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Wednesday, April 23, 2008

How Rookies and Startups Can Maintain Their Unfair Advantage

from "Uncle Saul"





Editor's note: "Uncle Saul" is a local, well regarded technology executive who will be making occasional contributions. He's requested that he remain anonymous so he can be free to use some real world examples to better illustrate his points.

Late in the 1936 baseball season, a 17-year-old Iowa farm boy struck out 15 St. Louis Browns batters in his first Major League game. Shortly thereafter, that same pitcher went on to strike out 17 Philadelphia Athletics batters, an unprecedented feat for anyone, let alone a youth with no professional sports experience.

How could such a young, inexperienced athlete baffle so many major league veterans? The answer is simple: the Browns and the Athletics had the misfortune of facing Bob Feller before anyone wrote The Book on him.

Rookie Advantage

Bob Feller’s signing bonus was $1 and an autographed baseball. In the 1930s, baseball regulations required rookies to play a requisite number of innings on a minor league team before proceeding to the major leagues. This process allowed scouts to assess up-and-coming athletes and write The Book on them before they entered the major leagues. However, Cleveland Indians officials circumvented this regulation in order get Feller on the field before the season ended.

There are clearly a number of disadvantages to being a rookie, irrespective of the profession. You must learn on the job and you have few relevant experiences to apply to the daily challenges you face. However, you have one huge advantage: you are unknown. This relative anonymity is the Rookie Advantage.

Fast and Wild

Police refer to a criminal’s modus operandi as that individual’s “Book.” By studying a criminal’s pattern of behavior, they can anticipate his next move. Bonnie and Clyde were difficult to apprehend, but not because they were brilliant criminals. On the contrary, they were uneducated louts. In addition, they were erratic, mobile and highly unpredictable louts. Rather than meticulously plan a robbery, they tended to strike whenever and wherever they ran out of money. As such, it was difficult for the police to write The Book on them.

In crime, in baseball and in business, it sometimes pays to be both untested and a bit wild. Even if you have a 100-mph fastball, batters will eventually compensate and begin to hit your pitching. However, if the batters are concerned with the possibility of being nailed by a wild pitch, they will remain off-balance and thus unable to dig in and calmly swing for the fences.

The effectiveness of speed and unpredictability was evident throughout Bob Feller’s career. Upon his retirement, in addition to holding various strikeout records, he also garnered the following dubious records: (i) most career walks, (ii) most walks in a single season and, (iii) most career hit batsmen. This combination of speed and unpredictability led him to be the first pitcher voted into the Baseball Hall of Fame in his first year of eligibility.

Startup Rookies

Startups are like rookie athletes – unknown commodities full of promise and boundless energy, but lacking experience. They are also often fast and a bit wild. Just like in sports, as soon as a company begins to achieve success, competitors begin to create The Book on the company. Although there is nothing you can do to avoid this inevitability, you can make it more difficult for the Book-makers.

As noted in Private Means Private, covet your private status and do not share intimate information that could cause you damage in the wrong hands. When Satchel Paige was asked about his various pitches, he was evasive and coined comical names for them – the bee ball, the trouble ball, the hesitation pitch. He gave the media a colorful story, without giving his competitors any useful information they could deploy against him.

You can also mitigate the effectiveness of The Book by changing the rules. As Bob Feller matured, he refined his curve ball and developed a slider. As these pitches were introduced, batters had to adjust their approach to his fastball. Similarly, Satchel Paige introduced an off-speed changeup during the latter part of his career in order to reduce the wear and tear on his body and to keep batters from teeing up on his (not-as-fast-as-it-used-to-be) fastball.

Companies can keep their competitors off-balance in a similar fashion by introducing their products into new and unexpected markets, distributing existing products via new channels and serving new customer segments. In addition to the incremental revenue generated by such opportunities, you can also decrease the effectiveness of The Book your competitors have written on your adVenture. Now quickly write down three new and unexpected things you can do to confuse your competitors and negate The Book they have written on your adVenture.

Political Rookies

OK. So maybe sports and crime analogies do not work for you. Let’s take a quick look at the world of politics. During the 1992 Presidential campaign, Ross Perot, Bill Clinton and George H.W. Bush participated in a series of national debates. Perot’s debating style differed greatly from that of life-long politicians. He utilized simple charts and spoke in plain English. He was also unafraid to risk offending a particular voting block and thus many of his comments were refreshingly blunt and non-scripted.

Many people, including jaded pundits, felt that Perot won the first 1992 Presidential debate and that he held his ground in those that followed. Even though he effectively pulled out of the election as it neared its close, Perot still garnered nearly 19% of the popular vote, more than any independent or minor-party candidate since Theodore Roosevelt’s victory in the 1912 election.

Fast forward to the 1996 Presidential campaign. Mr. Perot debated Vice President Al Gore regarding the North American Free Trade Act. The debate was shown on Larry King Live and was watched by a record number of cable TV viewers.

However, Perot’s effectiveness was greatly diminished, as compared with his prior national debates. To Perot’s chagrin, Al Gore and his Democrat handlers had written The Book on him. Perot’s simple, easy-to-digest charts were matched chart-by-chart by Mr. Gore. His homilies (e.g. “That dog won’t hunt”) competed with similar down-home utterances from Mr. Gore, delivered in an exaggerated Tennessee drawl. At one point, Gore even quoted one of Perot’s more famous homilies – “Measure twice, cut once” – in order to make a point. Emulating Perot’s style was a deliberate act, and all of Gore’s quips were taken right out of Perot’s Book.

As each of his previously successful approaches was countered by Mr. Gore, it was apparent that Perot’s frustration was getting the best of him. However, Perot still had one debating technique left – giving his opponent a gag gift which mocked their argument. As this tactic was well-documented in Gore’s Book on Perot, Gore beat Perot to the punch. He presented Perot with a framed photo of Mr. Smoot and Mr. Hawley, the Congressmen who drafted protectionist legislation during the 1930s, which many historians believe exacerbated the Great Depression.

Perot’s dismal performance against Al Gore, a man not noted for his debating expertise, is a powerful example of the impact of The Book and what happens when a rookie does not change their game.

The Rookie Advantage is also evident in a variety of other industries. In movies, one need only look at the impact of The Book written on Michael Moore. When creating Fahrenheit 911, the fact that he was relatively unknown allowed him to sandbag numerous Gulf War veterans, grieving family members and even experienced politicians. However, when Moore attempted the same approach with his follow-up film, Sicko, he was far less successful. The people he interviewed were guarded, which made it difficult for him to twist their comments to conform to his predetermined narrative. It is likely that the inevitable Borat sequel will also suffer from the loss of the Rookie Advantage.

The key to mitigating the effectiveness of The Book written on your adVenture is to come out of the gate hard and fast and to change your game as soon as your opponents begin to believe that they have you figured out. By systematically modifying your game and keeping your strategic cards close to your vest, you can frustrate your opposition’s efforts to anticipate your next move.

In most ventures, whatever was effective in the past probably will not be effective in the future. This phenomenon is exacerbated by competitors writing The Book on your adVenture, emulating your tactics and attempting to counter your competitive advantages which they cannot outright copy.

Bob Feller was not just a rookie sensation. He built upon his raw talents and enjoyed one of the most successful pitching careers in baseball, despite taking four years off during his prime to fight in World War II. His career began with a fierce fastball, but it thrived because of his unpredictable lack of control and his willingness to expand his pitching repertoire. In business, like in baseball, no matter how hard you throw, if you pitch in a methodical, predictable manner, it is only a matter of time before you competitors start to swing from their heels and knock your pitches out of the park.

"Uncle Saul" is a serial entrepreneur (who wishes to remain anonymous) who has led one IPO, was window-dressing in another and has executed several M&A transactions, all of which collectively generated over $450 million in shareholder value. Saul is a CPA and a Wharton MBA who never qualified for the PGA but likes to watch the NBA. Uncle Saul is also a songwriter who managed a successful rock band and plays an awesome iPod. He also teaches would-be entrepreneurs at a major California university. You can read more of his thoughts at www.infochachkie.com.


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