The wisdom of crowds - a shortcut to better decisions

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

Leadership, especially military leadership, is often characterised as a lonely experience - the loneliness of command. At the point of decision, a leader is alone with his or her responsibility - think of Eisenhower deciding when to launch Operation Overlord in 1944 for example.

But before the time comes for decision, leaders have the opportunity to observe and orientate. The wisdom of crowds can help make this observation and orientation quicker and more accurate. And emerging technology and techniques are making it easier to gather and respond to crowd wisdom.

Estimating distance

I was introduced to the concept of crowdsourcing as a trainee Royal Marine. We were taught that the best way to estimate the distance to a target was to ask everyone with you to make their own estimate, and then to take an average of all the estimates. The result, we were assured, is reliably more accurate than the estimate of any single individual.

This fits with the work of researchers such as Scott E. Page who wrote The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (New Edition). Page argues that his claims that "collective ability equals individual ability plus diversity" and "diversity trumps ability" are "mathematical truths, not feel-good mantras".

Safety in numbers

Business success depends on the engagement of crowds of people with your business idea. These may include customers, employees and investors. While the entrepreneurial vision is your own, its prospects of success depend on the response of others. Balancing your own enthusiasm with "reality checks" is essential, and there are more and more tools that make it easier to do this.

If you are able to gauge the response to your business before committing large investments of time or capital, you will reduce the risks involved, and you may pick up some valuable insights at the same time.

How to ask the crowd

With the proliferation of social media and special interest forums it is easier than ever to collect crowd insights. You could start by asking your friends on Facebook using the polling feature, or starting a discussion in a relevant LinkedIn group. For a larger crowd you could try visiting forums and posting questions - a technique I found very useful last year when investigating raising capital for This Tribe.

For more formal research there are also plenty of services like Crowdflower. And of course for crowdsourced fundraising (in which you invite a crowd to put their money where their mouths are), there are a growing number of crowdfunding platforms in the UK such as Crowdcube and Seedrs.

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

Linkedin and Coffee - two essential tools for ex-military entrepreneurs

Linkedin and Coffee

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

For people leaving the Armed Forces, one of the most important - and time consuming - activities is developing personal networks.

If you have spent most or all of your career in the military, it is likely that most of your friends and professional contacts are also military themselves. But in creating a career beyond the Armed Forces, it pays to reach out further afield.

Networking

The most powerful personal networking tool I have found is Linkedin - a website used by over 100m people to manage their professional profile and engage with others. One of its key features is that it enables you to see who connects you to people who you may want to engage with - and so who can help you with introductions. It is also a great source of information about personal and organisational interests and priorities.

Many service leavers have extensive networks within the services, but if you are moving on to civilian life it is best to focus on developing a network that gives access to the key shapers of the environment you are entering. This helps with recruiting potential mentors, introducers, customers, advisors, competitors and even regulators. And if you explicitly set out to increase your network you will quickly identify key contacts who are themselves great networkers and can open many doors for you.

6 Steps to Kevin Bacon

To illustrate how far networking can reach, I decided to check on how many removes I am from the Holywood actor Kevin Bacon. In 1994 he famously claimed to have worked with everyone in Holywood, but since then the world has become much more connected. In summer 2012 I went to Linkedin to find that I was 3 removes from Kevin Bacon - 7 people I knew knew someone who knew one of the 142 people he listed as connections. 6 months later I now know 11 people who know one or more of his 204 connections.

In other words, it is possible to build very broad networks as soon as you recognise the value your contacts can have by introducing their own contacts - so always end a meeting by asking for introductions. This is the alchemy of networking.

Caffeine Rush

Investing time in meeting people face to face is a great approach, and to adapt a military phrase, "time spent in coffee shops is rarely wasted". Getting to know people whose activities shape your environment is essential, and learning from their experience is usually less costly than trying to work everything out alone.

Coffee has played a part in networking for hundreds of years - in fact many of the great trading and banking institutions of the City of London grew out of coffee shops in the 17th and 18th Centuries, as did the RSA, which still does a fine job of promoting networking more than 250 years after it was founded. For more on the value of coffee in the generation of good ideas, see is video of Steven Johnson.

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

Timing and Capital - Early Bird or Second Mouse

Timing and Capital

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

If you never leave home without a wrist watch and wallet, you already know the importance of timing and capital. In a competitive commercial context these two tools are of vital importance.

Service leavers can bring their skills to bear usefully at every stage in the life of a company and an industry, and this post aims to illustrate some of the timing and capital considerations that may help a service leaver to choose a market that best suits their skills and expectations.

Timing

As the market for any product or service develops, demand typically follows a predictable pattern. After development and launch, a small number of "early adopters" are gradually joined by a growing group of customers. The market grows to maturity and then eventually declines.

Understanding the importance of timing and capital is essential if you are to harvest the best results from the market you are in - or thinking of getting into.

Early stage - to the victor the spoils

If you join a market at a very early stage - or create it - timing is critical. Get it right and you can enjoy high profit margins and high growth as early adopters sing your praises and spread the word. Get it wrong and you may find that demand doesn't appear - or takes longer and costs more than you expected.

While many early stage markets don't require large quantities of capital to enter, unless you are sure of your timing it is essential to have sufficient resources to survive if demand takes longer to pick up than you expected - you may also need to refine what you are selling so that more people want to buy it.

Of course any given quantity of capital will last much longer if you have a tight grip of costs and keep the "burn rate" as low as you can.

Growth markets - more capital required and less timing risk

If you choose to join the market later in its development - perhaps as a "fast follower" improving the initial offerings of others (Apple and Virgin are great examples of companies that do this), you are less exposed to the timing risk - the danger that you will have launched something that is ahead of its time - but you will probably also need more capital in order to capture customers and gain attention.

Mature and declining markets - optimisation and big balance sheets

Once a market has matured, the profit margins typically reduce and competitive success turns on being able to run the leanest operations. The search for economies of scale lead to consolidation and the creation of larger and larger organisations - along with the need for larger and larger quantities of capital. Strategic timing becomes less of an issue - but tactical timing is essential working capital management in particular becomes a key determinant of success.

You choose - bird or mouse

Military experience can fit people for each of these stages. The early stage of the development of a market is typically characterised by uncertainty - one of the staples of a military career - while fast following involves learning quickly from the experiences of others and seeking to build on their insights.

"The early bird catches the worm, but it's the second mouse that gets the cheese"

Since the military in the UK could fairly be described as a mature and declining market, servicemen and women have plenty of practice in optimising systems and processes to try to find efficiencies - particularly in large supply chains and communications systems.

Capital - be sure of your budget and backup

Each of these options depends to some extent on the capital available. While (except in some industries like mining or pharmaceuticals) there is often little capital required in the early stages of a market, joining an established market can require massive scale and resources.

Beyond the resources and expectations that an entrepreneur can bring to bear personally, they may need to seek additional capital from other investors or lenders. Understanding the expectations and constraints of those investors - whether they be friends and family or formal investors like business angels and venture capitalists - is essential to ensuring that the entrepreneur has the resources to realise their vision.

So gaining a clear understanding of the investor perspective should be high up the list of tasks for any entrepreneurial service leaver.


This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

Financial Analysis and Marketing - Two Key Skills for Entrepreneurs

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.


When I left the Royal Marines in 2000 I knew I had a lot to learn about civilian life (and I still do!). Two of the subject that were particularly alien to me, coming from an armed forces background, where finance and marketing.

I was fortunate enough to have a great introduction to each of these in the 2 years after I left the Corps. First I joined JP Morgan and was sent to Wall Street for their analyst training programme, and then during my MBA at Warwick Business School, I studied marketing and strategy under the legendary Professor Peter Doyle.

Financial Analysis

Financial analysis, an understanding of the way financial information is recorded, presented and interpreted, is essential to anyone who wants to understand how an enterprise works. The single most important piece of financial analysis is probably "can I sell this product or service for more than it costs me to make or buy?" if the answer to this first question is no, then it's time to go back to the drawing board. But this is only the beginning, and I would encourage any would-be entrepreneur - especially with an Armed Forces background - to spend some time learning how bookkeeping, accounting and financial modeling work.

While I was at JP Morgan I was analysing the financial statements of a major international energy company, when I noticed a $47 million discrepancy between two sets of reports. At first I thought I had uncovered some criminal activity, so I spoke to my boss who meticulously checked though the details, and after several hours pointed out the problem - on a billion dollar balance sheet, the $47m had disappeared as a rounding error!

Marketing

While the Armed Forces are a monopoly provider of services to a single client - the British Government - most businesses are competing with a wide range of capable rivals, each vying to take away customers. In any market where supply exceeds demand, an entrepreneur has to find ways of ensuring that they can sell their products or services at a premium. This is the realm of marketing.

I recommend spending time on a sales and marketing course, or at the very least reading widely on the subject. Peter Doyle's Marketing Management and Strategy is a great top level introduction.

While Doyle puts marketing into a strategic context (he trained as an economist before becoming a marketing guru), there are also simple tactical questions that every entrepreneur should keep a close eye on, such as:

• do I know my customer as well as possible?

• does my product fit my market as closely as possible?

• what can I measure to improve the performance of my marketing activities?

For me marketing remains the most interesting of the disciplines involved in entrepreneurship - and also the most challenging!

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

The Royal Marines Toolkit - Determination and Adaptability

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

The Royal Marines often have to travel light and deal with a wide variety of challenges, so they have developed a toolkit which combines simplicity with effectiveness in almost any circumstance. The toolkit contains two items: a hammer and a roll of duct tape.

There aren't many problems that you cannot solve - or at least deal with for the time being - with a hammer and/or duct tape - which is known in the Royal Marines as "Maskers" or "Harry Black".

These tools have metaphorical importance too of course - the hammer is a symbol of determination, while the maskers stands for improvisation and adaptability. Time spent in the Armed Forces gives plenty of opportunity to develop these two characteristics, and my message to every serviceman and woman considering leaving the Forces is to remember that they have these tools in their pockets long after they take off their uniform.

One word of warning though - as Abraham Maslow, the father of modern management pointed out, "If the only tool you have is a hammer, every problem begins to resemble a nail." While determination and adaptability are the most important tools in the entrepreneurial toolkit, they should be the only ones...

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

Nine Tools for Entrepreneurs

On Tuesday I was asked to join speak on "Inspiring Entrepreneurs: From Battlefield to Business" at the British Library.

Following a keynote speech from Clare Perry, the MP for Devizes Matthew Rock from Real Business, who chaired the event, introduced me, Peter Fitchett of Absolute Rubbish, Sarah-Jane Hill of Bish Bosh Becca and Mark Palmer of Green & Black's.

You can see the full webcast of the event here. My presentation starts at 17:17.

I shared nine tools that I believe can help service leavers in their journey from the Forces to Entrepreneurship. The nine tools are:

1. Determination
2. Adaptability
3. Financial Analysis
4. Marketing
5. Timing
6. Capital
7. LinkedIn
8. Coffee
9. Crowds

I'll explore each of these tools in more detail in following posts.

After the presentation we faced questions from the audience and also via twitter from the online viewers. I asked what tools other people would recommend and "Mentor" was a frequent suggestion - what additional tools would you suggest?

The Scottish Highlands - the Perfect Cure for Ennui

If you're experiencing a sense of ennui - "listlessness and dissatisfaction resulting from lack of interest", you might be inspired by John Macnab , a little gem of a book by John Buchan.

Set in the 1920s, the book follows 3 Londoners - a barrister, a banker and a cabinet minister - as they devise an entertainment to relieve their ennui - their frustration with their successful but unexciting lives.

They issue challenges to 3 Scottish landowners from whose estates they intend to poach stags and salmon. What follows is a masterpiece of storytelling and an evocative journey through the beautiful Scottish Highlands.

For the first time since 2000 I've returned to Sutherland, the rugged north western tip of Scotland for a week long holiday. Tomorrow I'm visiting a retired ghillie who lives nearby. He's a former paratrooper, a poet and a countryman who would have fitted right into Buchan's adventure. As I write the rain is pouring down outside and the wind is howling around the very comfortable Gull Cottage, where I'm staying. Darkness has only just fallen at 11pm and there is no traffic noise at all. There's no O2 here, though there's plenty of fresh air. It's a far cry from London and not a trace of ennui.