Twelve Tips from an Entrepreneur Who's Walked in Your Shoes
Launching a new company or business division? A new award-winning book
by Wayne McVicker, co-founder of dotcom roller coaster Neoforma, offers some been-there-done-that advice that can help you keep your cool in the midst of the maelstrom.
Los Altos, CA (October 2004)-Start-ups can
be scary. Whether you're heading up a new division of an established
corporation or launching your own small consulting firm, uncertainty
comes with the territory. So many variables are involved-from
business and societal trends to employee personalities to
competitor attacks to investor pressures-that your new creation
will take on a life of its own. You might as well try to raise
a predictable toddler. Still, according to entrepreneur Wayne
McVicker, there are some common threads and overarching principles
that transcend time, place, and type of business.
"I can't stress enough how important it is to pay particular attention to commonsense keys to the development of a strong corporate culture," says McVicker. "They are the rocks in the shifting sand. The problem is, the whirlwind nature of a start-up makes it difficult for many entrepreneurs or professionals to stay focused on them. You get distracted. You second-guess your decisions. Fear takes precedence over logic. You allow yourself to be swayed by others. And often, even though luck plays a role in the success of any start up, it's failing to follow the tried-and-true principles that hurts or even destroys a new operation."
McVicker certainly speaks from experience. And he traces that experience in his upcoming book, Starting Something: An Entrepreneur's Tale of Control, Confrontation, & Corporate Culture (Ravel Media, 2004, ISBN: 1-932881-01-8, $22.95). The book follows McVicker's journey as the co-founder of Neoforma, the first health care-dotcom-B2B-e-commerce company, which opened its doors in 1996.
By the time of its IPO in 2000, Neoforma had grown from the seed of a good idea into a publicly traded company worth $3 billion. Yet there was trouble ahead. Within four months, the company was in deep trouble, laying off good people and watching its stock value plummet. McVicker "made a few hundred million and lost a few hundred million" . . . just like that.
While Neoforma still exists, McVicker has little connection to it. Yet the lessons he learned from that experience will always be with him. And part of the reason he wrote his book is to share those lessons with others who might benefit from seeing how the commonsense principles that everyone "knows" can be affected during the tumultuous realities of "starting something."
Twelve Things to Keep in Mind When Starting Something
- Be who you are. If you aren't true to
yourself, your company's culture will suffer. So will you.
A recurring theme during Neoforma's early days was determining
how to present the company to potential investors. Investors
wanted to hear that McVicker and his partner, Jeff Kleck,
planned to pursue fast and furious growth for their company.
McVicker wanted the growth to happen in a more "organic"
way. "We argued about whether it was right for us to project
an image of ourselves as a very large corporation selling
hundreds of millions of dollars of software and services
a year," he writes. "We didn't doubt that this was possible,
but frankly, we would have been quite happy to sell a few
million dollars' worth of software a year."
- Hire for culture first, experience second.
If someone feels wrong, they are. However exhausting and
distracting hiring is, don't delegate it until after the
first hundred employees-and then only very carefully. Early
on in the process of staffing Neoforma, McVicker learned
the value of listening to his gut. He extended a job offer
to a man named Isaac. McVicker disliked him but felt that
he had the necessary experience. After some "aggressive
and abrasive" negotiation, Isaac accepted the offer, but
made Neoforma wait two months-and then quit the first day.
McVicker writes about his rage: "This guy hadn't felt right
from the beginning-even though he sounded right. I had focused
on his computer skills-which can be learned-instead of more
important and innate qualities-like an arrogance, born of
insecurity-that would have made him difficult to work with,
even if he'd stayed."
- Communicate empowerment. In the maelstrom
that is a young company, it is easy for employees to feel
helpless or isolated. All employees powerfully influence
a company's success and direction. Let them know they are
valued and their voices are heard-often and in many ways.
Don't waste the potential of any employee. "By far the most
common, frustrating, and damaging issue I had to deal with
in those days of frenzied growth was disempowerment," writes
McVicker. "Within this dynamic, unstable environment, employees
were convinced that their voices were not being heard. No
matter how much we tried to ensure that they were empowered
and had access to me and other executives, many felt undervalued.
They flooded into my office, yelling, crying, and pleading."
What McVicker learned from this phenomenon, he says, was
simply this: "Don't underestimate the importance of communicating
empowerment to your people. It's one of the most critical
functions of a leader."
- Learn to release, without letting go.
When you delegate (and you must) you can neither control
every detail nor allow the idea to get diluted. Make your
plan clear and monitor progress regularly. If you hired
well, everything will work out. The saga of Larry and Emma,
two employees hired in 1998, underscores the paradoxical
"releasing without letting go" principle. McVicker told
them to take control of their respective departments. Taking
this directive to the extreme, they began disregarding his
requests and suggestions. When he discussed this behavior
with them, they went behind his back to complain. Fearing
that he was being a "control freak," McVicker allowed Larry
and Emma to continue their behavior. "In retrospect it's
clear that I should have nipped the situation in the bud,"
he reflects. "Not only were they ignoring what I wanted,
but they were creating a culture of division and closed
doors. Clearly, this was not the culture I wanted for our
- Balance is not always found in the middle.
Make and communicate clear decisions. Changing a position
is better than not having one. In 1999, Neoforma needed
to cut some projects. One project on the table, which McVicker
loved, was a capital equipment solution code-named Picasso.
In a classic leadership dilemma, McVicker had to determine
whether to make the popular decision to cut Picasso and
alienate the people who had remained loyal to his original
vision for the company, or make the less popular decision
to keep Picasso alive and alienate the others. "In an attempt
to be fair to everyone, I came up with a weak compromise
that satisfied and inspired no one," he writes. "We'd keep
the Picasso program going, but only allocate it just enough
to stay alive. Sadly, my half-hearted decision conveyed
uncertainty. The effect was immediate and deeply disheartening."
- Do one thing well, then do it better.
Then, while you are still improving the first thing, consider
doing one, and only one, related thing well. And so on.
Neoforma had a powerful catalog and messaging system on
its website that was used by thousands of medical professionals.
Then, in the interest of expanding their reach and potential,
the team decided to "add a few new features." These features
ended up overwhelming Neoforma's resources to the point
that they completely obscured what was good about the site.
Traffic dropped precipitously overnight from tens of thousands
of visitors per day to hundreds. "We had tried to be everything
to everyone-all at once" writes McVicker. "In the process
we turned our innocent, obedient child into an adolescent
monster. On the surface, it looked much larger and more
grown-up than it had been before, but it was raw and unstable
- Regularly wear your customers' clothes.
Most entrepreneurs come from the industry they are trying
to serve, but when confronted by the challenges of starting
or running a business, they quickly lose touch with the
customer experience. One of the features the Neoforma website
was known for was its state-of-the-art virtual reality tour
of medical facilities. To create this technology, Neoforma
and a firm called Be Here Corporation spent days photographing
the interior of the Center of Advanced Medicine (CAM) in
Chicago. McVicker found that the task gave him and his team
a valuable sense of purpose. "Even though we had all worked
in health care to varying degrees, we had only an abstract
idea of the potential impact Neoforma could have on real
people in real hospitals," he writes. "The creation of this
virtual tour solidified our connection to the real thing
and gave us a renewed sense that what we were doing wasn't
just good for business-it might actually be important."
- The unsatisfied customer is the most important
customer. Therein lies all opportunity. In the
early days of Neoforma, McVicker was showing off his new
website to his father-in-law, a dentist. His father-in-law
checked out the feature that allowed visitors to send e-mail
inquiries to vendors, but couldn't see the value since writing
an e-mail and waiting for a reply would be slower than a
quick phone negotiation. He added that if he could send
messages to several vendors at once, that would be a timesaver.
So, McVicker sent a specification to the developer that
weekend, and by the end of the next week, Neoforma had implemented
the new feature. "At its peak, twenty thousand messages
a week were being sent from buyers to sellers," writes McVicker.
"We knew that we had significantly improved the lives of
many people. I felt very good about that, even though it
hadn't been my idea."
- Never let your competitors drive your business
decisions. Stay focused. If your competitors come
up with something good, your customers will let you know.
Right before Neoforma's IPO, CEO Bob Zollars received a
call from the CEO of major competitor Medibuy. The CEO informed
Zollars that WebMD was not going to renew its agreement
with Neoforma when it expired later in the year, but was
instead going to go with Medibuy. Zollars recognized the
Medibuy/WebMD deal as a "transparent ploy" designed to "take
some wind out of our sails." "Had Bob not rationally analyzed
that the WebMD deal was worthless, he might have been tempted
to pay an exorbitant fee to renew the agreement to keep
it out of the hands of the competition," says McVicker.
"And he might have been knocked off balance by the notice
of cancellation on the day before our IPO. Instead, Medibuy
paid an inordinate amount of money to steal a worthless
deal from Neoforma-not in an attempt to help themselves,
but to hurt us."
- Never let your investors drive your business decisions.
They are usually smart and can be intimidating, but they
aren't as familiar with your business as you are. Their
viewpoint is short-term; yours should be long-term. Pressure
from investors was a problem McVicker faced constantly.
From campaigning to change the logo to insisting that Neoforma
hire certain people, they relentlessly made their opinions
known. Perhaps the most painful example of this pressure
was when later-in-the-game venture capitalists insisted
upon a participating preferred clause. Basically, this meant
that if the company were sold, the most recent investors
would get their money first-in fact, they would be guaranteed
a multiple of their original investments before any money
was distributed to earlier investors. This issue caused
a major rift between McVicker, who favored compromise, and
his partner Jeff Kleck, who was totally opposed to the clause.
Kleck eventually agreed to a compromise, but harmony was
lost. "As much as I had disagreed with the inflexibility
of Jeff's position on the funding round, I did agree with
him on one thing-my new partners, the VCs, were certainly
not my friends," writes McVicker. "I had allowed them to
manipulate me into putting my fear of losing everything
above my loyalty to a friend."
- Listen to all advice, but trust what you know.
As you confront frequent obstacles, you may begin to question
your core beliefs. Don't. Be patient. Ideas that require
customers to change behavior often take ten or more years
to implement. In the midst of their fundraising activities,
McVicker and Kleck hired a Stanford Ph.D. and MBA named
Sasa to create their business plan. Sasa was insistent that
Neoforma should emphasize the health care supplies market
(which the founders knew little about) over the equipment
market (which they knew very well). Though he had misgivings,
McVicker capitulated. "After two months of work, Sasa delivered
a hefty document that defined our long-term business plan,"
he writes. "I never even read the whole thing. I was much
too busy, and I knew the plan reflected where the company
could go, not necessarily where I thought it would or should
go." This documented shift away from the founders' core
expertise triggered a very subtle division between them
and their customers, and, perhaps more importantly, their
- Enjoy yourself. It is very easy, during
the inevitable times of monetary starvation and market inertia,
to lose sight of how much fun it is to create something
new and useful. In Starting Something, McVicker describes
his slide into depression, anxiety, and marital distress
that, ironically, accompanied Neoforma's rise to success.
He eventually began working with a business consultant with
an unconventional background who got him to dig into the
emotional issues that he was trying so hard to keep superficial.
To McVicker's surprise, he found that such an experience
wasn't unusual. "It was not until years later that I would
read disclosures by several well-known executives describing
the bouts of extreme depression that they had suffered,"
he writes. "I didn't hide under my desk for hours at a time,
as one had, but I certainly would have welcomed the idea
that such an escape was possible. It would have helped to
know earlier that I wasn't alone after all, that it is okay
to admit limitations and seek help."
Although McVicker is adamant that following tried-and-true principles is no guarantee of start-up success, he also points out that guarantees aren't what drive the entrepreneur in the first place.
"There are rewards, many rewards, inherent in creating something new," he says. "You meet fascinating people and form complex relationships. You learn something every day. You get that intense feeling of accomplishment that comes only from running on pure passion and adrenaline. There is nothing like conceiving a new idea and bringing it to fruition. Of course, much like having a child, you can't predict with certainty how that child will turn out. But regardless, parents are seldom sorry they had the child. That's the lesson I most want to convey with my story."
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About the Author:
Wayne McVicker is an architect and entrepreneur. Having co-founded Attainia, he has served as an executive there since its inception in 2001. He has 25 years of experience in the design, health care, and IT industries. McVicker's five-year-long wild ride as co-founder, board member, and president of Neoforma (NASDAQ: NEOF) is the basis for his book. He lives with his wife and two sons in Silicon Valley, California. For more information, please visit www.startingsomething.com.
Starting Something won the 2004 DIY Book Festival Book of the Year Award. In the late September press release announcing the winners, Bruce Haring of DIY Convention stated: "McVicker perfectly captures the excitement, strategy, and struggles of building his own venture, a battle which DIY artists and entrepreneurs face on a daily basis. For perfectly capturing that quest, McVicker wins our top honor." For more information, please visit www.diyconvention.com.
About the Book:
Starting Something: An Entrepreneur's Tale of Control, Confrontation, & Corporate Culture (Ravel Media, 2004, ISBN: 1-932881-01-8, $22.95) is available at bookstores nationwide and all major online booksellers.