Bernhard Schroeder: Part 2 of an interview by Bob Morris

SchroederBernhard Schroeder is the Director, Lavin Entrepreneurship Center Programs and oversees all of the undergraduate and graduate experiential entrepreneurship programs on the San Diego State University campus. He also has responsibility for the Center’s marketing and outreach on both the SDSU campus and in the San Diego community. He is a part-time Clinical Faculty, Entrepreneurship teaching several entrepreneurship course including Creativity and Innovation.

Prior to moving to San Diego, Bernhard was a Senior Partner in the worlds’ largest integrated marketing communications agency, CKS Partners, which in 1998 had offices in over 30 countries, more than 10,000 employees and over $1 billion in revenue. Bernhard joined CKS in 1991 and working with the other four partners, grew the firm to almost $40 million in revenue by 1995 and led CKS to a successful IPO that same year.

He has experience working with Fortune 100 firms like Apple, Nike, General Motors, American Express, Mercedes Benz, Kellogg’s and others as well as start-up companies. He was involved in the initial branding and marketing launches for startup companies Yahoo! and Amazon. Today, he mentors more than 20 founders of startup companies in San Diego with yearly revenue ranging from $400,000 to more than ten million.

His book, Fail Fast or Win Big: The Start-Up Plan for Starting Now, was published by AMACOM (February 2015).

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Morris: When and why did you decide to write Fail Fast or Win Big?

Schroeder: I never intended to write a book. I attended a networking event to celebrate startup “food” companies in San Diego. Sat down next to guy who I did not know and we chatted about each other’s careers and what we were both doing now. Next day he called me and asked if I would do a private TED Salon talk on Entrepreneurship in Education. I did that talk about 90 days later. Someone in the audience called me about two weeks later and asked I would talk at a full TEDx around the theme of Change. So I spoke at that TEDx with a talk I created around why I felt Failing Fast was good. Next day I got an email from a book publisher in New York who asked if they could see the presentation I created for the TEDx talk. Long story short, I sent them the presentation and over the next two weeks hammered out an outline for what the publisher felt was a book. Once the outline was completed, they sent me a contract to write fail Fast or Win Big. Crazy, huh?

Why did I write it? I teach entrepreneurship on the campus, mentor founders in the community, have met hundreds of entrepreneurs. My goal in writing the book was to pay it forward…to demystify and simplify exactly how someone could go about creating a company in an easy to read and understandable book. Just simply tell someone, this is how you do it. With a solid idea, good business model, big marketplace and lots of passion and sweat. Because I really believe no one was born to do what they do…they just decide to do. So, I hope I help someone I will never meet to create a great company.

Were there any head-snapping revelations while writing it? Please explain.

Schroeder: Not really. So, I got up every day at 3:30 AM for about 70 days straight (mostly) and wrote for about three hours and then showered and went to the campus. I wrote the book in no particular order. I write every morning on the chapter I felt good about. So I bounced all over the place. Once the draft was finished, I sent it to the publisher who promptly shredded it. It took me about three weeks just to get my head around their comments and edits. Then I sat down and edited it over the next 30 days, one chapter at a time. The forward was the last thing I wrote. What was interesting to me is how easily this book “fell out” of me. It was not job either; I looked forward to writing every day. Sometimes at night, I would go to bed and anticipate waking up at 3:30am. After about two weeks, I woke up at that time without the alarm. My only concern the whole time was to not write “war stories” and make it about me. Rather, to provide insights and knowledge, and some tools that might help someone become an entrepreneur. Or to help an existing entrepreneur go further.

Morris: To what extent (if any) does the book in final form differ significantly from what you originally envisioned?

Schroeder: It’s way better than I imagined. Working with a professional publisher and editor took me to another level in terms of how well the book turned out. They provided very fair and tough critiques that made the whole book better. They constantly reminded me of my target audience and the clarity of my messages. I have marketed a lot of things in my career but never really myself. I formed a quick trust level with the publisher and we hit it off immediately. To this day, we have never met face-to-face but I trust him.

You ask your reader to embrace “a new way of thinking about creating and launching a company.” How so “new”?

Schroeder: There has never been a time like this…it’s the perfect storm for an entrepreneur. You have the availability of low cost, innovative tools and resources where you can rapidly prototype your product or service. You have marketplaces being disrupted everywhere. You have new sources of funding or early sales with crowdfunding. And you have the largest generation ever forming (Millennials) right now. So, if you have an idea, you have to move fast because everyone else and everything is moving faster. Marketplace windows are slamming open and shut rapidly. You wanted to create a new type of transportation company? Too late, Uber came out six months ago and is flying in terms of growth. Have an idea for a new alternate hand-craft goods marketplace? Too late, Etsy is steaming ahead. Want to get in the “new” healthy juice business? Suja was created three years ago…they will do $40 million this year on their way to $100 million. Did you see the new juice craze coming? So, amazing opportunities but you have to move fast. Or maybe faster.

Morris: To what extent can this “new way of thinking” also assist the launch of a new project? Please explain.

Schroeder: You can just prototype something faster and test the business model quickly. Based on early marketplace feedback, you know you are either onto something or you have to pivot or abandon the idea. I know of one group here in San Diego that had one successful exit last year. They see what’s going on in an area of focus they have developed an expertise. So they convinced investors to give them $2 million dollars to start FIVE small companies at the same time in one location. They are looking for one hit in the next year and then they will focus on that one. That is certainly a new way of thinking. Can you say “entrepreneur factory?”

Morris: What are the defining characteristics of a “solid” business model?

Schroeder: One that makes money, better if it can make money quickly. I look for 3-4 things when I examine a business model. One, is the product or service truly unique or does it deliver a unique value to the customer, that the customer actually needs, not wants. Two, does the business model have a focus on a target segment of the population that over time is large (either large today or growing)? If successful, does the product or service have crossover appeal to other large segments? Three, is there a solid distribution or delivery strategy to get the product or service to the targeted customers in the most efficient way possible. Fourth, based on cost and projected revenue, does the product or service have good (60% or better) gross margins? And finally, not really part of the model but most critical, is the team (read founders a this point) capable of creating this company? I reviewed some amazing ideas that never got off the ground and some pedestrian ideas that have become amazing little companies. Why? The founders worked their ass off in every way possible.

Morris: What are “lean resources”?

Schroeder: Those resources which cost very little time and or money. Crowdfunding, 3-D printer prototypes, food carts, computer science majors going to school at a university you can pay with “coke and pizza” to write mobile applications, farmers markets to test your food prototypes, etc. Online ecommerce websites for less than $30 month, iPads with Square payments is the new cash register, leverage Uber drivers to deliver something, the list just goes on. The mantra is pay little or next to nothing to test your idea. Then continue to leverage everything to support the fledgling company and keep it lean on purpose.

Morris: What is accomplished by “rapidly prototyping a minimally viable product”?

Schroeder: Getting customer feedback quickly. Early in my marketing career, I grew wary about market research reports on everything about the customer. I just did not believe the “data” could tell me what customers were thinking. Only what they eventually did. So, on every account for the rest of my life, I always made it a point to go into the marketplace and meet with customers. With rapid prototyping, you get early marketplace feedback and make your necessary adjustments quickly.

Morris: How best to obtain customer feedback that is sufficient in quantity and of direct relevance to the given objectives?

Schroeder: I think it’s a mix of three things. I like to look at market analyst data that looks down the road about 5-7 years. They are not always right but they get close and they talk about trends at a high level. Second, I like to review local/national marketplace and tend data of the actual customers that are being targeted. Want to really quantify the target market is real and what they look like. Last, want to meet with at least 50 real target customers in perhaps three levels of refinement; first 15 to get a gut fee about this customer segment and present them idea of what we are doing, second 15 to present any refinements to and third 15 to get an idea of how many would buy and why. You just cannot substitute quantitative data with feedback from real customers.

Morris: Here is a comment that caught my eye: “Customers are not always right, but they are never wrong.” Please explain.

Schroeder: This is a great quote. One that I really believe in. Customers are obviously critical to each and every product or service. But here’s the rub…customers will tell you want they want, not what they need. I want a Porsche but I need reliable transportation. Steve Jobs (who our agency worked with at NEXT, Pixar and back at Apple) once stated in general “if I asked customers to design an iPod, they would not design what we designed.” BMW designs its cars five years out. They have to figure out what their customers/prospects will need or expect in a BMW. However, if you are wrong and don’t give customers what they need, they will not buy the product or service and that is where my quote comes from. And in that essence, since they vote with their wallet, they are never wrong.

Morris: Who needs a business plan? Please explain.

Schroeder: The only people who need business plans are those people who have successfully executed a startup company into a $2-3 million company based on a solid business model. Now if they need investor capital or are creating key partnerships, they need a short business plan on the necessary strategy needed to take the company to the next level. No person contemplating a startup should write a business plan. Rather, understand the core components of a good business model and sell something.

Morris: Who doesn’t need one? Please explain.

Schroeder: Anyone contemplating creating a startup company does not need a business plan. Sell something based on a good business model and a growing marketplace.

Morris: What differentiates the LeanModel Framework from all other business models?

I think every entrepreneur or educator likes to create a framework or new model to communicate what’s new or different or to look smart. The LeanModel Framework is my “tool” to simply focus and explain to would be or current entrepreneurs what’s really important in creating or growing a company today. It’s relatively easy to understand and holds all the advice and knowledge together in a simple but powerful framework.

Morris: What are the most important dos and don’ts to keep in mind when determining which business model is most appropriate to the given business situation?

Schroeder: Ah, and there’s the rub. Most people I meet today struggle with building the right business model to address an opportunity or problem in the marketplace. As a matter of fact, most people struggle to just wrap their head around what constitutes a business model in the first place. Crafting a solid business model is critical since there are quite a few variables that could go wrong. But therein lies the beauty of creating a business model and actually testing the business model with potential customers. In other words, walk into the marketplace, show people a picture of “new” photo shopped sunglasses, ask them about the design, the colors, where they would expect to buy them and what they would pay. Adjust your business model based on that feedback. Then get 50 prototyped sunglasses made and try to sell them. Based on the next round of feedback, adjust the business model and move forward. Had two students do just this and today will sell in their third year, more than $2 million dollars of sunglasses.

Morris: Of all the great entrepreneurs throughout history, with which one would you most want to share an evening of conversation if it were possible? Why?

Honestly, I would like to sit down with Steve Jobs. Our agency worked with him at NEXT, Pixar and when he returned to Apple. I met him a few times socially at our agency parties but never had a real conversation with him. We had a good working relationship with him; we did not disappoint. He trusted 2-3 of our partners/senior designers and we never let him down. I always respected that he had a point of view and did not compromise. I felt he set a bar and inspired, cajoled, pushed and shoved his teams and employees to that goal. The reason I would like to sit down with him is to learn just how did he ascertain that “feeling” of what to create next and when? How was he gathering his information? Who did he trust to give him insights into customers and trends? How did he know exactly when to enter into certain markets (MP3 players, iTunes, iPhones, iPads, etc.)? I think he was an innovative futurist who always could figure how the right time to enter or create a marketplace and give people what they did not know they needed.

Morris: Let’s say that a CEO has read and then (hopefully) re-read Fail Fast or Win Big and is now determined to apply its principles in order to establish or strengthen a workplace culture within which personal growth and professional development are most likely to thrive. Where to begin?

Schroeder: The CEO would call all the employees together and tell them about the future of the company in the marketplace in great candor. Then the CEO would tell them the firm’s destiny in that marketplace. Then the CEO would ask them to weigh in on everything needed to get there. The CEO would indicate that best idea wins no matter where it comes from, the company was now operating on an open door policy where creativity and innovation would be rewarded. The CEO would create a program for those employees who wanted to create a spin-out company based on emerging trends and would support rapid prototyping new ideas with lean resources. The CEO would also, along with all senior officers, move out of executive row and work in amongst staff employees to get better feedback and respond quicker to changes in the marketplace. Change and rapid prototyping of new innovative services and products is now the new norm and that is what will be rewarded.

Morris: For more than 25 years, it has been my great pleasure as well as privilege to work closely with the owner/CEOs of hundreds of small companies, those with $20-million or less in annual sales. In your opinion, of all the material you provide in Fail Fast or Win Big, which do you think will be of greatest value to leaders in small companies? Please explain.

Schroeder: The idea of rapid prototyping new products and services and getting quick market feedback. Because at $20 million or smaller, they are probably not market leaders. Does not mean they are not great companies. But in order to survive and grow, they need faster feedback from their marketplace and because of their size, they can move faster or more nimbly than their larger competitors. They need to build a great little brand that can stand the heat and onslaught from bigger companies that will move to take their market share. “Small company be nimble. Small company be quick.”

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Bern cordially invites you to check out the resources at these websites:

His website link

Lavin Entrepreneurship Center link

Fail Fast or Win Big Amazon link

TEDx Encinitas video link

StartUp Circle video link

LinkedIn link

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