
clueless that you don’t
have a life.”
Tweets for Profit
Kawasaki asked audience members to raise their hands if they use Twitter. A few hands went up and he quipped,
“They’re all Mac people. All the Windows users are still installing their operating systems.”
Kawasaki, a prolific Twitterer, says, “Unlike 99.99 percent of people on Twitter I believe Twitter is a marketing
and broadcasting mechanism. It is a tool for me to make Alltop.com successful. It is not for me to make friends, have
social interactions or find people to date. Twitter for me is a mechanism to broadcast Alltop. The beauty of Twitter is
that it’s the only way I know unless you are the National Security Agency to search what people
are talking about.”
For example, Kawasaki uses resources like
www.twitterhawk.com to market Alltop’s news
feed service, which incorporates traditional news media and blogs. “We look for keywords like autism, then we tell
them they ought to check out Autism.Alltop.com. People on Twitter have also suggested topics for Alltop to cover like home
schooling. They help us figure out what topics and what feeds to add to Alltop; and then they market it for us.”
Useful business leads emerge when Tweets are screened with advanced Boolean search capabilities. “Say you’re
a specialist in search engine optimization (SEO). You can search by zip code for everyone who used the term SEO in a Tweet
within 50 miles. If you are an SEO search consultant, you can look through Tweets to look for someone who tells the public
world of Twitter that they are looking for SEO advice. Then you can find this person and send them a message: ‘I saw
your Tweet; and I can help you.’ This is business development.”
He adds, “I don’t know how else you can do that. That’s the crux of why Twitter is such a powerful
marketing mechanism: the ability to search. You have to be careful not to turn this into the ultimate spam machine.
It’s up to your moral sense how far you want to push this.”
Kawasaki explained how Twitterhawk.com (not affiliated with Twitter) enables users to create keyword searches and
then draft responses for those searches that can be sent automatically or by manually approving each response (which
he recommends). The site charges a nickel per outgoing messages. Twitterhawk also has rate limits to prevent abuse
As an example, Kawasaki cites how a Philadelphia-based reseller of parts for classic Porsches could construct a
Twitterhawk search: Look for classic Porsches within 100 miles. Then the firm could send a Tweet: “If you
are restoring Porsches, we have the largest East Coast collection of Porsche parts.”
Venture Capital and Online Dating
“Many people think and wish to believe and even try to position the venture capital game as being like
www.eHarmony.com,” says Kawasaki. “You answer all these questions do you like to walk on beach,
red wine or white wine, big families or small families, what music you like. You’re supposed to take this
psychographic thing and then you find a life partner to stroll on the beach with for the rest of your life.”
“Venture capital is actually more like that other kind of dating site,
www.hotornot.com,” says Kawasaki.
“There’s no psychographic profile. Unlike eHarmony, you just look at a picture and decide ‘hot or not?’
Venture capital is hot or not. In roughly 30 seconds, everybody in the room has made up their mind about a pitch. That’s
why only ten slides matter and should be used. If you don’t get them in the first 30 seconds, you waltz.”
Recession: Making the Most of a Perfect Storm
“I could build a case that there has never been a better time to be an entrepreneur,” says Kawasaki.
“That’s easy for me to say because I’m not unemployed; and I realize we are in the perfect storm
of a recession now. However, there are a lot of talented people who will now work for free or for options. Talent
is available. Because of open source software development, you don’t have to call up Oracle and buy a $150,000
compiler anymore. All that stuff is free. You have to really be a bozo to pay for a tool now.”
“And with Amazon’s thing in the clouds, you don’t even have to buy servers anymore either. So to
recap, you have all this stuff in the clouds, free marketing with Twitter, free tools and free people. Life is good
except that nobody’s paying for anything. The time to innovate is not when a recession ends. The time to innovate
is now so that when the recession ends you can really sell stuff.”
In keeping with his reputation as a trend-allergic business blogger, speaker and author, Kawasaki says, “Most VCs
tell you they’re looking for a proven team, proven technology and a proven business model. If you were to apply
that test to all of the great tech companies, venture capital would have funded none of them. That test would not apply
to Apple, Cisco, Google, Yahoo, eBay or Twitter. None of them would have passed the test. The longer I’m in the
venture capital business, the less I think I know. I could build a case that you should invest in the stupidest idea
that comes in your office.”
As a venture capitalist, Kawasaki has more than sympathy for the people on the other side of the pitch. He offered
hilariously useful advice in a talk, “The Art of Innovation,” at the EMTM 20th
anniversary gathering in keeping with his two-word motto: empower entrepreneurs.
Guy Kawasaki The Art of Innovation
Here are highlights of Kawasaki’s talk, “The Art of Innovation,” presented in a top 10 format plus one bonus tip.
1. Great Innovation Happens because the Company wants to make Meaning as Opposed to Making Money
As venture capitalists, we meet with many companies. Often they come in thinking we want to hear that the reason they’re creating this company is to make money. Most companies that are founded on the concept of making money pretty much fail. They fail because they attract the wrong kind of co-founders and early employees.
If you make meaning, one of the consequences of making meaning is that you will also make money. If you start off with the primary purpose of making money, you probably will fail because that kind of motivation doesn’t sustain itself.
Let’s pretend I’m vice president of marketing at Nike. I say, “You have $150. You give me that; and I’ll give you two pieces of cotton, leather and rubber manufactured under somewhat suspect conditions in the Far East.”
That’s not quite the pitch for Nike women’s shoes. Nike turned that $2.50 of raw materials into something that stands for efficacy, power and liberation. They are making meaning with shoes.
2. Make a Mantra
Companies should use mantras, not mission statements. Use just two or three.
Back then I looked at the company’s website and decided there is no business there. Yahoo then was just a directory of web sites with an unproven management team, technology and business model. Plus, I thought an hour-long commute was just too far to drive. Who could have predicted it would become all things Yahoo has become today?
Words to explain why your organization exists, a mantra is memorable, keeps everybody on the same page and helps the external community and employees understand why you exist.
Otherwise, you end up coming up with something like this, a typical McKinsey-esque $25,000 off-site mission statement: the mission of Wendy’s is to deliver superior quality products and services for our customers and communities through leadership, innovation and partnerships.
I have four children and the children outnumber the adults. We’ve gone from man-to-man to zone control. We have been through Wendy’s drive-through and stood at the counter many times. I have to tell you, in all the times I ordered French fries, cheeseburgers and Cokes it has never occurred to me that what we are participating in is leadership innovation and partnerships. I don’t think any Wendy’s employee could repeat this mission statement verbatim. I don’t think the founder could repeat this mission statement verbatim. I know he can’t. He’s dead.
Wendy’s should use a two- or three-word mantra “healthy fast food” even though it’s somewhat oxymoronic. My mantra is “empower entrepreneurs.” That’s what I do in two words.
3. Jump Curves
The perspective of entrepreneurs is not to stay on the same curve and duke it out to do things 10 to 15 percent better. True innovation
happens when you do things ten or a hundred times better.
A great historical example is ice 1.0. There used to be a huge ice harvesting industry in the northern United States. This meant that Bubba and Junior would hook up their horse to a sleigh and cut blocks of ice from a lake. In 1900, 10 million pounds of ice were shipped.
Next came Ice 2.0, the ice factory that froze water into ice so you could make ice in any city. The ice man delivered ice to your house or you went to the factory to get ice. By the 1930s and 1940s, Ice 3.0 came into being the refrigerator. Now instead of the ice man delivering to your house, you had your own personal ice factory.
Here’s an interesting fact: none of the ice harvesters became ice factory owners. And none of the ice factory companies became refrigerator companies. That’s because most organizations define themselves in terms of what they do instead of thinking about what benefit they provide to the customer. We go to a frozen lake with a saw and a horse and we cut blocks of ice. We freeze ice in a factory and then the ice man delivers the ice. We build little ice factories called refrigerators and put them in people’s homes.
Bubba and Junior surely should have said this is so much better that we can freeze water in any city in any time of year rather than having to wait for winter. And the ice factory owner should have said to himself it is so much better if the ice factories were distributed in people’s homes instead of having to come to the ice factory or have the ice man deliver ice.
Okay that was a 50,000 foot ‘duh-ism:’ of course you should jump curves. Thank God that guy came in and made this speech because until he made this speech I was going to create this piece of crap.
4. Roll the DICEE
Now I’m taking you from the 50,000 foot view to the 5,000 foot view of what that means: what are the qualities of curve-jumping.
The D stands for Deep. Great products and services have lots of features that anticipate what people need. For example, the REEF sandal. Every sandal has one purpose: to protect feet. This one has twice the functionality. It has a metal clip on its sole near the reef logo that opens beer bottles. This sandal has twice the functionality
I stands for Intelligence. Consider the Panasonic BF-104 flashlight. When you look at it you say “somebody was thinking!” This solves a very simple problem. You have jars full of batteries and you have flashlights that don’t use those size batteries. Panasonic figured out that problem. This flashlight takes 3 types of batteries. You have tripled the odds that you have the right size batteries.
C stands for Complete. Lexus is not simply a car made of steel, rubber and glass. It’s the totality of the Lexus experience and the after-sales support.
E stands for Elegance. Great products are elegant, user-friendly and beautiful. Interface matters. One of the great mysteries in life is why companies with virtually unlimited resources cannot make beautiful things. There needs to be a new position in many companies, a CTO: Chief Taste Officer.
The second E stands for Emotive. Great products generate strong emotions. You either love a Harley or you hate a Harley.
Ask yourself as you jump curves, are you creating something Deep, Intelligent, Complete, Elegant and Emotive? Are you rolling the DICEE?
5. Don’t Worry, Be Crappy
What I learned about innovation is don’t worry... be crappy. Consider the Macintosh 128K shipped in 1984. It was a revolutionary piece of crap with no software and minimal RAM. But if we had waited for chips to be cheap enough and fast enough and LCD displays, Ethernet, wireless and 700 dpi printers, we never would have shipped. Life would have passed us by.
I am not telling you to ship crap. I am telling you to jump curves. If you do something ten times better, then your innovation can have elements of crappiness to it.
I can tell you 20 ways why Twitter has elements of crappiness to it. But it has fundamentally jumped the curve in communication. Don’t ship crap. Ship something great with elements of crappiness to it.
6. Polarize People
Be unafraid of polarizing people. Many entrepreneurs believe they have to ship this holy grail of a product that appeals
to all people no matter their race, color, creed, socio-economic background or sexual orientation. When companies try
to do that, they inevitably ship mediocrity.
My recommendation is: take your best shot. You’ll polarize people. Some people will love it. Some people will hate it.
TiVo, for example, generates very strong emotions, TV owners love TiVos because they get to time-shift and skip commercials.
We watch them one Sunday a year. I love TiVo. I watch three hours of TV every day and I’m not talking PBS specials on
Elizabethan England. But there are other people who hate TiVo. If you’re an advertiser or an ad agency, you hate TiVo.
You shouldn’t piss people off on purpose. Just keep in mind that great products tend to polarize people.
7. Let 100 Flowers Blossom
This was stolen from Chairman Mao. Here’s the way I apply it: At the start of great innovation you may witness a
strange thing which is that unintended people buy your product in large quantities. Some companies freak out when this happens.
My recommendation if this ever happens to your company is first: take the money. Second, find out who is buying your product, ask them why and give them more reasons to buy. This is different from asking people who are not buying your product, “Why aren’t you buying it,” and then trying to fix it for them. Trying to fix it for people who do not believe is very difficult. It’s too hard to convert an atheist to your religion.
When we sold Macintoshes, the easiest person to sell a Macintosh to was an Apple II user because they already loved Apple.
The second easiest person to sell a Macintosh to was someone who had never used a personal computer before. The hardest person to sell to was someone who worshipped the false god of MS-DOS.
Let 100 flowers blossom. Imagine if you are the vice president of marketing for Avon and you have this product that makes
skin soft, luscious, beautiful and moist “Skin so Soft.” You find out all these moms are buying it not for
the beauty and the luxurious moisturizing. They’re buying it because it repels insects. What do you do? Take the money!
8. Churn, Baby. Churn
This is stolen from the Black Panthers. They said “Burn, Baby. Burn.” I think what innovators in business
do is “Churn, Baby. Churn.” That means you take version 1 of your product and you have to make version 1.1,
1.2, 1.3. 1.4 and so on. I am saying ship, then test. Ship that thing that is 10 times better and then as soon as you
ship start listening to your customers again to improve your product.
This is the hardest step in innovation. To be an innovator you have to be in denial because most people will say it
can’t be done, shouldn’t be done, isn’t necessary. I’ll bet somebody told the founders of
Google “Why does the world need a sixth search engine? There’s Alta Vista, Yahoo, Ask Jeeves. There
are 16 ways to search already. Why do we need another way to search the internet?”
I’ll bet people told Steve Jobs and Steve Wozniak “What would you do with a personal computer? Who’s going to use a personal computer? Computers are for banks and universities.” That’s the kind of bozosity you need to ignore.
Having done that, once you ship, you need to flip that bit. You need to start listening to people. And that is one of hardest things in the world to do, to go from ignoring all the nay-saying to having to listen to problems that people are having with your product. Find out how to improve that product so it is better for people. Churn baby churn.
9. Niche Thyself
Here’s all the marketing you need to know. Consider a very simple graph that measures uniqueness on a vertical axis, and value on a horizontal axis. This is a 2x2 matrix. I’ll take away the suspense. You want to be in the upper right hand corner.
Consider the other three corners. Low and to the right you have something of great value, but many other companies create the same thing. Perhaps you slap the same operating system on the same generic hardware. In that corner, you always have to compete on price. You can make millions of dollars here but it’s about price.
The second area is up high on the left where you create something of no value that’s unique. Only you do it. In that case you’re just stupid. You’re in a market that doesn’t exist.
Even worse is the quadrant with low uniqueness and low value: you create something of no value and people fund a lot of competition. This is the famous dog food corner. Pets.com and dozens of companies like it seven or eight years ago were funded by venture capitalists. They figured out there’s a stupid thing called a brick and mortar pet food store that doesn’t serve much purpose. Pet owners don’t exactly go there to do taste tests. You don’t need a point of purchase display. They’re just selling pieces of cow in cans.
They decided to remove the pet food store from the equation so they could discount dog food 25 percent. There’s only one problem: cow pieces in cans weigh a lot. The shipping and handling removed all the margin you could make when removing the pet food store. Then when UPS dropped off the dead cows in cans you had to be there. Somebody had to be home. So it was less convenient and just as expensive.
The holy grail of marketing is to be in that upper right hand corner, to have a product that is unique and valuable to some people. As an engineer, it’s your job to create that. As a marketer, it’s your job to convince people that it’s true.
This is the Clear card. Here’s how it works. You go and you register. You prove that you aren’t al-Qaida. Then they give you the Clear card. When you’re at airport security, you give them the card, stick your thumb in a machine and give a thumb print. And they take you to the front of the line. In about 20 airports in the country, I know I can get through security in less than five minutes. For a business traveler who frequents those airports, this is an absolute no brainer. It’s the only way to get through security really fast.
This a Breitling Emergency watch. If you unscrew the knob at the ‘five’ position there is an antenna that pops out that activates the emergency broadcast system. It’s the same signal that airplanes put out when they crash. If you pull that out, Kevin Costner in a helicopter will be looking for you. This is something you pull out when you have a real emergency. This watch is unique in that can save your life.
This is a smart car all models of cars can park parallel to the curb. This is one of few cars that can park perpendicular to the curb. When there’s really tight parking: smart car.
If you want to get through airport security: Clear card. If you want to perpendicular park your car: smart car. If you want to save your life with a watch: Breitling Emergency.
That’s the holy grail of marketing. If you can pull that off, that’s where meaning is made, where margin is made, and where money is made. That’s where history is made: in that upper right hand corner.
10. Follow the 10-20-30 Rule of Pitching
As an innovator you will have to pitch for money, market share, approval, sales, partnership recruitment you name it. You will have to pitch successfully.
I have something called Ménière’s disease in which you have tinnitus, hearing loss, ringing in the ear, and sometimes attacks of vertigo. There are many theories about what causes this. The medical world has a theory that you should reduce your caffeine, salt, alcohol and stress which basically describes my life. I have another theory about MJniIre’s which is that it’s an occupational hazard for me as a venture capitalist.
What do I do day in and day out? I listen to people pitching. Everybody comes in and goes thru 60 slides in 60 minutes. Because they are so eloquent, they can rip through one slide per minute. Everybody says we have patent-pending, curve-jumping, paradigm shifting, new ways to use Google ad-sense with open-source technology to tackle, for example, the growing lucrative dog food market.
We’ve had some real doozies come in. We had a company wanting to raise money to buy Israel. Let’s not sweat the whole Palestine situation just buy Israel and make it into an amusement park. I am not kidding you. Another company wanted to raise money for funding to build a geodesic dome over LA to control air pollution. To this day I don’t know whether it was to keep air pollution in or out.
I’m telling you these VC stories because I believe I have a moral obligation to help people pitch better in order to
prevent a pandemic of Ménière’s disease; I believe my Ménière’s disease is occupational because I listen to this crap day in and day out.
So the 10-20-30 rule is this: the optimal number of slides in a PowerPoint presentation is 10. That’s all the human mind can handle. If you ever pitch a VC, if you can do it in 10 slides, you are 90 percent ahead of all the other people the VC meets. The purpose is not to use shock and awe to bludgeon a VC into saying at the end of the meeting “Please give me the wiring instructions because we are ready to give you the money today.” That just never happens. The purpose of pitching a VC with PowerPoint is to not be eliminated. The next step is due diligence, not wiring the money.
You should be able to give these 10 slides in 20 minutes. Generally speaking, 90 percent of people in the world use a Windows machine. They need 40 minutes to make it work with the projector. The other five percent of the world can use the time to have a better discussion.
The 30 part of this rule is that the optimal size font for a PowerPoint presentation is 30 points which means that you have to know your presentation much better. You should never read your slides. If you read a slide during your presentation, the audience figures out: “This guy is a bozo. I can read faster silently to myself than he can read out loud. I’ll just skip ahead.”
The reason to use a 30-point font is that it truly does force you to come to the essence of what you want to communicate. Another rule of thumb is to divide the age of the oldest person in your audience by two. Most of the time you’re pitching to 50- to 60-year-old people, so 60 divided by two is 30.
When there are 16-year-old venture capitalists, you may use the 8 point font. Until that day use 10 slides,
20 minutes and a 30-point font.
11. Bonus: don’t let the bozos grind you down.
There are two kinds of bozos in the world. One is slovenly, has disgusting body odor, and is a slob with a pocket protector: a loser-type of a person. But that bozo isn’t dangerous. That bozo you can walk away from.
The dangerous bozo dresses in all black and has a lot of products from manufacturers like Lamborghini, Ferrari, Armani and Maserati. Beware of people who like expensive products that end in “i” and who wear Prada and Rolex watches. Remember that rich and famous often parses to lucky, not smart.
The more innovative you are, the more you are going to have to deal with the more dangerous bozos of the world. And if you ask one of these bozos, “Should I do this? Should I create YouTube, eBay, Google, Apple, Cisco, Yahoo?” They will say, “It can’t be done, shouldn’t be done, isn’t a necessity.” Don’t let the bozos grind you down.
I’ve figured out bozosity is much like the flu. You need to build up resistance so that when you encounter it your body can resist it. I’m going to inoculate you by exposing you to a little bit of bozosity
“I think there is a world market for maybe five computers.” Thomas Watson, the chairman of IBM, said this in 1943. I have five Macs in my house. I have all the computers he anticipated in the world in my house.
“This telephone has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us” Western Union internal memo, 1876. If Western Union were in business today it should be PayPal. But it’s hard to go from the telegraph to the internet if you write off telephone in the middle... That’s too big a chasm to cross. To be fair to Western Union, in 1876 if you have the first telephone, who would you call?
“It’s too far to drive and I don’t see how it can be a business.” Source: Guy Kawasaki, bozo, 15 years, 6 weeks, 7 days, 5 hours, and 43 minutes ago. I said this when Michael Moritz of Sequoia asked me if I wanted to interview for the CEO position of the company he had just funded. And I declined the opportunity to interview for the CEO position of Yahoo.
May you never have this experience. When you make a mistake of this magnitude you tend to obsess about it. I have come to this conclusion from the bottom of my heart: to be there and to partner with my wife as our four children are growing up is worth something. That’s worth a lot. It’s worth roughly $1 billion. I pick my family over money.
Herein lies the problem. That explains the first billion I would have made. Really what bugs me is the second billion I would have made because it shows that I, too, was a bozo. I was so successful in the personal computer curve that when I saw the internet I said “This is nothing more than an extension of the personal computer curve. It’s the thing that’s coming through the modem cable.”
Back then I looked at the company’s website and decided there is no business there. Yahoo then was just a directory of web sites with an unproven management team, technology and business model. Plus, I thought an hour-long commute was just too far to drive. Who could have predicted it would become all things Yahoo has become today? Don’t let the bozos grind you down!