By Andrew Patterson
Coming up with an array of business ideas has never been a problem for NZ entrepeneurs.
Kiwis seem to have an innate ability to dream up clever ideas that have ranged from the bizarre (bungy jumping) to the transformative (aerial topdressing) not to mention the extremely practical (the jet boat).
Commercialising many of our ideas though has been much less successful.
But how do you decide between what seems like a good idea and one that has the potential to become a viable business proposition?
More importantly, who do you go to to find out?
The issue for many of those starting out involves finding credible, independent professional advice to assist in the evaluation process. Note that word independent; it’s important.
Making the wrong decision during the start-up phase can not only be costly but has the potential to seriously jeopardize the future of the business; particularly when it comes to protecting intellectual property.
However, as the entrepreneurial eco-system continues to grow a new type of hybrid business professional is emerging focused specifically on the commercialisation process.
Paul Adams, founder of Ever Edge IP says that honest advice can often be hard to find and sometimes it’s not always the advice a budding entrepreneur wants to hear.
“I originally qualified as a lawyer but, I have to admit, not a particularly good one. I had a habit of telling the truth, which I discovered was a career-limiting move in the law, particularly when I was advising clients against undertaking the business ventures they were considering.”
“So I left the profession and travelled to Silicon Valley in the U.S where I founded a start-up raised some money and for a while we were doing extremely well. Then we got hit by the tech wreck so I opted to return to New Zealand.”
“I had the option of going back into the law but instead I got talking with Andy Hamilton at The ICEHOUSE who asked me to start up and run their incubator programme. I took him up on his offer and so that was really my entree into the world of business commercialization.”
“Since then, I’ve come to appreciate that New Zealanders are very good at coming up with a vast range of ideas. However, they tend to be a particular type of idea that often involves a high degree of risk and little in the way of proper market validation. We don't tend to be quite so good at very deep, very technical research. One exception to that is in primary sector research. But in terms of just generally innovative, out-of-the-box thinking, we do that every well.”
Coming up with an idea is one thing, making money from it is quite another. The start-up landscape is littered with examples of world-changing ideas that NZ entrepeneurs have been unable to turn into wealth for themselves and their financial backers.
Evans wants to shift that paradigm.
“The biggest issue we face as a country is a lack of management capability. If you think about what it takes to make an idea successful, you obviously start out with the idea itself but then you need capital, and ultimately its success will hinge around management capability. While that capability includes skills it's also experience and networks that are important.
“Our biggest problem is that we just don't have a lot of that capacity in the country in NZ. So if you went to Silicon Valley or Boston for instance, there's no shortage of people who have done it before, who have made lots of money, who have great connections, who have great capability, lots of skills and expertise to offer.”
“Here there are very few people who’ve gone through this process previously themselves and possess those sorts of skills and experience and expertise. We're only just starting to produce those kind of people; the likes of Sir Peter Maire and Rod Drury for example.”
“That lack of capability and experience does put us at a distinct disadvantage.”
It’s not the idea that counts
For many entrepeneurs it’s all about coming up with the idea believing this is the essence of getting a business started. Adams would beg to differ.
“There is a tendency to think the idea is everything, but it’s not. The reality is that in order of importance it’s not even at the top of the list. If you think of the three things that you need - capability, capital and the idea itself – probably the least important is capital. If it’s a good idea you’ll find the money.”
“By far the most important is capability, and while the idea is somewhat important, if you were ranking it in terms of relative proportion, you'd probably say 75% is capability, 15% is in the idea itself, and the balance is the capital required to launch the idea.”
Building and investing in capability – both internal and external – is absolutely vital, according to Evans, if the business is going to be viable over the long term.
“With internal capability you need to focus on what you're really good at, the existing skill set and capacity within the business and what kind of things you don't want to outsource.”
“Then there's external capability and they include your various professional advisers including your accountants and lawyers etc. It's about finding those people who really understand what you're doing and can get alongside the business and act as partners to the business.”
“There’s also an issue we have with some professional service providers in New Zealand who do a great job with traditional industries, the likes of agriculture or real estate or light manufacturing, those kind of sectors. But often when you start talking to many law firms and accounting firms about, for instance technology commercialization, they’re a lot less experienced.”
The hazards of our DIY mentality
Evans says our DIY mentality often acts as more of a hindrance than a help when it comes to the way we approach business start-ups.
“One thing we have going against us when it comes to business commercialization is our love of DIY. We DIY just about everything: our bathrooms, our kitchens and inevitably we try to do it with our businesses as well. If I try to DIY my bathroom, I can tell you it's going to be a disaster. That's why I bring in a plumber. Ditto if you don't really know what you're doing inside a business, you can very quickly do some serious damage.”
“When you’re starting up a business you’re inevitably short of cash and that often restricts your capacity to seek professional advice at a time when it’s actually the most critical.”
“There's an old saying that nobody ever regrets paying for good advice. We see it all the time when businesses make decisions based on things that they think they understand, and then things go horribly wrong. It’s more common than you realise.
“A client we saw recently had come to see us about two years ago when they were looking to file a patent application. Our advice to them was to proceed with caution and carefully decide whether filing the patent was going to be in their best interests because we weren’t convinced it was going to be worthwhile in the long run.”
“But they were adamant they wanted to proceed so they went off and filed the patent application. They came back to see us some years later but when we examined the patent it had been drafted so poorly that the whole thing was going to end up costing them about five or six times the amount it actually should’ve cost them which was completely unnecessary.”
What constitutes “good advice”?
Advice comes in many forms and not all of it should be relied upon; particularly from those who believe they’re qualified to offer it but in reality aren’t. The issue for many budding entrepeneurs is who you trust to give you good advice? What are the tell-tale signs to look for?
“We always say look at whether or not that organization is truly independent. So for example, take a patent attorney. Their primary interest is in filing patents. That's their business. They're not the person you should be seeking your IP strategy from for the simple reason is it's a bit like going to a barber and asking if you need a haircut. Of course they’re going to tell you that you need a haircut. You find the same issue with lots of professional service providers. So one of the key things to ask yourself is: are they truly independent? The person who's setting your strategy should not be the same person who's benefitting from it. That’s an important rule to remember.”
“So it's about looking behind the service providers' objectives to understand what their real interests are. Now that's not to say they're all bad. There's some great accountants, great lawyers, great patent attorneys out there. It's about understanding what the driver for their business are, and ensuring that there's a separation between their interests and yours.”
Approaching your business start-up idea in a strategic manner where the focus is on the process rather than trying to get the business up-and-running as quickly as possible will deliver a much better outcome according to Evans.
“I think that we’re starting to understand that there is a professional way to do this, and I think process is a big part of that professionalism. A lot of entrepreneurship, especially in New Zealand, is fairly amateurish. I don't mean that in a pejorative way, it comes back to my earlier point that we lack capability and experience, so almost by definition we're amateurs a lot of the time.”
“If you think about what an amateur does, often times they’re making it up as they go, they're trying to understand things on the fly, etc. Whereas the way a professional approaches something is in a very structured and process-driven and professional manner. That doesn't mean they ignore bolts of insight from the side, but they try to do things in a way that's been done successfully before.”
“That’s exactly the approach we follow as well. I always say: I want an unfair, competitive advantage. I want to tip the odds as much as I possibly can in my favour. The way you do that is by doing it in a way that's been done before and been proven to be successful. Market validation is a key component of that. It's sitting down and saying: does anybody actually want this product or service? It seems obvious, but a lot of people don't do it. Ditto, asking how strong is the intellectual property”?
The reality is if you've got a great product and it's successful and you have weak IP, it'll get copied straightaway. Equally, if you have a product that's a failure, it doesn't matter - nobody is going to copy it. So in reality you end up in a catch 22. It means the only place you can actually develop a strong, sustainable business over the long run is great product with great IP. Very few companies understand that.
Honesty is always the best policy
Just because you’re paying for the advice doesn’t mean to say your idea is going to get a tick of approval.
Evans says that all too often he ends up giving an idea the thumbs down even though this might ultimately cost him future fee income.
“We've always made it an absolute policy of ours that we are direct and honest and to the point, because I've seen so many individuals and inventors, small companies and even medium-sized companies spend huge sums of money developing technology and it just goes absolutely nowhere.”
“You're far better off telling someone early on that you don’t believe their idea is viable so that they have the opportunity to pull back, reconsider the situation and then perhaps develop another idea with those resources instead of burning them on something that's not going to go anywhere.”
“Now, that doesn't mean we're always going to be 100% right in our assessment. We could miss the Beatles, we could miss the next Google, but usually we see around 10 to 15 new ideas a week, so we've got a pretty good nose now for what works and what doesn't. At the very least, if it causes someone to stop and think and re-evaluate what they're doing then that’s a good outcome from our perspective.”
As legendary U.S. inventor Thomas Edison famously put it: “I have not failed. I’ve just found 10,000 ways that won’t work.”
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