Author: Tom Koor

Tom Koor

How will startups destroy your company? V2

How will startups destroy your company? V2

 What is the purpose of this article?

  • Help startup founders understand what’s necessary to destroy incumbents.
  • Help incumbent board of directors, CEO, C-Suite, and investors to understand what must change to both survive attacks by startups and to destroy established competitors.

You can download a PDF of this article from:How will startups destroy your company V2

What are the critical learnings?

  • The startup is a temporary organization designed to search out a repeatable, scalable, and profitable business model with lots of potential customers who are willing and able to pay to solve their problems and needs. Startups are not building a solution. They are building a tool to learn what solution to build.
  • Startups begin by making assumptions about the problems customers are willing and able to pay for, and about how customers would perceive the value proposition they’d achieve from the startup’s solution.
  • The startup is driven by immediate and ongoing understanding of the customer based on face-to-face interviews supplemented by surveys.
  • The assumptions are quickly validated or invalidated. Invalidation results either in a new set of assumptions or the startup stopping.

Where is your company today?

  • Your company is a large, well-established incumbent.
  • Your company is not in crisis.
  • Revenues and sales have been growing yearly and are forecast to continue to grow.
  • Your board of directors is well compensated.
  • Your C-Suite is well compensated.
  • Your board of directors and C-Suite agree that everything is going well and that there is no need to make any major changes to the board, the C-Suite, or the company’s business model.

How fast can your company end up in crisis?

  • Your company can go from double digit CAGR(Compound Annual Growth Rate) to negative CAGR within 3 years.1
  • Even country empires can fall within 5 years e.g. France in 1700, The Ottaman Empire in early 1900’s. the Soviet Union in the late 1900s. 2
  • Blackberry was the cell phone leader in 2007. The iPhone was announced in 2007.  In 2008, the iPhone unit sales already exceeded Blackberry unit sales.

Will your company survive crisis?

At any given moment, 5-7% of incumbents are in free fall.  Free fall occurs when a mature incumbent comes under severe attack by new insurgents.  Only 10%-15% of companies ever pull out of free fall. 3

What are the phases a startup goes through to destroy your company?

Phase 1 – create two sets of assumptions: #1 the urgent problem or need for which cash paying customers are seeking a solution; #2 a solution which enables the cash paying customer to achieve benefits (i.e. customer perception of value proposition) as a result of addressing their problem or need.

Phase 2 – validate or invalidate assumption #1 within two months. If invalided, either create a new set of assumptions or stop trying to launch a startup.

Phase 3 – assumes that assumption #1 has been validated.

  • Now validate assumption #2. Create a version of the solution that cash paying customers will both pay for and achieve benefits from. A solution can have three components: a) what you build, how the customer onboards what you build, how the customer perceives and measures the benefits they get.
  • If customers won’t pay or does not achieve benefits, you have invalidated assumption #2
  • The startup now has two choices: create a new assumption #2 OR stop trying to launch a startup.

Phase #4 – assumes that both assumptions #1 and #2 have been validated.

  • The startup has some revenue.
  • The solution may be very unprofitable because the startup has manual processes and technology which is inefficient and will not profitably scale.
  • The startup now makes some assumptions regarding lifetime customer profitability and customer acquisition costs and the number of future customers.
  • The startup creates a plan to grow the business, with milestones directly related to the metrics defined by the milestones.
  • At any point in phase #4 the assumptions may be invalidated. There could be many reasons e.g. turns out that there are than many customers, customer problems and needs change, competition changes, etc.

 Startups will have far better understanding of customers than your company.

  • What the cash paying customers perceive as the urgent problems and needs they are actively seeking a solution.
  • What the cash paying customer perceives as the value of the solution and the implications of not addressing the problem or need.
  • How the customer perceives your current value proposition.
  • How the customer perceive the startup’s competitively differentiated value proposition.

 How does the startup gain this deep customer understanding?

  • The startup does up to 100 face to face (in person or Zoom) meetings with potential customers.
  • Why?
  • To validate that there is an urgent problem or need for which customers are seeking a solution and the customers a both willing and able to pay for.

What is the CEOs role?

  • At the pre-revenue stage the CEO is spending up to 40 hours a week (of their 80-hour work week) on learning about customers.

What other ways does the startup maintain deep understanding of customers?

  • There is a massive amount of information coming in from many sources e.g. ongoing one-on-one interviews, focus groups, surveys (Net Promoter Score), interactions with call centres, customer support, customer onboarding, notes from sales and marketing people, interactions with 3rd parties that also deal with customers (suppliers), etc.
  • The directors on the board have current and relevant knowledge of the marketplace, customers, competitors, etc.
  • The startup never stops experiments with customers.

 What is done with this flood of customer information?

  • Software (Thematic4 and ethnographic5) analyzes this information.
  • It is critical to have detection of changes in the customer perception of: problems, needs, and startup’s value proposition.

How does the startup know they will be profitable?

  • The key metric is lifetime customer profitability exceeding customer acquisition costs.
  • At the pre-revenue stage, theses metrics are assumptions. As the startup builds and scales, these metrics become facts.
  • The metrics may be tracked in a variety of categories: e.g. by cohort, channel, geography, demographic, etc.
  • It’s critical to identify a downward trend in the customer lifetime profitability/aquation cost ratio.

Does the startup start building a solution immediately?

  • No
  • The startup is a temporary organization designed to search out a repeatable, scalable, and profitable business model with lots of potential customers who are willing and able to pay to solve their problems and needs. Startups are not building a solution. They are building a tool to learn what solution to build.
  • The startup may do things manually at first, in order to improve customer understanding at low cost.

What is the underlying reason for the startup being able to destroy your company?

The founders and later the CEO and C-Suite have a set of core talents that is superior to your company.

What are the 10 components of talent?

  • Self Awareness
  • Character
  • #Relationship skills:
  • Communications
  • Crystallized intelligence
  • Fluid intelligence
  • Cognitive skills
  • Ability to quickly learn and unlearn: paradigms, frameworks, methodologies, data, facts, knowledge.
  • Creativity
  • Physical capabilities.

Further detail is available in Appendix A

What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Assess your company relative to a startup described above. Most long established companies have returned to the startup stage, but don’t realize that. It’s hard to build a roadmap for future success if you don’t know where you’re starting from.
  • Describe the talent a startup would need to be able to destroy your company. Include the board of directors, CEO, and C-Suite. Use the framework described in Appendix A.
  • Assess the talent of your company relative the startup description in 3) above.

Footnotes

1 Chris Zook and Charles Allen, The founders mentality, 2016, Page 52

2 Chris Zook and Charles Allen, The founders mentality, 2016, Page 106

3 Chris Zook and Charles Allen, The founders mentality, 2016, Page 51

4 software used to identify, organize, and interpret patterns of meaning (themes) within qualitative data such as interview notes

5 software which supports observational research method where researchers immerse themselves in customers’ natural environments—homes, workplaces, or stores—to understand behaviors, motivations, and pain points in real-time

What further reading should you do?

Your company will fail. Koor and Associates

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

Is your company planning to fail? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Appendix A – What are the core components of talent?

Even more detail is available in the following article:

https://koorandassociates.org/creating-business-value/core-components-of-talent/

 #1 Self Awareness

  • Internal self-awareness: How clearly we see and understand ourselves. Understanding what our competitive strengths, weaknesses, and capabilities are.
  • External self-awareness: understanding how other people view us.

#2 Character

  • VME (Values, Morals, and Ethics) Warren Buffett supposedly said “..looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you.”
  • Courage: It takes courage to make the right decision. The right decision is often not: the cheapest, easiest, lowest risk to the company, lowest risk to you, and what everyone else is doing.
  • Perseverance, especially against all odds.
  • Knowing when to stop persevering. One leader told me “If you’re digging yourself into a hole, stop digging.”

#3 Relationship skills:

  • The ability to create and sustain a network of personal relationships.
  • Persuasion and negotiation, which is key to managing different points of view and interests.
  • Creating and maintaining followers. A leader without committed followers is not a leader.

#4 Communications

Communications activities include:

  • Writing, speaking, singing, drawing, and body language
  • Speaking and singing also include tones, pitch, etc.

Communications is two way:

  • Broadcasting
  • Listening, which includes analysis of input

#5 Crystallized intelligence

  • Crystallized intelligence is comprised of historical: skills, knowledge (including ways to think, mental paradigms, methodologies), and data.

#6 Fluid intelligence

  • The ability to solve problems without past experience. This is critical for innovation, which is coming up with new and better solutions.

#7 Cognitive skills

  • Long-term memory
  • Working memory: hang onto information while using it
  • Logic and reasoning
  • Visual processing
  • Processing speed
  • Attention
    1. Sustained – for long periods of time
    2. Selective – without distraction
    3. Divided – doing two things at once

#8 Ability to quickly learn and unlearn: paradigms, frameworks, methodologies, data, facts, knowledge.

 #9 Creativity

  • The ability to think about a task or a problem in a new or different way

#10 Physical capabilities. These may include:

  • Senses, including sight, hearing, touch, smell, taste
  • Strength and endurance
Tom Koor

What is a startup? V3

What is a startup? V3

What is the purpose of this article?

This article enables a discussion about how to define what a startup is.

The audience for this article includes: investors, founders, board of directors, C-suite, and investment analysts.

This article applies to all companies, ranging from pre-revenue through to long established global companies.

This article does not provide tax, legal or financial advice. You must do your own research and fact-based analysis using current and relevant information.

AI did not write this article.  100% human written.

You can download a PDF of this article from: What is a startup V3

What are the critical learnings in this article?

  • There are no commonly accepted definitions regarding startups.
  • There are no commonly accepted definitions of a successful startup.
  • Each of the 5 US universities I looked at has different definitions, metrics, and processes for startups.

 Are there commonly accepted definitions regarding startups?

There are no commonly accepted definitions regarding startups. I looked at what the following 5 U.S. Universities have published publicly regarding their pre-revenue startups which have no customers or users: Harvard, MIT, Stanford, University of California Berkely, and Wharton. I have deliberately excluded the names of the five universities from the following definitions. I have shown some key finding for each of the five universities.

#1 What is a startup?

  • Teams focused on “defining their offering or exploring customer validation.
  • A startup is “validating their target market” and building “viable sustainable venture”.
  • A startup is “founders who are in the prototyping phase” “The entity is actively building or testing a product”
  • Could not find a formal definition. Some discussion that the intent a startup has high growth potential is preparing for venture capital investment.
  • “A temporary organization designed to search for a repeatable and scalable business model”.

#2 What is the process for launching a startup?

  • Has a proprietary process. First phase is focused on problem identification. The second phase validates the solution with customers, using the Minimum Viable Product the founders have built.
  • Has a proprietary process, based on Lean Startup methodology. There is a monthly simulated board meeting. Expectation that founders will meet with customers.
  • Structured 10-week curriculum, requiring 2-3 meetings with mentors.
  • Has a proprietary process. 50+ workshops along with a mentor.
  • Has a proprietary process. Starts with identifying key assumptions e.g. Do customers want this? Can this be a business?

#3 What is the approach for the first week of a startup?

  • Orientation week. Integrating founders into the university’s startup community and ecosystem
  • Simulate making decisions. Networking with senior executives. Intense one-week bootcamp.
  • Could not find published information.
  • Only information I could find was matching with mentors.
  • Only information I could find was 2.5-hour orientation.

#4 What are the metric for measuring the progress of a startup?

  • Some of the milestones included: customer definition, problem validation.
  • Weekly goal setting. Each team defines their own Key Performance Indicators.
  • Could not find published information.
  • Could not find published information.
  • Could not find published information.

#5 What is the definition of a pivot for a startup?

  • Could not find published information.
  • Could not find published information.
  • Could not find published information.
  • Could not find published information.
  • Could not find published information.

#6 What are the metrics which indicate the startup founders should stop or pivot?

  • If current solution does not address customer pain, pivot.
  • Pivot when key hypotheses are invalidated by data.
  • Could not find published information.
  • Could not find published information.
  • Could not find published information.

#7 What is the definition or set of metrics for when the startup is no longer a startup?

  • Program success is measured by student engagement, not commercial success. Startup success measures included: revenue, valuation, launching, partnerships, etc.
  • Successful transition out of the university environment.
  • Capital raised or graduation to accelerators.
  • Graduation to the university’s accelerator program. Raising capital from the university’s startup fund.
  • Graduation to the university’s accelerator program

 What does success look like to the founders?

The following are my personal observations regarding what success might look like.

  • Learn the concepts for launching a company.
  • Launch a company which generates enough profit to meet founders’ financial needs. If the founders are gone, the company disappears.
  • Launch a company which generates enough profit to meet founders’ financial needs. If the founders are gone, family /children may take over, or other owner/operators take over.
  • Launch a company which will generate enough profit to attract investors and enable founders to make large amounts of money by selling some or all of their equity.

 What are your next steps?

If you are a founder:

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Agree with the other founders on what success looks like. Founders with different end results will likely fail. Create and sign a founders’ agreement.
  • Agree with the other founders regarding: What is a startup? What is the overall process the founders will use the launch the startup? What will happen in week 1? What are the metrics for measuring the progress of the startup? What is the definition of a pivot? What are the metrics which indicate that the founders should stop or pivot? What is the definition or set of metrics which indicate that the startup is no longer a startup?

What further reading should you do?

How will startups destroy your company? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/how-will-startups-destroy-your-company/

How will undergraduate founders destroy your company? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/how-will-undergraduate-founders-destroy-your-company/

Is your company actually a startup? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-actually-a-startup/

Is your company planning to fail? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

 

 

Tom Koor

How will undergraduate founders destroy your company?

How will undergraduate founders destroy your company.

 What is the purpose of this article?

  • Help existing companies improve the return on the investment they make in new business ideas.
  • Help startup founders succeed by reducing the time spent on ideas with little market demand. Help founders understand what’s necessary to destroy incumbents.

The audience for this article includes business, ranging from pre-revenue through to long established global companies.

This article does not provide tax, legal or financial advice. You must do your own research and fact-based analysis using current and relevant information.

AI did not write this article.  I wrote every word.

You can download a PDF of this article from: How will undergraduate founders destroy your company

How do you read this article.

The article reflects my observations regarding the early-stage startup programs at 5 US universities.

The Appendix contains brief highlights of these programs.

What are the critical learnings in this article?

  • Founders first go through a program to validate that cash paying customers believe they have a problem which needs a solution.
  • The first step is to have face-to-face interviews with cash paying customers.
  • There should a multi-disciplinary set of founders e.g. business, technical, social sciences
  • Program, mentor, and founder problems are addressed by AI.
  • The programs have a structured learning process to rewire the founders’ brains over a period of several semesters.
  • The program is part time, with the founders taking other courses during the semester.

Why focus first on validating that a cash paying customers believe they have a problem?

  • This saves founders’ time. No point in building a solution people who don’t think they have a problem.
  • The founders are not building a solution. They are building a temporary organization to learn what solution to build
  • The founders can think about the necessary solution once they know the problem to focus on.

 Why are immediate face-to-face interviews with cash paying customer critical?

  • This immediately identifies if founders have both the desire and skills to meet with cash paying customers. Weaknesses in this area can be addressed through a combination of team changes and talent development.
  • Consulting reports and industry surveys rarely focus on the specific problem the founders are tying to understand.
  • Surveys by founders don’t allow the deep understanding of problems resulting probing customer dialogue such as the Five Whys root cause discussion.

Why does success depend on a multi-disciplinary team?

  • There are many aspects to how cash paying customers perceive a problem: financial; functional, operational & technical; and emotional. All decisions are emotional.
  • A silo-based team e.g. all engineers, often lacks the broad base of skills to understand how customers perceive their problem and the value of addressing the problem.
  • A multi-disciplinary team reduce the cognitive load on founders’ brains, reducing the need to learn and unlearn, and enabling more focus.

Why do the programs, founders, and mentors use AI tools?

Some of the many program pain points which AI can address are:

  • Tracking and reporting on the long-term outcomes of founders and startups.
  • Matching potential founders across faculties to create multi-disciplinary teams.
  • Helping to analyze program applications.
  • Matching founders with mentors and advisors.

Some of the many founder pain points which AI can address are:

  • Enabling business founders to create software without becoming software experts.
  • Enabling technical founders to create marketing and sales materials without becoming marketing and sales experts.
  • Helping founders prepare for face-to-face interviews by interacting with AI simulated customers.
  • Providing multiple founder team equity split scenarios.

Some of the many mentor pain points which AI can address are:

  • Saving mentor time at the beginning of the meeting by generating a pre-read package.
  • Helping mentors better communicate with founders by coaching the mentors on appropriate communications approaches.
  • Answering simple founder questions using AI coaches, allowing founders to focus on the most difficult and valuable issues.

Universities are implementing AI enabled infrastructure to reduce administrative load and enable both more and better startups to succeed. One example is MIT’s Orbit.

Why do the founders’ brains need to be rewired by a structured learning process?

  • Learning requires biological changes to the founders’ brain structure e.g. new connections among neurons, strengthen connections among neurons, and delete connections. The brain will naturally resist ideas and knowledge which is not consistent with historical ideas and knowledge.
  • The structured learning process encourages founders need to quickly learn new things, do things they are not comfortable with doing, do things they don’t want to do.
  • The founders don’t need to use cognitive capacity to figure out what are the critical things to do. The founders can use their cognitive capacity to learn and figure out how to execute what is critical.
  • This rewiring takes place over several semesters resulting in founders who can quickly learn and unlearn.

What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Do your own research and fact-based analysis using current and relevant information.
  • Compare your company’s process, talent, and technology for assessing new customer needs with the approach taken by the leading US Universities.
  • Transform your company’s approach. You may need to make talent changes as well as implement talent development process.  Your capital and talent allocation processes may need transformation.

What further reading should you do?

Is your company planning to fail

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Do you understand your customers

https://koorandassociates.org/understanding-customers/do-you-understand-your-customers/

Why is learning critical for your company’s success

https://koorandassociates.org/avoiding-business-failure/why-is-learning-critical-for-your-companys-success/

Appendix – 5 U.S. Universities. Startup programs for undergraduate students

This appendix provides some very brief highlights of undergraduate student startup programs.

Stanford University

  • Stanford has a decentralized set of student run and departmental programs.
  • Cardinal Ventures is a 10-week university wide student run program, on a part time basis during semesters.
  • BASIS is a first-year university wide undergraduate program with $100,000 prize money.

University of California, Berkely

Berkely has university wide structured funnels.

  • The STEP program is a university wide “top of the funnel” program with 1,000 new students annually. 70-75% are undergraduates. This is a 10 week long, part-time, program during school semesters.
  • Free Ventures is a student run program during school semesters. The expectation is at least 5 hours a week devoted to the startup.

Harvard

Harvard has a single process which encompasses all 13 schools.

  • The i-Lab program has three stages: Explore for students exploring ideas or looking for teams. Test is for teams with ideas. The focus is to validate that there are cash paying customers with problems. Propel is focused on All programs are semester based and are part-time

Wharton

The Venture Lab serves the entire university and is based in the business school.

  • The Venture Initiation Program (VIP) Venture Track runs on a rolling basis with no fixed end date for each startup. The program is part-time, during semesters.

MIT

MIT has a highly structured funnel.

  • MIT Sandbox Innovation Fund provides seed funding as milestones are met. Expectation of at least 6 hours per week. This part time during the semester program has no fixed end date.
  • VMS is an indefinite part time program with 90 minute in person mentoring sessions every 4-6 weeks. A team in VMS may be other MIT startup programs.
Tom Koor

Your greatest challenge is to learn, and unlearn, faster and better than before.

Your greatest challenge is to learn, and unlearn, faster and better than before.

The purpose of this article is to share my learnings and unlearnings, with the expectation that some will be of value to you. This article was 100% written by me – not by AI.  When you send me an email, my response is 100% written by me.

What have been my most valuable learnings in the past three months?

  • I forgot a learning from 30 years ago. If a leader does not believe they have a critical issue or problem, it is impossible for me to change their mind.  The reasons are based on cognitive psychology and neuroscience.
  • CEOs of successful companies spend 20-25% of their time listening to and understanding cash paying customers by meeting and talking with them. CEOs of poorly performing companies spend 3% of their time on this.  CEOs of fast growing early stage companies spend 50% (or more) of their time listening to and understanding cash paying customers.
  • I’m using AI to find fact-based reports with the data to answer to my very specific questions. I don’t use AI to make recommendations.
  • The psychological and biological construction of brains has helped people survive for 10,000 of years. That same psychological and biological construction results in most business leaders failing in today unpredictable, fast changing, and hyper competitive world.
  • My greatest challenge is to learn, and unlearn, faster and better than ever before.

What is my personal update?

  • Mentored a startup at the Hatchery, University of Toronto, Department of Engineering.
  • Accepted as a mentor at the Health Innovation Hub at the University of Toronto, Faculty of Medicine.
  • Continued my long-term fundraising for the Geoff Carr Fellowship at Lupus Ontario. Over the past 19 years family, friends, neighbours, and colleagues have contributed over 283,000. You can use the donation link later in this update
  • Continued as a member of the Angel Capital Association in the US and the Institute of Corporate Directors in Canada.
  • Continued to share with you, and on my website, some of what I’ve learned and unlearned, with the intent that some of you will find value. The learnings and unlearnings are applicable to any size company, ranging from early-stage startups to large global enterprises.
  • Continued as Board Director at a private company.

I continue to focus my time to maximize the value and impact of my two professional purposes: #1 Enabling current and emerging business leaders to succeed, #2 Enabling business leaders to have a positive impact on society.

Sharing my learnings

Below are links to my website containing new and revised articles since my last update in September. The critical learnings from each article are included. Each article designed to enable discussion among founders, owners, shareholders, investors, CEOs, and boards of directors. The learnings and unlearnings are applicable to any size company, ranging from early-stage startups to large global enterprises.

Links to my points-of-view articles:

What are the core components of talent? V7

  • There are 10 core components of talent.
  • People often focus on just 1 component of talent: Crystallized intelligence (e.g. historical skills, knowledge, experience, etc.) and ignore the other 9. This often leads to major problems, because historical skills, knowledge, and experience are quickly becoming obsolete.
  • The core components of talent fit into the qualification’s sections of a typical job description.
  • The core components of talent fit into the key competencies section of a typical job scorecard.
  • An AI worker would have both a job description and a job scorecard.
  • If AI is assisting a person in a role, then need clarity on how the AI’s 10 core components of talent are improving the person’s job scorecard.
  • What is the definition of an AI worker? What is the definition of an AI agent? What is the definition of AI? I don’t know.

https://koorandassociates.org/creating-business-value/core-components-of-talent/

What is learning? V3

  • Learning is a biological process of changing your brain structure. The key changes to enable learning are new connections between neurons and strengthening the connections.
  • The best way for you to learn is to create your own conclusions and recommendations based on your own analysis of data you’ve collected.
  • The worst way for you to learn is to read reports and attend presentations.
  • Learning and unlearning is hard to do, especially if you’ve been a successful leader.

https://koorandassociates.org/creating-business-value/why-have-your-minimized-your-talent/

What is a startup? V2

  • A startup is a temporary organization designed to search out a repeatable, scalable, and profitable business model with lots of potential customers who are willing and able to pay to solve their problems and needs.1 Startups are not building a solution. They are building a tool to learn what solution to build.2
  • Your company may slip back into the startup stage at any point. Changes may mean that you no longer have a profitable business model with lots of potential customers who are willing and able to pay to solve their problems and needs.
  • Never ending customer, competitor, external environment, talent, operational, and financial monitoring is key to ensuring your company does not slip back to being a startup.

https://koorandassociates.org/the-startup-journey/what-is-a-startup/

Strategic Advisor vs Consultant vs Coach vs SME vs Trainer

  • The focus of the strategic advisor is helping business leaders learn to solve their critical problems.
  • Learning is a biological process of changing your brain structure.
  • The best way for you to learn is to create your own conclusions and recommendations based on your own analysis of data.
  • The worst way to learn is by reading reports and attending presentations.
  • Determine what combination of: strategic advisor, consultants, coaches, SME, and trainers your company needs. Identify which roles can be humans vs AI workers (often referred to as AI Agents or just AI) vs AI

https://koorandassociates.org/creating-business-value/strategic-advisor-vs-coach-vs-consultant/

MY NPS (Net Promotor Score)

I’m doing what I advise companies to do – getting my NPS.  I am asking you to complete the attached anonymous survey which asks you: “How likely are you to recommend me, or not recommend me, and why?”

Bain developed the Net Promoter Score process. They believe one question is the best predictor of future company behaviour. Very simply, asking customers how likely they would be to recommend or not recommend the company, followed by the question why. The answers enable companies to determine what they need to change.

I am doing the same thing, getting facts as to how I’m perceived and then deciding what to change, if anything.

The survey is totally anonymous.  I don’t know who responds or who does not respond.  I don’t know who gives what answers.  Thus, you can be honest in your response.

The following is a link to my survey:

Tom’s NPS Survey Link

Thank you in advance for your help.  The following is a link to the Bain website homepage for Net Promoter Score, which contains several short articles.

Link to Bain NPS articles

To support the Geoff Carr Fellowship at  Lupus Ontario

Link to my Geoff Carr Fellowship fundraising page

Tom Koor

What are the core components of talent? V7

What are the core components of talent? V7

 What is the purpose of this article?

Enable founders, the C-Suite, board of directors, investors, and others to discuss the company’s talent requirements.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

AI did not write this article.  100% human written.

You can download a PDF of this article from: What are the core components of talent V7

How do you read this article?

  • The body of the article contains description of the 10 core components of talent.
  • The appendix describes the core skills that will be even more important in 2030 than 2025. The appendix is based on a report from the World Economic Forum. The value of future skills is illustrated using the board of directors.

 What are the critical learnings in this article?

  • There are 10 core components of talent.
  • People often focus on just 1 component of talent: Crystallized intelligence (e.g. historical skills, knowledge, experience, etc.) and ignore the other 9. This often leads to major problems, because historical skills, knowledge, and experience are quickly becoming obsolete.
  • The core components of talent fit into the qualification’s sections of a typical job description.
  • The core components of talent fit into the key competencies section of a typical job scorecard.
  • An AI worker would have both a job description and a job scorecard.
  • If AI is assisting a person in a role, then need clarity on how the AI’s 10 core components of talent are improving the person’s job scorecard.
  • What is the definition of an AI worker? What is the definition of an AI agent? What is the definition of AI? I don’t know.

What are the 10 core components of talent? – summary

People often focus on just 1 component of talent: Crystallized intelligence (e.g. historical skills, knowledge, experience, etc.) and ignore the other 9.  This often leads to major problems, because historical skills, knowledge, and experience are quickly becoming obsolete.

#1 Self Awareness

#2 Character

#3 Relationship skills:

#4 Communications

#5 Crystallized intelligence

#6 Fluid intelligence

#7 Cognitive skills

#8 Ability to quickly learn and unlearn: paradigms, frameworks, methodologies, data, facts, knowledge.

#9 Creativity

#10 Physical capabilities.

What are the 10 Core components of talent? – details

#1 Self Awareness

What are the two types of self-Awareness?1.

  • Internal self-awareness: How clearly we see and understand ourselves. Understanding what our competitive strengths, weaknesses, and capabilities are.
  • External self-awareness: understanding how other people view us.

What is the value of self awareness?

  • How can you succeed if you don’t know how others perceive you, and which perceptions you need to change? E.g. Decision makers who would hire you or promote you? Customers who would buy from you? Someone deciding whether or not to become your spouse?
  • How can you succeed if you don’t understand your capabilities, the implications of your capabilities, and which ones to change? E.g. I’ve met people who have limited skills in certain areas but at the same time hope that companies that are looking for world class skills will hire them. The result is they don’t get hired, sometimes accompanied by massive disappointment.
  • Internal self-awareness is associated with happiness, and higher job and relationship satisfaction.1
  • Employees perceive leaders with higher external self-awareness as: having better relationships with them and being more effective leaders.1

How many people have self-awareness?

  • Most people believe they are self-aware.1
  • Only 10-15% of people have self awareness.1
  • 87% of Stanford University MBA students rate their academic performance above the median. 94% of U.S. college professors rate themselves superior to their colleagues. 2
  • 96% of leaders believe their people skills are above average. 3

What are the challenges in gaining self-awareness?1

  • People don’t always learn from experience. Experience leads to over-confidence in self-knowledge
  • The more power a person has, the more likely they are to over-estimate their skills and abilities.
  • People who spend time in introspection are less self-aware, have worse job satisfaction, and well-being

#2 Character

  • VME (Values, Morals, and Ethics) Warren Buffett supposedly said “..looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you.”
  • Courage: It takes courage to make the right decision. The right decision is often not: the cheapest, easiest, lowest risk to the company, lowest risk to you, and what everyone else is doing.
  • Perseverance, especially against all odds.
  • Knowing when to stop persevering. One leader told me “If you’re digging yourself into a hole, stop digging.”

#3 Relationship skills:

  • The ability to create and sustain a network of personal relationships.
  • Persuasion and negotiation, which is key to managing different points of view and interests.
  • Creating and maintaining followers. A leader without committed followers is not a leader.
  • Industry disruption and major change require the identification and creation of new relationships and spending less time on obsolete relationships.

#4 Communications

Communications activities include:

  • Writing, speaking, singing, drawing, and body language
  • Speaking and singing also include tones, pitch, etc.

Communications is two way:

  • Broadcasting
  • Listening, which includes analysis of input

Communications can have a variety of outcomes, including:

  • Understanding other people
  • Changing the belief, emotions, and behaviours of others.
  • Learning – such as facts, knowledge, ways of thinking.
  • Building trust and relationships.
  • Persuading people to take certain actions.
  • Gaining the emotional and intellectual support of people.

#5 Crystallized intelligence4

  • Crystallized intelligence is comprised of historical: skills, knowledge (including ways to think, mental paradigms, methodologies), and data.
  • The need for crystallized knowledge varies enormously depending on the situation.
  • Many years of experience may be very valuable for a doctor doing knee replacements.
  • Understanding what customer needs were 5 years ago, and how those were met, may be of little value when: customers have changed; needs have changed; and competition has changed.

#6 Fluid intelligence4

  • The ability to solve problems without past experience. This is critical for innovation, which is coming up with new and better solutions.
  • The future is impossible to predict but actions and decisions are focused on this unpredictable future.
  • The future will also be different from the past. i.e. there won’t be historical experience to draw upon.
  • Able to provide direction when there is no map. 5

#7 Cognitive skills6

  • Long-term memory
  • Working memory: hang onto information while using it
  • Logic and reasoning
  • Visual processing
  • Processing speed
  • Attention
    1. Sustained – for long periods of time
    2. Selective – without distraction
    3. Divided – doing two things at once

#8 Ability to quickly learn and unlearn: paradigms, frameworks, methodologies, data, facts, knowledge.

  • The founders of the majority of unicorns (startups which achieved a $1 billion valuation) had no previous domain experience. 7
  • Roche paid $1.9 billion US for Flatiron Health, a cancer electronic records company. The Flatiron founders (Nad Turner and Zach Weinberg) had no background in cancer. They came from advertising.8

 #9 Creativity

A Google search of creativity reveals many very different definitions of creativity. Two definitions are:

  • “The ability to think about a task or a problem in a new or different way”
  • “Creativity involves two processes: thinking, then producing. If you have ideas but don’t act on them, you are imaginative but not creative”

#10 Physical capabilities. These may include:

  • Senses, including sight, hearing, touch, smell, taste
  • Strength and endurance

How do the core components of talent fit into a typical job description?

The core components of talent fit into the qualification’s sections of a typical job description.

  • Job Title:
  • Job Summary: High-level overview (2-4 sentences) of the role and its purpose within the company.
  • Company Overview: Introduction to the company’s mission, values, and culture.
  • Duties and Responsibilities: Primary tasks and essential functions.
  • Required Qualifications: Must have skills, education, experience, and certifications. CORE COMPONENTS OF TALENT
  • Preferred Qualifications: Nice-to-have skills and experience. CORE COMPONENTS OF TALENT
  • Reporting Structure: Who does the role report to.
  • Location & Working Conditions: Specifies the job location (e.g., in-office, remote, hybrid) and any relevant physical demands or environmental factors.
  • Compensation and Benefits: Often includes a salary range (though not always) and a summary of key benefits like health insurance, retirement plans, and paid time off.

How do the core components of talent fit into a typical job scorecard?

The core components of talent fit into the key competencies section of a typical job scorecard.

  • Role Mission: A sentence that defines the ultimate purpose of the role.
  • Key Result Areas (KRAs) / Outcomes: A short list (3-5 items) of the measurable results the person is accountable for.
  • Key Performance Indicators (KPIs): The specific metrics used to track the KRAs.
  • Key Responsibilities / Activities: The primary actions the person will take to achieve the outcomes. This links the “how” (activities) to the “what” (outcomes).
  • Key Competencies: The essential behaviors, skills, and traits a person needs to succeed in the role. CORE COMPONENTS OF TALENT.
  • Company’s Core Values: Lists the company’s core values to ensure what the employee does is aligned with the core values.

What are the implications of AI?

  • An AI worker would have both a job description and a job scorecard.
  • If AI is assisting a person in a role, then need clarity on how the AI’s 10 core components of talent are improving the person’s job scorecard.

What are some of the AI challenges?

  • What is the definition of an AI worker? What is the definition of an AI agent? What s the definition of AI? Often I hear people explaining something will say “The solution is based on AI”. That is not an explanation. It’s similar to saying “The solution is based on people”
  • Since 1993 Visa AI had been deciding whether to decline or accept credit card transactions.
  • AI is screening job applications and determining who to interview or not interview.
  • AI is making stock buying and selling decisions in high frequency trading.
  • Cybersecurity AI is making decisions on what to do with threats without human oversight.

What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Review job descriptions and job scorecards. Start with the board of directors and C-Suite.  Measurable results and KPIs are critical.
  • Include AI workers and AI assistants in the above.

Footnotes

1 What self-awareness really is (and how to cultivate it) – Harvard Business Review 2019 January 04

https://hbr.org/2018/01/what-self-awareness-really-is-and-how-to-cultivate-it

We’re all above average

2 https://www.northcoastjournal.com/humboldt/were-all-above-average/Content?oid=4206392&media=AMP+HTML

Aspiring to leadership: Technical knowledge vs people skills

3 https://smartleaders.ca/aspiring-to-leadership-technical-knowledge-vs-people-skills/

4 Fluid vs crystallized intelligence

https://www.simplypsychology.org/fluid-crystallized-intelligence.html

5 The five new foundational qualities of effective leadership, PWC, Strategy+Business, June 14 2023

https://www.strategy-business.com/article/The-five-new-foundational-qualities-of-effective-leadership

6 What are cognitive skills?

https://www.mindmattersjo.com/what-are-cognitive-skills.html

7 Ali Tamaseb, Super Founders, New York, New York, Hatchette Book Group, 2021, Page 49

8 Ibid., 53

 What further reading should you do?

What is learning? Koor and Associates

https://koorandassociates.org/creating-business-value/why-have-your-minimized-your-talent/

Is your company planning to fail? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Appendix A What are the core skills that will be even more important in 2030 than 2025.

The following core skills are important in 2025 and will be even more important in 2030.  Who believes this? Over 1,000 global companies with over 14 million employees.  The following ranking reflects the % of companies that believe both core in 2025 and more important in 2020. 1

  • Analytical thinking
  • Resilience, flexibility, and agility
  • Leadership and social influence
  • Creative thinking
  • Technological literacy
  • Curiosity and lifelong learning
  • Talent management
  • AI and big data
  • Systems thinking

What are core skills required in 2025, but will not increase in importance in 2030?

The following ranking reflects the % of companies that believe both core in 2025 and 2030.1

  • Motivation and self awareness.
  • Empathy and active listening.
  • Service orientation and customer service.
  • Resource management and operations.

How valuable are the core skills which will be more important in 2030?

Let’s use a simple example to show the value of core skills. Which of the two following two companies will be more successful?

Company A board of directors:

  • Analytical thinking – jumps to conclusions with little evidence. Make decisions based on gut feelings and personal anecdotes.
  • Resilience, flexibility, and agility – cannot deal with sudden unexpected changes in the business environment. Update the strategic plan once a year.
  • Leadership and social influence – poor communications with shareholders, C-Suite, employees, etc.
  • Creative thinking – relies on outdated mental models and past successes. Rejects new ideas because don’t fit the current way things are done. Focuses on minimizing risks.
  • Technological literacy – don’t ask the specific problems technology investments will solve. Defer all technology decisions to one technical expert on the board. Do not use current technology, e.g. AI tools, to carry out their board duties.
  • Curiosity and lifelong learning – little curiosity. Board decisions based on 10-year-old understanding of customer needs and solutions.
  • Talent management – unable to determine talent requirements for a CEO who will be successful in an uncertain and turbulent future. Unable to assess CEO candidates for future success, resulting in poor CEO performance and company performance.
  • AI and big data – not setting metrics for AI initiatives to directly impact value creation. Not understanding the AI talent, and talent compensation, required to drive competitively differentiated customer perceived value propositions.
  • Systems thinking – focus on symptoms and not able to identify root causes. Cannot identity that their decisions will have follow-on reaction. Struggle to deal with complex and inter-related problems. The analogy is: if playing chess, don’t consider possible future moves, even the reaction to the first move.

Company B board of directors:

  • Analytical thinking – asks for data, metrics, and assumption behind recommendations. Focus on metrics which drive value to customers, employees, and investors.
  • Resilience, flexibility, and agility – Recognize that it is impossible to predict the future. Use scenario planning. Review and revise strategies whenever facts and assumptions change.
  • Leadership and social influence – excellent communications with shareholders, C-Suite, employees, etc.
  • Creative thinking – challenges the status quo and proactively seeks unconventional ideas.
  • Technological literacy – questions focus on the customer and business impact of technology investments. Use current technology to carry out their board duties e.g. AI tools.
  • Curiosity and lifelong learning – recognize that much of their own historical knowledge and experience is out of date. Regularly bring in experts to update the board. Takes advantage of the advisory board supporting the board. Continuous personal education to have current and relevant knowledge.
  • Talent management – the board has long-term process to assess and develop successors for the CEO and C-suite. Company continues to succeed as CEOs and C-Suite members change.
  • AI and big data – directors are using AI tools to challenge and validate what company leaders are telling the board.
  • Systems thinking – recognizes that the company (directors, C-Suite, employees, customers, investors, etc.) exist in a complex inter-related ecosystem. Understands the interrelationships and how business success is impacted by this ecosystem. The analogy is: if playing chess, considers possible future moves, even the reaction to the first move.

Footnotes

1 Future of Jobs Report 2025, World Economic Forum Jan 07, Page 41

https://www.weforum.org/publications/the-future-of-jobs-report-2025/

 

Tom Koor

Strategic Advisor vs Consultant vs Coach vs SME vs Trainer. V3

Strategic Advisor vs Consultant vs Coach vs SME vs Trainer. V3

 What is the purpose of this article?

Enable your company’s corporate leadership (board of directors, C-Suite, and any controlling shareholders) to discuss the need and value of strategic advisors, coaches, consultants, SMEs, and trainers.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

AI did not write this article.  100% human written.

You can download a PDF of this article from: Strategic Advisor vs Consultant vs Coach vs SME vs Trainer V3

What are the critical learnings in this article?

  • The focus of the strategic advisor is helping business leaders learn to solve their critical problems.
  • Learning is a biological process of changing your brain structure.
  • The best way for you to learn is to create your own conclusions and recommendations based on your own analysis of data.
  • The worst way to learn is by reading reports and attending presentations.
  • Determine what combination of: strategic advisor, consultants, coaches, SME, and trainers your company needs. Identify which roles can be humans vs AI workers (often referred to as AI Agents or just AI) vs AI

 What are the four ways to compare working strategic advisors, consultants, coaches, SMEs, and trainer?

  • Focus: Is it the individual or the company?
  • Problems: What are the problems?
  • Outcome: What are the outcomes?
  • Accountability: What are the accountabilities?

Let’s compare strategic advisors, consultants, coaches and trainers, using examples.

Strategic advisors

Focus: The focus of the strategic advisor is helping business leaders learn to solve their critical problems.

Problems: Problem may be unknown, ambiguous, critical to company success or survival

Outcomes: The business leader has learned what to do and has a deep understanding. Problems are identified. Company survival and success.

Accountability: The business leader is accountable for the decisions and cannot blame the advisor. If a decision turns out poorly. The leader must be open and share the most pressing issues and personal doubts. The advisor must provide absolute confidentiality, ask the hard questions and challenge assumptions. Must help the leader see the bigger picture.

Consultants

Focus: The company, division, or project

Problems: Clearly defined problem.

Outcomes: Recommendations, analysis, plans

Accountability: Consultants are accountable for the recommendations and analysis. Business leaders are accountable for the for benefits.

Coaches

This is a business coach, not a life or career coach

Focus: The individual

Problems: 360 assessment has identified issues to resolve.

Outcomes: The next 360 assessment shows major improvements.

Accountability: The individual is accountable for learning to change themselves. The coach is accountable for the learning process.

SME (Subject Matter Expert) e.g. lawyer

Focus: The individual or the company.

Problems: The problem requires advice based on deep fact-based knowledge, such as a lawyer

Outcomes: The business leader has received both the fact-based advice as well as observation on how others have used the advice.

Accountability: The SME is accountable for sharing fact-based information using the language of the business leader. This enables understanding.  The business leader makes the decisions.

Trainers

Focus: The individual.

Problems: Need to learn new software, need to learn a new sales process

Outcomes: Using new software each day, using the new sales process each day.

Accountability: The trainer delivers the training.  Company does follow up to ensure training is being used.  Company also ensures training addresses the real problem e.g. no amount of sales training could have persuaded Blackberry users to not switch to Apple iPhones.

What is learning?

Learning is often critical, as noted above.

What is learning?

  • Learning is the relatively permanent change in your talent.
  • The 10 components of your talent are: Self awareness; character, relationship skills, communications, crystallized intelligence, fluid intelligence, cognitive skills, ability to quickly learn and unlearn, creativity, and physical capabilities.
  • All talent is based on the biological structure of your brain i.e. your neurons and the synapses which connect your neurons.
  • Learning is a biological process of changing your brain structure. The key changes to enable learning are new connections between neurons and strengthening the connections.

What is the best way for you to learn?

Active learning is the best way to learn. E.g.

  • The best way for you to learn is to create your own conclusions and recommendations based on your own analysis of data.
  • Coaching or teaching someone else is the second-best way to learn.
  • Other good ways to learn are: simulation & role playing, and case study analysis.

All the above approaches engage multiple parts of your brain and make significant changes to your neural connections.

What are the worst ways for you to learn?

The following passive learning approaches don’t result in any significant learning i.e. sustainable change in behaviour and knowledge.

  • Reading reports
  • Attending presentations, lectures

All the above have limited changes to limited parts of your brain. As a result, you gain little deep understanding, long term skills, and knowledge retention. BUT, if you take notes while listening to a presentation or reading documents, your learning is improved.

Why is learning hard for you to do, especially if you’ve been a successful leader?

Learning also requires unlearning.  The world is changing faster than ever before.  Crisis and turmoil are never ending.  The future is unpredictable.

What are the psychological barriers to your unlearning?

One barrier is: Unlearning is the conscious process of recognizing that your past skills, experience, and mental models are of limited or no value now.

What are the neurological barriers to your unlearning?

One barrier is: When those skills and knowledge that resulted in your success are challenged, your brain triggers the same defensive and emotional stress response as when you are in physical danger.

Can everyone learn?

  • Many leaders can learn.
  • Many leaders are unable to learn. They cannot overcome their psychological and neurological barriers to learning. One business psychologist told me that many leaders are “hardwired to fail”.
  • In today’s hypercompetitive and turbulent world, the only way for leaders and their companies to succeed is to learn faster and better than competitors.

A strategic advisor will have to end the relationship if it becomes obvious that the business leader cannot or will not learn.

What are some characteristics of a strategic advisor?

The focus of the strategic advisor is helping business leaders learn to solve their critical problems.

Socratic questioning – not giving answers

Active listening – hearing what is not being said – hearing assumptions, biases and fears.

Candor – courage and ability to tell the leader what they need to hear in a way that they can understand.

Comfortable saying “I don’t know”.

Facilitation – guiding the conversation to help the business leader untangle their thoughts

Foresight – help the business leader see the 2nd and 3rd order long-term consequences of a decision.

Knowing how to explore the unknown.

Recognizing the emotional and political aspects of the business leader’s environment.

Reframing – helping the business leader look at an old problem from a new perspective.

Synthesis – able to listen a long brain dump from the business leader and identify the one or two key points

Total trust – the business leader must feel safe being vulnerable and uncertain.

Why do you need Strategic Advisors, Coaches, Consultants, and Trainers?

  • Your leadership talent will not improve by itself.
  • In today’s competitive business environment capital is unlimited but talent remains scarce.
  • Olympic gold medal winners need world class coaches.
  • Sports teams need coaches and trainers.
  • All levels of the military have ongoing talent development.
  • The best Strategic Advisors, Coaches, Consultants, and Trainers are rarely the best company leaders or the best athletes.

 What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Assess the types of problems you have and the value of addressing them.
  • Determine what combination of: strategic advisor, consultants, coaches, SME, and trainers your company needs.
  • Determine which roles can be humans vs AI workers (often referred to as AI Agents or just AI) vs AI.

 What further reading should you do?

“What is learning?” Koor and Associates

https://koorandassociates.org/creating-business-value/why-have-your-minimized-your-talent/

“What are the core components of talent?” Koor and Associates

https://koorandassociates.org/2025/09/29/what-are-the-core-components-of-talent-v6/

“Is your company planning to fail?”  I’ve observed that many, if not most, companies are passionately executing their plans to fail.

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Tom Koor

What is a startup? V2

What is a startup? V2

 What is the purpose of this article?

This article enables a discussion about how to define and identify whether or not your company is a startup.

The audience for this article includes: investors, founders, board of directors, C-suite, and investment analysts.

This article applies to all companies, ranging from pre-revenue through to long established global companies.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

AI did not write this article.  100% human written.

You can download a PDF of this article from: What is a startup V2

What are the critical learnings in this article?

  • A startup is a temporary organization designed to search out a repeatable, scalable, and profitable business model with lots of potential customers who are willing and able to pay to solve their problems and needs.1 Startups are not building a solution. They are building a tool to learn what solution to build.2
  • Your company may slip back into the startup stage at any point. Changes may mean that you no longer have a profitable business model with lots of potential customers who are willing and able to pay to solve their problems and needs.
  • Never ending customer, competitor, external environment, talent, operational, and financial monitoring is key to ensuring your company does not slip back to being a startup.

 What is the definition of startup?

  • A startup is a temporary organization designed to search out a repeatable, scalable, and profitable business model with lots of potential customers who are willing and able to pay to solve their problems and needs.
  • Startups are not building a solution. They are building a tool to learn what solution to build.

What does repeatable, scalable, and profitable mean?

Repeatable:

  • You use the same processes, technology, and types of talent as your company grows. You don’t have to constantly reinvent processes, technology, and talent.

Scalable:

  • Costs do not increase as quickly as revenue.
  • You don’t have to make major changes as you grow.
  • Your talent, processes and technology have the flexibility and capability to support large increases in volume arising from new markets and new customers.

Profitable:

Profitability is determined on a cash flow and net present value basis. This is different from financial statements based on IFRS or GAAP. The appendix contains detailed descriptions of the terms used.

There are 5 steps to calculating overall company profitability:

Step 1 Profit = (lifetime customer revenue) – (Cost Of Goods Sold)

The lifetime calculation must also include the impact of Churn.

Step 2 Profit = (Step 1 profit) – (Customer Acquisition Costs)

Step 3 Profit = (Step 2 profit) – ((General & Admin costs) + (New Development Costs))

Step 4 Profit = (Step 3 profit) – ((debt interest) + (taxes on financial statement profit))

Step 5 Profit = (Step 4 profit) – (debt repayment + other cash disbursements + other cash income)

There are multiple future profit scenarios e.g. debt can be rolled over and does not need to be repaid vs unable to roll over debt.

What are the three overlapping phases and steps of a successful startup?

Phase 1 Understanding customers and competitors

Step1 Understand potential customers.

  • What are their problems and needs?
  • What do the customers believe is the value of addressing those problems and needs?
  • What do customer perceive as their value proposition?
  • What might the customers pay to achieve their value proposition?

Step 2 What might a solution look like to customers?

  • What are the characteristics of a solution which might meet the customers value proposition? i.e. What are the benefits? There is a major difference between benefits and features.

Step 3 What are the components of the solution?

What is your business model canvas?

Step 4 What are the cash flow scenarios and related assumptions?

Build a set of cash flow scenarios using the five profit calculation steps above and the definitions in the appendix.

Phase 2 Validating the customers perception of the value

  • Implement temporary processes and technology to validate the customers value perception.
  • These processes may be manual. The technology may not be scalable.
  • Customers are not profitable at this point.
  • You will be learning by doing many experiments.
  • Revise your business model and cash flow scenarios

Phase 3 Transition to a repeatable, scalable, and profitable business model

  • Replace manual processes with lower cost technology.
  • Replace temporary technology with lower cost technology.
  • Implement standardized (flexible) processes which are both scalable and lower cost.
  • Change the organization structure. The talent you hire may also be different.
  • Continue to revise your business model canvas and cash flow forecasts

 How can you tell your company is no longer a startup.

  • You have 6 months of company financial and operational metrics which validate your assumptions.
  • You interviewed customers to confirm that they are achieving their value proposition.
  • NPS (and other surveys) do not reveal major issues.

You will always continue to do the above 4 actions.  Why? The world changes and your company may suddenly slip back to being a startup.

What are the critical factors to keep in mind?

  • The number and size of fund-raising rounds has nothing to do with whether or not a company is a startup. I know of one company that raised $1.75 billion U.S. that shutdown 6 months after launching services.  This company never left the startup stage.
  • Your company may slip back into the startup stage at any point. Changes may mean that you no longer have a profitable business model with lots of potential customers who are willing and able to pay to solve their problems and needs.
  • Never ending customer, competitor, external environment, talent, operational, and financial monitoring is key to ensuring your company does not slip back to being a startup.

What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Collect the facts: is your company repeatable, scalable, and profitable?

Footnotes

1 adapted from: Steve Blank, “What’s a startup – first principles”. https://steveblank.com/2010/01/25/whats-a-startup-first-principles/

2 Alistair Croll, Benjamin Yoskovitz , Lean Analytics – Use data to build a better startup faster, Sebastopol, California, O’Reilly Media, 2013, Page 41

What further reading should you do?

What is learning? Koor and Associates

https://koorandassociates.org/creating-business-value/why-have-your-minimized-your-talent/

Is your company planning to fail? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

What are the core components of talent? Koor and Associates

https://koorandassociates.org/creating-business-value/core-components-of-talent/

Appendix – Definition of operational and financial terminology

LTP (Life Time customer Profit)

What is the lifetime customer profit, after customer acquisition costs?  This will take into account retention.

CAC (Customer Acquisition Cost) includes all the costs to acquire a new customer:

  • Sales
  • Marketing
  • Onboarding
  • Related compensation of the people.
  • Overhead associated with the people.
  • Technology to support CAC.
  • Legal expenses associated with sales and marketing.

COGS (Cost of Goods Sold) What comprises cost of COGS? Everything required to meet the direct needs of current customers.  E.g.

  • Customer support people, and software.
  • Technology e.g. software, cloud services, communications costs.
  • Bug fix and minor enhancement to the software – after all you do need to retain current existing customers.

CAC is not part of COGS.

G&A (General and Administration) What comprises G&A?

  • Payroll administration.
  • Recruiting administration.
  • Finance
  • IT security.
  • Corporate development e.g. M&A.
  • CEO salary/benefits.
  • Legal expenses (both in house and external), other than those associated with sales contracts.

R&D/Engineering/new Development?

All of the costs associated with discovering major changes to the business model and enhancing the solution.

Tom Koor

What is learning? V3

What is learning? V3

 What is the purpose of this article?

  • This article enables a discussion about what is learning and the best ways to learn.
  • The audience for this article includes: board of directors, C-Suite, founders, and investors.
  • This article does not provide tax, legal or financial advice.
  • You must do your own research and fact-based analysis using current and relevant information.
  • AI did not write this article. 100% human written.

You can download a PDF of this article from: What is learning V3

What are the critical learnings in this article?

  • Learning is a biological process of changing your brain structure. The key changes to enable learning are new connections between neurons and strengthening the connections.
  • The best way for you to learn is to create your own conclusions and recommendations based on your own analysis of data you’ve collected.
  • The worst way for you to learn is to read reports and attend presentations.
  • Learning and unlearning is hard to do, especially if you’ve been a successful leader.

What is learning?

  • Learning is the relatively permanent change in your talent.
  • The 10 components of your talent are: Self awareness; character, relationship skills, communications, crystallized intelligence, fluid intelligence, cognitive skills, ability to quickly learn and unlearn, creativity, and physical capabilities.
  • All talent is based on the biological structure of your brain i.e. your neurons and the synapses which connect your neurons.
  • Learning is a biological process of changing your brain structure. The key changes to enable learning are new connections between neurons and strengthening the connections.

Why do you learn?

You learn for 3 reasons:

  • Curiosity
  • An external reward e.g. get a promotion or keep your job
  • Your own recognition that you your have a gap between your current talent and the talent you need to solve a problem or reach a goal

What is the best way for you to learn?

Active learning is the best way to learn. E.g.

  • The best way for you to learn is to create your own conclusions and recommendations based on your own analysis of data you’ve collected.
  • Coaching or teaching someone else is the second-best way to learn.
  • Other good ways to learn are: simulation & role playing, and case study analysis.

All the above approaches engage multiple parts of your brain and significant change your neural connections.

What are the worst ways for you to learn?

The following passive learning approaches don’t result in any significant learning i.e. sustainable change in behaviour and knowledge.

  • Reading reports
  • Attending presentations, lectures

All the above have limited changes to limited parts of your brain. As a result, you gain little deep understanding, long term skills, and knowledge retention. BUT, if you take notes while listening to a presentation or reading documents, your learning is improved.

Why is learning hard for you to do, especially if you’ve been a successful leader?

Learning also requires unlearning.  The world is changing faster than ever before.  Crisis and turmoil are never ending.  The future is unpredictable.

What are the psychological barriers to your unlearning?

  • Unlearning is the conscious process of recognizing that your past skills, experience, and mental models are of limited or no value now.
  • You were an expert – able to successfully do things without deeply thing about it. Unlearning takes you back to making mistakes, which can be very disturbing to you.
  • You have become emotionally attached to your mental models.
  • Your past expertise and experience are part of your identity. Information which contradicts your past, triggers defensive mechanisms to protect your ego.
  • Learning involves mistakes and uncertainty. This is very uncomfortable for leaders who like to project competence and confidence.
  • Past successes create the cognitive bias that overestimates your ability in new areas. This results in your believing that you don’t need to learn.

What are the neurological barriers to your unlearning?

  • When those skills and knowledge that resulted in your success are challenged, your brain triggers the same defensive and emotional stress response as when you are in physical danger.
  • Your brain has developed many short cuts to enable fast decision making. But when the world that created those short cuts has changed, or when your brain is overloaded, you’ll continue to make those same short cut decisions – which are no longer valid.
  • When you’re under stress, the part of your brain that detects danger, reduces access to the planning and reasoning parts of your brain. When you are in high anxiety, you are incapable of learning new or complex information.
  • When you first learn something, you need your prefrontal cortex to go through intense conscious concentration and effort to create neural connections which connect external input to your behaviours and decision. Repetition over time results in your subconscious and automatic behaviours and decisions.
  • Unlearning is a painful process which requires your prefrontal cortex to consciously suppress your automatic behaviours and decisions AND to create new neural connections which will be stronger than your old neural connections. Your old neural connections are not deleted but become weaker over time.

Can everyone learn?

  • Many leaders can learn.
  • Many leaders are unable to learn. They cannot overcome their psychological and neurological barriers to learning. The lack of self awareness results in total conviction that they do not need to learn.
  • In today’s hypercompetitive and turbulent world, the only way for leaders and their companies to succeed is to learn faster and better than competitors.

 What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Identify which situations requires learning and unlearning vs those situations where you can rely on your automatic behaviours and decisions, based on your historically successful mental models.
  • Identify those few critical business decisions which require you to maximise your learnings.

 What further reading should you do?

What are the core components of talent? Koor and Associates

https://koorandassociates.org/creating-business-value/core-components-of-talent/

Is your company planning to fail? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Note taking is key to value creation. Koor and Associates

https://koorandassociates.org/creating-business-value/note-taking-is-key-to-value-creation/

Tom Koor

Do you need to transform your brain?

Do you need to transform your brain?

The purpose of this post is to share my learnings and unlearnings, with the expectation that some will be of value to you. This post was 100% written by me – not by AI.  When you send me an email, my response is 100% written by me.

Why am I able to help business leaders succeed, without telling them what to do?

  • The leader must make major critical decisions and business changes they’ve never successfully done before.
  • Leaders who want me (or a subject matter expert) to tell them what to do will usually fail. Why? Hearing what I say, seeing my presentation, or reading my presentation results in leaders having: little in depth understanding, low long-term retention of knowledge, little ability to successfully answer challenging questions, and little ability to make to make ongoing changes to the leaders’ actions.
  • What results when I ask leaders questions and suggest the thinking they need to do to make their decisions and manage their execution? Leaders have a deep understanding of the knowledge, retain the knowledge for long-periods of time, can successfully answer challenging questions, and can make ongoing changes as they execute.
  • To learn and understand something new requires their brains to create new neural connections. Brains naturally resist this process. Brains will find many reasons not to change. Changing the mental model of a leader results in mental discomfort, stress, and pain.
  • A leader doing their own thinking results in them persuading and convincing themselves, with less resistance and pain.

Sharing my learnings

Below are links to my website containing new and revised articles since my last update in May. The critical learnings are included. Each article designed to enable discussion among founders, owners, shareholders, investors, CEOs, and boards of directors. The learnings and unlearnings are applicable to any size company, ranging from early-stage startups to large global enterprises.

Links to my points-of-view articles:

What are the core components of talent? V5

  • There are 10 core components of talent.
  • People often focus on just 1 component of talent: Crystallized intelligence (e.g. historical skills, knowledge, experience, etc.) and ignore the other 9. This often leads to major problems, because historical skills, knowledge, and experience are quickly becoming obsolete.
  • Any role many be comprised of both people and technology (such as software, including AI) talent.
  • The 10 core components of talent apply to both people, technology, and AI.

https://koorandassociates.org/creating-business-value/core-components-of-talent/

How profitable are public stocks?

  • The majority of US public stocks from Dec 1925 to Dec 2023 had negative returns.
  • The best performing 4% of US public stocks from 1926 2016 provided the entire stock market gains which exceeded one-month Treasury Bills.
  • S&P 500 outperformance relative to S&P 600 small cap and Russell 2000 has been increasing over time.
  • Most U.S. large cap funds have underperformed the S&P 500 for the past 15 years.
  • Most U.S. mid-cap funds have underperformed the S&P mid-cap 400 for the past 15 years.
  • Most U.S. small-cap funds have underperformed the S&P small-cap 600 for the past 15 years.
  • It appears to be close to impossible to predict the future performance of equity funds by looking at past performance.

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-are-public-stocks/

How profitable is private equity?

  • The traditional PE equity value creation model appears broken. For 40 years the approach has been financial leverage and increasing the price to EBITDA multiple. This approach now often appears to fail.
  • The future is impossible to predict. The future is uncertain. The future cannot be predicted by extrapolating historical trends.
  • Successful GPs and LPs will be those who have the desire and ability to transform themselves.

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-private-equity/

How profitable is venture capital?

  • If you were good at predicting which fund managers would be successful, you could have had excellent returns. But many Limited Partners (LPs) lost money from their investments.
  • The trend has been that the % of funds providing any cash return has been declining.
  • I have read multiple articles that some LPs have started to question VC fund managers who are showing high IRR results (which include both actual realized returns and estimated future unrealized returns) while the LPs are receiving little or no cash because the fund managers are unable to sell their investments to buyers.

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-venture-capital/

How profitable are search funds?

  • The IRR for traditional search funds in Canada and the US has been 35.2%.
  • To make a profit by investing in search funds, you need the ability to predict which people (searchers or managers of funds which invest in searchers) have the talent to be successful.
  • 66% of search funds with an investment return, lost some or all their investor money. A small number of search funds generated much of the IRR return e.g. 8 exits had IRRs of 100% or more.
  • You may need to fund between 30 to 45 searchers, to have a high chance of approaching the IRR for the asset class as a whole.

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-are-search-funds/

How profitable is angel investing? V4

  • Someone making investments in individual angel startups has the potential to make profit if: has the capital to create a diversified portfolio, the time to do due diligence and support the portfolio companies, the talent to select potentially profitable startups.
  • Someone making investments in an angel fund has the potential to make profit if: has the time to do due diligence and the talent to select fund managers who will be profitable in the future.
  • In either of the above cases, you may need to wait 10 or more years before achieving a cash profit.

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-angel-investing/

Are you an angel investor or gambler? V3

  • You may need to create a portfolio of 20 or more companies.
  • You might need to invest $800,000 or more.
  • You need the skills and time for both due diligence and helping founders succeed. Money by itself is not enough.
  • You need to determine if you’re putting capital into early-stage companies because: you are an investor; you are a gambler; or this is a charitable activity and not part of your overall investment portfolio.

https://koorandassociates.org/selling-a-company-or-raising-capital/are-you-an-angel-investor-or-gambler/

Traditional succession planning dooms your company to failure? V3

  • Board directors and C-Suite executives must be able to make major decisions on the day they are appointed. Needing to learn about the company for 6-12 months risks failure.
  • Board directors and C-Suite executives need to have the capabilities to succeed in a future which is very different from the past. These leaders are of limited value if they only have the skills and experience to solve yesterday’s problems with the day before’s solutions.
  • Board director and C-Suite talent requirements must be defined in terms of the 10 core components of talent. The traditional approach of focusing on crystallized intelligence (i.e. historical skills, knowledge, and data) is insufficient in today’s turbulent and hyper-competitive world.

https://koorandassociates.org/creating-business-value/traditional-succession-planning-is-obsolete/

Personal Update:

  • Mentored a startup at the University of Toronto, Department of Engineering. The approach was based on weekly advisory board meetings.
  • Continued as Board Director at a private company.
  • Continued as a Patient Family Advisor at Sunnybrook Hospital.
  • Continued my long-term fundraising for the Geoff Carr Fellowship at Lupus Ontario. Over the past 19 years family, friends, neighbours, and colleagues have contributed over 276.000,000. You can use the donation link later in this update
  • Continued as a member of the Angel Capital Association in the US and the Institute of Corporate Directors in Canada.
  • Continued to share with you, and on my website, some of what I’ve learned and unlearned, with the intent that some of you will find value. The learnings and unlearnings are applicable to any size company, ranging from early-stage startups to large global enterprises.

I continue to focus my time to maximize the value and impact of my two professional purposes: #1 Enabling current and emerging business leaders to succeed, #2 Enabling business leaders to have a positive impact on society.

 

To support the Geoff Carr Fellowship at  Lupus Ontario

Link to my Geoff Carr Fellowship fundraising page

Tom Koor

How profitable are public stocks?

How profitable are public stocks?

What is the purpose of this article?

This article enables fact-based discussion regarding the profitability of public stocks.  The audience for this article includes investors, fund managers, and public company leaders.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from:

How profitable are public stocks

What are the critical learnings in this article?

  1. The majority of US public stocks from Dec 1925 to Dec 2023 had negative returns.
  2. The best performing 4% of US public stocks from 1926 2016 provided the entire stock market gains which exceeded one-month Treasury Bills.
  3. S&P 500 outperformance relative to S&P 600 small cap and Russell 2000 has been increasing over time.
  4. Most U.S. large cap funds have underperformed the S&P 500 for the past 15 years.
  5. Most U.S. mid-cap funds have underperformed the S&P mid-cap 400 for the past 15 years.
  6. Most U.S. small-cap funds have underperformed the S&P small-cap 600 for the past 15 years.
  7. It appears to be close to impossible to predict the future performance of equity funds by looking at past performance.

Do US public stocks provide better returns than US treasury bills?

Historically, most US public stocks have underperformed US one-month Treasury Bills. 4% of US stocks provided the entire stock market gains which exceeded one-month Treasury Bills.

  1. The majority of US public stocks from 1926 to 2016 have lifetime buy-and-hold returns less than one-month US Treasury Bills. The best performing 4% of US public stocks provided the entire stock market gains which exceeded one-month Treasury Bills. 1
  2. The majority of US public stocks from Dec 1925 to Dec 2023 had negative returns. The highest compound return for any stock listed for at least 20 years, was Nvidea at 33.38% per year.2

How have the major US stock indices performed over the past 20 years? 3

S&P 500 outperformance relative to S&P 600 small cap and Russell 2000 has been increasing over time.

Index2024 Return5-Year CAGR (2019-2024)10-Year CAGR (2014-2024)15-Year CAGR (2009-2024)20-Year CAGR (20004-2024)
S&P 50025.0%17.19%14.16%15.02%9.94%
Nasdaq Composite29.6%21.68%17.58%18.06%12.87%
S&P 600 SmallCap8.7%11.21%10.33%Not AvailableNot Available
Russell 200011.5%10.82%8.90%10.74%8.21%

What percentage of U.S. large-cap equity funds underperform the S&P 500? 4

Most U.S. large cap funds have underperformed the S&P 500 for the past 15 years.

Fund Category1-Year Under-performance5-Year Under-performance10-Year Under-performance15-Year Under-performance
All Large-Cap Funds64.91%86.53%91.36%93.36%
Large-Cap Core Funds59.48%80.82%88.07%91.67%
Large-Cap Growth Funds57.65%89.29%94.62%95.21%

What percentage of U.S. mid-cap equity funds underperform the S&P mid-cap 400?5

Most U.S. mid-cap funds have underperformed the S&P mid-cap 400 for the past 15 years.

Fund Category1-Year Under-performance5-Year Under-performance10-Year Under-performance15-Year Under-performance
All Mid-Cap Funds62.06%82.99%88.70%92.86%
Mid-Cap Core Funds64.57%83.18%90.00%92.59%
Mid-Cap Growth Funds62.26%92.05%93.23%96.67%
Mid-Cap Value Funds88.00%80.00%84.81%89.47%

What percentage of U.S. small-cap equity funds underperform the S&P small-cap 600? 6

Most U.S. small-cap funds have underperformed the S&P small-cap 600 for the past 15 years.

Fund Category1-Year Under-performance5-Year Under-performance10-Year Under-performance15-Year Under-performance
All Mid-Cap Funds29.83%77.92%88.35%94.46%
Mid-Cap Core Funds28.00%76.71%87.82%93.97%
Mid-Cap Growth Funds35.19%86.96%95.53%97.58%
Mid-Cap Value Funds94.23%68.00%78.33%9057%

Can you predict the future performance of an equity fund manager by looking at past performance? 7

It appears to be close to impossible to predict the future performance of equity funds by looking at past performance.

  1. Only 2% of all US large-cap equity funds remained in the top half over 5-years.
  2. None of the top-quartile large-cap or mid-cap funds from 2022 remained in the top quartile for the next two years. This appears to be worse than randomly picking funds.

What are your next steps – as an investor?

  1. Define the words/concepts you’re using, in a glossary.  I’ve seen major confusion when the same words mean different things to different people. Different data sources will have different definitions.
  2. Document your future cash flow requirements, with scenarios.
  3. State your overall investment thesis, with metrics for risk tolerance
  4. Define your asset allocation mix and criteria for changing the mix.
  5. State your public stock investment thesis.
  6. Do analysis to determine whether: you’ll be buying individual stocks, buying ETFs, buying mutual funds, or a combination. Clearly describe your criteria for selling.

Footnotes

1 “Do stocks outperform Treasury Bills”, May 2018, Hendrik Bessembinder, Arizona State University, Page 1

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447

2 “Which U.S. stocks generated the highest long-term returns?”, Nov 2024, Hendrik Bessembinder, Arizona State University, Page 1

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4897069

3 Data is from a variety of sources

4 “S&P Dow Jones Indices SPIVA U.S. Year-End 2024 Report”

Click to access spiva-us-year-end-2024.pdf

5 “S&P Dow Jones Indices SPIVA U.S. Year-End 2024 Report”

Click to access spiva-us-year-end-2024.pdf

6 “S&P Dow Jones Indices SPIVA U.S. Year-End 2024 Report”

Click to access spiva-us-year-end-2024.pdf

7 “U.S. Persistence Scorecard Year-End 2024” S&P Dow Jones SPIVA

Click to access persistence-scorecard-year-end-2024.pdf

What further reading should you do?

How profitable is angel investing? Koor and Associates

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-angel-investing/

 How profitable are search funds? Koor and Associates

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-are-search-funds/

 How profitable is venture capital? Koor and Associates

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-venture-capital/

How profitable is private equity? Koor & Associates

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-private-equity/

Your company will fail. Koor and Associates

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

What are the core components of talent? Koor and Associates

https://koorandassociates.org/creating-business-value/core-components-of-talent/