We are closer to this situation than most business leaders realize. This new reality applies to everything we buy: consumer products, business software, tech gadgets, services, shoes at retail stories, meals at restaurants, or employees we hire. This brutal scenario is especially important for startups that are trying to create new markets or break into existing ones.

When you are creating a new product (or service) in the early stages of your company, your first priority should be to make a great freaking product. Make an outstanding product your customers says, “This is freaking great!” Beauty is in the eye of the beholder; it’s only great when customers says it’s great. If you don’t hear that from your early customers, you had better keep improving your products or lower your lofty growth expectations.

Your product has to be great to somebody

If your product isn’t great for somebody – really remarkable – no amount of marketing effort or price reductions or sales flogging will help you get really big and bring new buyers to your door without effort. Seth Godin reminds us that products that aren’t remarkably great won’t get talked about. And if it isn’t talked about in the new world, people won’t hear about it, let alone perceive it as the obvious choice.

I’ve been pretty grumpy about the state of many early startups and the perceptions of many entrepreneurs and big company innovators who don’t get it. You can’t market your way to the top without a great freaking product that somebody thinks is incredible and wants to talk about. I have been using the less politically correct version of “great freaking product” in frustration when I see a company that doesn’t get it.

Greatness is relative

Not every new product that takes off is perfect. Twitter has had its fail wail problems, but Twitter is still valuable and noteworthy and far better than the alternatives despite the problems. Guy Kawasaki calls this the 10X rule. Your new product doesn’t need to be perfect (bug free, feature complete, etc.), it just needs to be 10X better than the alternative for people to switch and buy your new new thing.  Great freaking products create change in the world.

Do people line up for the new iPhone just because of Apple’s snazzy TV ads? Nope. Apple makes great freaking products first — then they market them like crazy. Does the team at TechCrunch want to write about mediocre products that don’t have raving customer fans or remarkable news? Never — TechCrunch readers wouldn’t think it’s such a great news source any more if they lowered their high standards.

Yes, there are many ways to sell mediocre products to certain parts of the market where buyers buy for some other reason — your product is cheapest or you have built a personal relationship with the buyer. Just don’t expect your business to be well known and attract customers easily. Companies with mediocre products almost never grow to be big companies, and most won’t last very long.

Still trying to be great to everyone? I call this the Target Market Trap. Remember, single men and women only have to be perceived as great by one other person to find Mr. or Ms. Right and get married.  Narrowing your target market focus helps you get to “great” faster for somebody, which means you’re going to grow and can attack larger markets later.

I’m not saying you can just “build it and they will come” or “product is everything.” Having a great freaking product is just the first thing. You can do great marketing to help spread the word — but only after there is a remarkable story that can be spread.

Your product or service has to be remarkably valuable and feel like the best in class for your business to take off. There really is no other way to make company that will grow fast and be very valuable.

Do you have a great freaking product?

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• Is Your Focus Narrow Enough?
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Jim Head is my Dad. Apparently, he gained a lot of wisdom in his 30 years as an advertising executive in Chicago. When I was younger, I thought his stories were just funny and interesting. The older I get, the more I see the wisdom in the punch lines (after I stop laughing).

Here are a few of his best one-liners that make me smile the most:

The freak show is never in the main tent

In the circus, the main attractions play in the big top to the big crowds. The obscure and unworthy attractions, like the freak show, will never make it to the main tent no matter how hard they try. This one-line zinger applies to the politician who thinks that being unusual is going to help her win an election and to the chronic entrepreneur who keeps dreaming up new ideas that will never fit their core business.

Most organizations have one core and important “main tent” for their business — and plenty of freak shows. Are you playing in the main tent?  I certainly hope so.

There’s always someone who doesn’t get the message

Experienced CEOs and marketers know how hard it is to get your message across to everyone in a large group. This is never accomplished with just single press release, advertisement or blog post.

This one is also known in my family as, “not everyone gets the memo.” In big companies, getting the message across to the front lines (and back again) is often one of the top challenges — sometimes harder than communicating with customers. No matter what you do, there are always 10% of the people who never get the message. Jay Leno’s man on the street interviews are closer to reality than most leaders know.

Don’t be the last to get the message. People will make fun of you.

Nobody ever explained it to me like that before

As the story goes, Dad took over responsibility for a problem employee – a salesman who hadn’t made his numbers for a long time, but nobody had done anything about it. At their first meeting, he explained politely to the salesman that if he didn’t make his numbers this quarter he would have to let him go. The salesman appreciated the clarity and responded, “Nobody ever explained it to me like that before.”

Maybe the expectations you have for your employees or children are not as clearly “explained” as you think. And sometimes the message is clear but not really received. It takes two people to communicate. Just ask my wife – sometimes I need to be “’splained” for me to really get it.

Thanks for the witty advice, Dad. I remembered at least a few of your useful one-liners. :)

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• The Marketing Trap

But most startups don’t make it very far — most fail pretty fast. So what was the key problem? Was it their team, market, plan, “timing” or “not enough capital?”

From what I see, capable startup teams chasing big markets fail most often because they don’t narrow their target market focus enough in the early stages of their companies. They try to serve “everyone” in a potential big market rather than focus on a well-defined customer group where they can execute and win.

I call this the target market trap. How can you grow big unless you aim broadly from the start? It’s an easy trap for an ambitious entrepreneur to fall into, and it’s a common cause of startup distress.

When you are a small company, you should be focused on a small segment of the market that you can reach and serve with your meager resources — to the exclusion of the rest of the market. Laser focus is more likely to create early success that can then lead you to larger markets and eventually to your dream of “everyone” in the big market.

This is a strange idea to big-thinking startup leaders, but it’s really how the world works. You have to start small to get big, conquering consecutively larger markets as you grow. You just can’t do it all at once – even if you have lots of investment capital.

Surprise! Big companies started in smaller markets

All the big guys started small before they eventually conquered a big market. Amazon, Apple, Microsoft, HP, IBM, Google, Facebook, Walmart. Pick any big player these days. They may broadly serve big markets now, but all of them were laser focused on a specific small segment of their market in their early days.

• Microsoft – Microsoft is the ultimate large, successful company that servers “everyone” with a variety of products. However, while their ambitious long term goal was “a computer on every desk and every home,” they started in 1975 as provider of BASIC programming tools for the first personal computers, then made operating systems for IBM PCs, then more development tools, then Windows, then Microsoft Office, then Windows Servers, xBox and others. Check out the Microsoft history timeline to see their progression.
• Facebook – Facebook has quickly become a mainstream social website and is now used by over 500 million people. But Facebook didn’t start out targeting the masses. Far from it. At first, Facebook was only for Harvard students. Once that quickly caught on, they expanded to Ivy League schools, then to all university students, then to high school students, then everyone over 13.  Now parents and grandparents are signing up and Facebook is expanding internationally, but they didn’t start by serving “everyone.” It’s true – a business with a massive impact started to serve just the students on one campus. Facebook timeline
• Amazon – Yes, Amazon sells everything that you can buy with one click on the Web, but in the beginning in 1996 they only targeted serious book buyers who had an Internet connection and were comfortable shopping online. This was a relatively small group in the beginning — compared to large market they serve today. Amazon timeline
• Apple – Apple leads many exciting broad markets in digital media, personal computing and mobile consumer devices now, but they started out with products for computer hobbyists, families with kids and elementary schools. And Apple computers (Apple IIC, Macintosh) always addressed smaller niche markets in the PC world – for 30 years. Apple timeline
• Walmart – In their first 10 years, Walmart existed only as a no-frills discount retailer in rural Arkansas with 15 stores, because Sears or Kmart would never go there. Now are the largest retailer in the world. Walmart timeline

You get the idea. Try this with any big company you know. Where did they start? Pretty small and narrow at first, then they grew very fast as they expanded their focus.

The journey to being big starts by starting small and winning consecutively larger markets over time, rather than by getting 1% of a broad mass market, then 2% (often called “Chinese math“). Aim too broadly and you won’t have the traction, credibility or cash to stay alive long enough to win at any level.

Investors already know how this works. So do successful entrepreneurs and marketers.

I have found that most startups almost can’t focus narrowly enough, especially bootstrapping companies without outside investors. But this focus doesn’t mean you can’t grow extremely fast. All the companies listed above were growth superstars even though they started by serving narrowly defined markets.

You have to narrow focus so you can execute efficiently to succeed at something, knowing that bigger markets can be attacked once you’ve proven yourself and have more resources as you grow.

Dream big, but start smaller.

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• Is Your Focus Narrow Enough?
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How can you be more successful with your fundraising efforts?

Forget your fancy PowerPoint slides, dynamite demo and tremendous track record. If you can’t tell a simple and compelling story about your business, you won’t get past first base with an investor.

Surprisingly, many entrepreneurs don’t tell a story that includes the simple answers the key questions that investors need to answer first. And most startup CEOs don’t do this well — even though the basic elements of a compelling investor pitch are freely available and have been common practice for years. (Several investor pitch resources listed below.)

Every angel investor (or VC) needs to hear your answer to these basic questions to consider investing in your company. Miss one of these key elements and your story is incomplete.

The basic angel investor pitch

1. Introduction

• What exactly does your company do?
• What is the key value proposition?

2. Team

• What is the background and story of the CEO?
• Who are the key employees and advisors?

3. Problem/Opportunity

• What is the problem you are going to solve?
• How big and urgent is this problem for this market?

4. Product/Solution

• What specifically is the product or service?
• How does it address the market problem?
• What is the current stage of development?

5. Technology

• What the secret sauce technology or unique delivery approach?
• How is this defensible?

6. Competitive Advantage

• What are the key market segments and current competitors?
• How are you different and better than competitors?

7. Business Model

• How do you make money?
• Is this a common or standard model in your industry?

8. Go To Market

• How will you build awareness and grow sales?
• What traction do you have so far with customers?

9. Company Status

• Current number of customers, employees
• History, accomplishments and status

10. Financials

• Expected (pro forma) revenues, expenses, profits/losses for 5 years
• What are the key factors that drive this business?

11. Investment

• How much money are you raising at what valuation?
• How are you planning to spend this money?
• What are some likely exit scenarios?

This isn’t a revolutionary approach. This is the simple form of the standard investor pitch that has been been used for years.

Is there just one way to tell the story? Of course not. Only eleven slides allowed? Every investor and every startup is different, so make the adjustments that make sense. Also, a great presentation won’t make up make up for a mediocre CEO.

Your basic startup story gets you in the game with investors. Your selling skills, your knowledge of the business and several other factors get across the finish line to raise money.

It isn’t easy, so don’t avoid the fundamentals of your startup pitch.

Popular investor pitch resources

• Guy Kawasaki’s 10/20/30 Rule of PowerPoint for investor presentations
• Detailed outline with explanations from investor Bill Reichart
• Deloitte and Touche presentation outline with notes
• Outline and example slides from Alliance of Angels

What investor pitch resources or suggestions are most valuable to you?

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Technology entrepreneurs typically underestimate the marketing execution effort required to succeed – and overestimate the marketing investment.

Big budgets are no longer the magic pill that moves markets. The game has changed.

Execution is always harder than it looks

Like losing weight or getting fit, it’s easier to develop your plan than to actually give up sweets or exercise before the sun comes up every day. Billions of dollars are spent on diet plans, health clubs, and low fat foods, but more Americans are getting bigger each year. Most dieters have a decent plan, but they lack the discipline to do the hard things every day (forever) that are required to be healthier.

Unfortunately, modern marketing is more work and effort than “quick fix” spending on advertising and direct mail campaigns. It’s difficult to continually make your product or service great, write useful content for the Web, participate in the social conversation, develop partner relationships, test and retest new approaches, refine your strategy and all the other things required to grow fast and build a valuable reputation.

The bad news is most marketing activities these days require painstaking labor and detailed savvy about a wide variety of tactics. The good news that most marketing tactics don’t require significant budget any more.

Winning without big budgets

One fast-growing business that is succeeding in the marketing game is FireHost. FireHost delivers truly secure hosting for small and medium-sized businesses that have critically important websites but not big budgets. (FireHost has been a client of New Avenue and I’m an investor, too.)

Yes, FireHost offers much-needed service that is very disruptive to old dedicated hosting business (that costs too much and isn’t very secure). But the FireHost team is winning because they execute like crazy in every part of their business, including marketing.

During an important strategy discussion early last year, we decided that “secure hosting” was an available position in the big hosting market and FireHost was uniquely positioned to go after it. After this meeting, the FireHost team made a long list of the hundreds of additional things they would have to deliver and communicate to be known as the most secure hosting available.

Within months they delivered almost all the items on the list, including changes to their services, infrastructure, website, branding, marketing activities, messaging and content, search keywords, and on and on. When they finished that list they made a new long list. They have done this each quarter for a year. And each quarter they are more laser-focused than before.

Now FireHost is an acclaimed hosting company that is growing twice as fast as the industry and has successfully raised $2 million in capital to help them grow faster.

Lucky? Nope. Great product and terrific support? Yep. But that’s not enough.

The FireHost team executes 10X more marketing activity each month than any other company their size that I have ever seen. They have grown fast without a big budget. It is extremely hard work — and they do it better than most companies of any size.

Here’s another example: How did Marty Zwilling of Startup Professionals get over 200,000 loyal followers on Twitter and build hugely popular website for entrepreneurs?  Without a marketing budget?  Well, Marty has posted a useful article on his blog every day for the past two years. Every day.

This is how the fastest growing companies are doing it now. Modern marketing is mostly about work: consistent effort and constant improvement.  Not big budgets.

To win in the marketing game, be prepared to put in the extraordinary effort every day that is required.

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• Is Your Focus Narrow Enough?
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Ignite Phoenix is a quarterly event that brings together 18 new presenters who each give a brief talk on a particular topic they are passionate about. Every speech is just 5 minutes long with 20 slides that advance automatically every 15 seconds. It’s is a fun format which allows for an exchange that is both entertaining and educational.

Here’s the 5-minute video:

(This video was featured on Lifehacker and has been viewed on YouTube over 10,000 times.)

The Pomodoro Technique

I’ve always been pretty disciplined about managing my time, writing down my goals and using various systems to stay organized. There’s just a lot to do every day. But we all face an ever-expanding flow of little things that sap our attention — emails, calls, texts, tweets, meetings, news, and more. And now these digital distractions follow us everywhere.

How can busy people make time to get the harder deep thinking work done that creates the most value in our workday? That’s what the Pomodoro Technique does best.

The Pomodoro Technique uses a simple system developed in the 1990’s by an Italian graduate student to help him be more productive in his studies. It uses a simple kitchen timer – his was shaped like a tomato. In Italian, the word for tomato is pomodoro.

Four simple steps

1. Choose an important task you need to work on and write it down
2. Set a kitchen timer for 25 minutes
3. Work on that task without stopping for 25 minutes (really)
4. When the bell rings, stop for 5 min and take a quick break

That’s it. It’s not a big fancy system that requires you to buy a book or attend a class, but it really works. I started using this method about six months ago to help me get more valuable “thinking work” accomplished during my busy workday.

This system helps our brains to focus quickly; it’s the opposite of multi-tasking. Twenty-five minutes is long enough to make progress on any task, but not so long that it feels like a major time commitment or a big ordeal.

The Pomodoro Technique can be used by any busy person who needs to develop a concentration habit, including business executives, consultants, creatives, programmers, students, writers, teachers. It’s a great procrastination fighter, too.

Take the 25-minute challenge

Take a look again at these simple steps of the Pomodoro Technique. I challenge you to grab a kitchen timer (or Pomodoro software timer app) and pick an important task that your brain thinks is hard.

Then do just one 25-minute Pomodoro in the middle of a busy day. I guarantee the results will surprise you.

The Pomodoro Technique has helped me. Has it helped you?

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• The Freak Show is Never in the Main Tent

The key difference is that the $10 million company is completely committed to being known as being the best at something important in their market.

Yes, you actually have to deliver on your promise of being the best, but that’s not enough to grow past the wall most tech startups hit at about $2 million in revenues.

In the early days, the CEO and the executive team can sell all the customers personally. The sales relationship and trust developed by the founders are required to sell the first customers and create revenue as startup. But at some point as you grow, the CEO can’t be involved in the sales relationship with new customers.

Frontline CEO selling is important, but it doesn’t scale.

As you grow, the next customer won’t be buying from the trusted CEO – they are buying the best known solution available in the market.

Being known as the leader of your category is the only way to grow big.

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Click here to see the video on the Vertical Measures website.

In the video, I share some answers to these questions:

1. What are your predictions for the internet marketing in general for the year ahead?
2. How about investments and startups — where do you see that heading?
3. What one critical issue should those in the Internet entrepreneurial space be concerned about or focused on in 2010?

Hope you enjoy it.

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• Phoenix Groups & Events for Marketers
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• Improve Your Website Using Google Analytics

Using Google Analytics, the popular and free website traffic analysis tool, you can learn what’s really happening on your website in just 10 minutes each week.

If you aren’t tracking any visitor stats on your website, or if your current website reporting tool is too complicated, you’re missing an opportunity to see what’s really happening on your website.

Google Analytics is the easiest and cheapest way to learn what’s working and not working. No technical expertise is needed.

Once a week I quickly check the traffic statistics for the websites I manage. Here’s my simple checklist using Google Analytics:

Visits
The Visitors Overview page shows total visits, unique visitors and more. I see visitor traffic trends at a glance. Big traffic day on Tuesday? Fewer visitors overall this week? Do more visitors view one page and then leave? After a few weeks, it’s easy to understand typical traffic patterns and what merits further investigation.

Visitor Map
The Visitor Map shows where in the world those visitors are located. Browsing this map gives me some perspective on overall visitor numbers. My site may have had 500 visitors last week, but many of those are from visitors outside my region. How many visitors are my customers or prospects versus interested readers?

Traffic Sources – Search Engines
Web search engines drive traffic to every website, but most traffic comes from Google. Which keywords drove the most traffic to my website? I type those top terms into Google and see where the site ranks in the list of search results. Why did Google suggest that web page when this term was searched? When I change page content get better search results, I’m doing basic search engine optimization, or SEO.

Referring Sites
Which sites have hyperlinks that direct visitors to my site? Try to find more who promote your site too. When someone clicks on a Web link in Twitter, Facebook, LinkedIn to go to my website, I see it here. Are Social Media sites driving a lot of traffic? Not as much traffic as Google.

Top Content
Which pages on the website are being visited most? The  homepage will be the most visited page, but every other page is ranked, too. Is the best content on the most popular pages? Maybe the site navigation is leading visitors down the wrong path. Pages that are most useful to visitors have the longest “time on page” number.

The first time you view visitor statistics for your website, you might spend an hour exploring all the data. After a few weeks, you’ll just want to check these few things quickly, and then dig in to find answers to the questions you uncover.

For example, I saw traffic jump in the last month for one page on my website — my review of Malcolm Gladwell’s book “Outliers.” Google recently started ranking this page higher and higher. Now its the second most visited page on my website. Keyword searches like “malcolm gladwell outliers book summary” drove hundreds of visitors last month — and they average time these visitors spent on this page is an astonishing 7:49. They stick around to read the entire post!

So, what did I do?

I changed the post title from “book review” to “book summary” to match what people typed into Google search. Traffic from Google doubled within a week to this page. I had known there was a need for useful marketing book summaries, but now I’ve confirmed it. Look for more book summaries next year.

There is no magic to this.

If your Website developer says, “It’s too complicated for me to set up Google Analytics on the website” or “You wouldn’t understand the data,” he’s lying.

If you care about your market presence on the Web, get Google Analytics and start improving your website a little each week. You will be shocked by how simple and useful it is. Start with the basics. The data is all there.

Take the Google Analytic product tour to learn more.

How did you improve your website this week?

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They underestimate the amount of refinement and development of their service offerings, marketing execution, internal processes and company culture. By a factor of 10. At least.

I have worked with dozens of successful CEOs of project-based service businesses on their new scalable business enterprises. All but one of these leaders drastically underestimated what it takes to create a growing business that doesn’t rely on the principal’s involvement to attract and serve new customers.

• What it takes to make a great customer experience happen every time — without the founder in the room
• What it takes to have their story sell in Peoria without a face to face meeting with the owner
• What it takes to build a brand that people know about and trust
• What it takes to grow steadily and predictably

Think about the services we buy from national brands — like coffee from Starbucks, car service from Sears, our gym membership, online travel booking, buying books from Amazon. All of these used to be local services, but now they are large services businesses that (on the whole) work way better than our local providers.

When McDonald’s was getting started, there is no question that the founder, Ray Kroc, put at least 10x more effort into product definition, marketing execution, internal processes and company culture than the local hamburger shop. Truth is, Ray Kroc put at least 100x more energy into the things that would scale his business to change the world. He was a fanatic. And he created one of the world’s largest companies.

Amazon puts at least 100 times more energy into their customer experience and marketing than your local bookstore does. Think Geek Squad compared to your great local computer handyman. It’s a completely different game when the owner isn’t the frontline salesperson to their customers and is no longer the chief service provider.

Is it a simple incremental step for an expert consultant to write a book, build a national brand and create a growing training business? Nope. It takes 100 times more refinement and energy to build all that — compared to the effort of their next client engagement.

CEOs creating scalable service business need to think more like they are creating a consumer product business than running their old project-based custom service business. Like creating a software product or a national retail chain or a writing a book.

Make great pies on holidays that your family raves about?  Building a national pie business brand takes a lot more effort and energy.

Is 10 times the effort enough? 15.5 times? 55 times? 100 times?  There is no minimum number. Sorry.

You simply need to be an unstoppable fanatic about your customer experience, your processes, your company culture, your sales pitch. Steve Jobs? Fanatic. Debbi Fields of Mrs. Fields Cookies? Fanatic. Amazon website designers? Fanatics.

If you aren’t making people crazy about attention to detail and fanatical refinement of the things that scale your business, you probably aren’t doing enough to achieve the success you dream about.

Are you the chief fanatic?

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