Growing Early Stage Organizations
with Bud Michael
Bud Michael has 40 years experience for industry leading hardware, software and services companies. He has held executive level sales and marketing positions with large, industry-leading product companies including Intel, Tandem Computer, Sequent Computers and KANA Software, and has successfully contributed marketing, sales and general business leadership to mid-sized software and services companies. Bud has been CEO at four privately funded technology and data services companies where he led the scaling of these businesses, selling two of these companies for substantial return to the shareholders. Bud is currently a management consultant with Renaissance Management Services, a consulting firm he founded in 2006.
Bud is on the Board of Directors for Rockliffe, a leader in enterprise collaboration solutions for mid-tier companies, IRT Software, a leading provider of incident management software for public safety organizations and SunTechDrive, a provider of power electronics for the energy industry. Bud is an advisor to Innosphere a 501c3 nonprofit incubator formed to accelerate the development and success of high-impact scientific and technology Startup and Scaleup companies in Colorado. He is also an Independent Consultant for NAVIX, the leading services provider helping business owners achieve their goals for their business exit. Bud is author of “Favorite One-Liners for Business,” a business leadership book published in 2010.
Bud and his wife, Barbara, live in Denver, CO
Hugh Ballou: It’s Hugh Ballou. Russell David Dennis, from Denver Mile High, Colorado. How are you today, Russell?
Russell Dennis: It’s another beautiful day in Aurora, Colorado. Looking forward to chatting with my friend Bud Michael about growing early-stage companies this afternoon.
Hugh: We need to help nonprofits think about growing business principles. Bud, you have some sound business principles that nonprofit leaders need to embrace because they are tax-exempt, for-purpose businesses. Bud, we’re going to throw it to you. Give us a little bit about your background. Why is it that you do what you do today?
Bud Michael: Hi, welcome everybody. It’s a pleasure to join you today. I have been an operating executive in high-tech companies for 40 years. I run four companies and have successfully exited companies. The last two years, I have been an advisor to a nonprofit in Colorado called The Innosphere. We work with early-stage and growth-stage tech companies to get market traction and build out their businesses. My perspective is going to be from helping private companies build their business and develop their teams and whatever they need to do to get market traction. I think that from working in a nonprofit for a couple of years and associated with many. That’s what I hope to cover today and talk to you about and see if we can apply some of the things we have learned about growing private companies to the nonprofit sector.
Hugh: Awesome. Russell, you live in the neighborhood there. At least you are in the same state. How are you and Bud connected?
Russell: I met Bud in the Society of Entrepreneurs back in December, where he came to do a briefing. He was talking to us about Innosphere, which is in effect an incubator for bringing tech products to market. I was fascinated with what he was saying. He told me it was organized as a nonprofit. I thought, I got to get this guy on our podcast. He is straddling that line, running a nonprofit and working with businesses to help them be successful in bringing products to market. It’s critical to think in terms of bringing something to market. I think there are similarities.
The first thing I wanted Bud to address is how building a nonprofit is the same as building a for-profit enterprise. What are some of the similarities? What are some of the key differences?
Bud: I go back to work done by a guy Simon Sinek who wrote a book called First Start with Why. That is a starting point for any organization. You have to be clear on what is the purpose. Why are you doing what you’re doing? The contrast on that is that many of us, most of us, get so deep into how we deliver the services, what we do to deliver the services that we forget about the basic premise, which his why we’re doing this. It’s particularly important for nonprofits because of the mission.
For any organization, you really need to get clear on why are you doing this.
Then you can start talking about how you do it and what the particulars are about your organization to deliver value to your audience, to your membership. That is the baseline. If you don’t get clear with your why, you can never really resonate with your audience, which means you will never really be able to gather your membership and provide the services you want.
The biggest difference is the funding mechanism. As a nonprofit, you’re looking for non-equity-based financing, whatever that may be, donations, contributions, membership fees. In a for-profit, the initial money comes from your own funding as a founder. Eventually, bringing in other equity-based financings to support the company. Ironically, for most people, it’s less about are you in business to make money. Everyone needs to make money to sustain their business. It’s a question of distributing profits or putting them back in the organization to grow. That translates to who the stakeholders are in your organization.
The key takeaway for me is for-profit or nonprofit, if you really understand what your mission is, you can then identify your audience and the kinds of services that they need and you want to deliver to them.
Russell: With both for-profit and nonprofit services rolled up into one, and getting the thought process toward generating revenue apart from the traditional thinking that people would have, what are some of the unique challenges of making that marriage where you have a nonprofit purpose and profit-making ventures blended into one, as a hybrid? What are some of the unique challenges that you’ve found putting together a nonprofit that operates a business?
Bud: Great question. Let me start with a basic idea, which is whatever your operating plan is for your organization, if you are delivering value to your membership, to your customers, to your stakeholders, you will have a sustainable organization, and you will be able to attract the funds you need to build a business. That’s true for a nonprofit and for a for-profit. What is the value that you’re delivering to the audience? How are you going to deliver those services to them? If you are clear on that [technical issues] differentiable services, then you will have an organization that will sustain itself. If you’re not clear on that, you will be all over the map. One of the things that we talk with our entrepreneurs about is focus. It gets back to the why. Really understand who is your target audience. What is your value proposition as a nonprofit? Why are you doing this? If you weren’t there, how would that constituent solve that problem? I think an interesting distinction is in for-profit, organizations, the value proposition tends to be economic. You’re going to buy my goods or services. For that, you will get some kind of return. You will get more business efficiencies. You will deliver higher return to your stakeholders. Some economic value. It could be you will get greater return on the investments you make.
In a nonprofit, more than anything, the return I get by being a member is an emotional return. We share a common belief. That core value, whatever the nonprofit is intended to do. It’s less to the economic return. It’s much more to the purpose and the community return.
But whatever that is, it still has to resonate. It still has to solve that need for your [technical issues]. Does that make sense?
Russell: Yes, it does. You have a number of audiences that you’re serving. That’s a challenge for a lot of nonprofits. Some of them traditionally do not talk about things like value. Then you have so many different constituencies that are actually customers or stakeholders. You have people who are connecting to your agency in multiple ways. Talk a little bit about how you discuss these multiple audiences with nonprofits. You have people who are getting your services. You have donors. You have agencies who you fund them. In the case of a hybrid, where there is a combination of economic benefit and personal benefit for people who are getting your services, when you are running an organization and talking about value that you provide, how do you have that conversation in a way that helps people in the nonprofit get that they are playing to multiple constituencies? Yes, they are providing value.
Bud: It really comes down to how are you delivering on your mission? What are you doing in terms of services or even products to offer? We all go at something with a different problem set or need that you are trying to solve. In Innosphere’s case as an example, our why, our purpose, is economic development. Innosphere’s purpose is to help develop jobs in Colorado. That’s our why. How do we do that? Working with start-ups and growth companies. Those are the ones that create jobs. To the extent that we are helping them build out their business, they can create jobs, and we can deliver on our mission.
What do we do? The products we offer and various services. We work with entrepreneurs that need to find money. We work with entrepreneurs who need to develop their executive team. We offer a product in coaching them in business systems and methods and planning so they can scale their business. At any given time, any one of our entrepreneurs who is working with us has a different need. The product delivered delivers against that need. It manifests differently, but it is all working toward the same goal: if that company is successful, it creates more jobs in Colorado.
For your nonprofit, again, you think about why are we there? What’s our purpose? Then we think about how to deliver to that purpose. If we are going to be Goodwill Industries, we are going to deliver by picking up donated goods. We are going to create the systems and methods to deliver those goods efficiently and cost-affordably for the audiences. We will make retail stores. That is how to get it done. The products you offer are picking up services, refurbishing goods for people. As you drill into [technical issues], it really comes down to your point, Russell, that at any given time, the reason I’m interested and working with your nonprofit, donating to your nonprofit is because your mission resonates with me. As long as you keep close to your constituents and you deliver on those things they could use to get their own value return for being a member, you will connect with your audience.
Russell: I love the job creation aspect of Goodwill Industries, too. That is a marvelous example because they do so many things.
What you’re talking about essentially is what we would call critical success factors. What are the ones you think are most important for any enterprise, and particularly for nonprofits?
Bud: Critical success factors probably boils down into how you can execute on your plan. Something else that we talk a lot about that I think is relevant for nonprofits is a concept called the whole product. Each of us bring to bear one element, one part of what could resonate, what could be of value to your constituent. Goodwill Industries couldn’t deliver on their promise if they didn’t have trucks, if they didn’t have drivers, if they didn’t have retail outlets. The whole product is a concept that says, what are all of the things that we need to have as part of our services to deliver on our promise to our constituents, to deliver on our purpose?
The critical success factors start with do you really understand everything that your constituent needs to get value from your nonprofit? Quite often, more of those things come from outside of your organization. It’s your ecosystem; it’s your network that you have to bring into play. You create partnerships, and you create like-minded groups to collaborate with to deliver on this whole product. I would say critical success factor #1 is do you really understand your why? Critical success factor #2 is do you understand what it’s going to take, and all of the pieces to it? Many nonprofits have gone to having online web communities. Part of your product is you have to have a good website that delivers on that part of your value. Do you understand, and do you have in place everything that you need to deliver on that brand promise, on that value promise? If not, where are you going to get it? How are you going to partner with organizations to get it?
Lastly, it’s the execution. Do you have a solid operating plan? Do you have a solid continuous fundraising and funding mechanism? No organization can survive if you don’t have the capital to support it. Having a solid, executable plan and mapping with that plan.
Both of those are true for the for-profit as well as nonprofits.
Hugh: You make a good point. In my mind, there is really no distinction in the whole structure of the organization. You have a for-profit enterprise; people are buying goods and services. In the for-purpose organization, it is attracting money because of the unique value proposition that you talked about earlier. I refer to people leading nonprofits as a social entrepreneur. With all the gifts and liabilities of entrepreneurs, the shiny object, I am going to do it myself, I don’t want a routine, the lack of having discipline and routine, really tantalizes us. Speak to the person that says, “I don’t want a strategy because it will limit my creativity,” or that kind of mindset.
Bud: It’s an interesting one. Let me give you-
Hugh: You were smiling like you had heard this before.
Bud: I hear it every single day from entrepreneurs. Don’t contain my creative juices. I can solve all the world’s problems.
Hugh: we are unique individuals. People ask me all the time, “All you entrepreneurs suffer from insanity?” My answer is, “Hell no, we enjoy it.”
Bud: That’s right. When I think about establishing your presence in your world to deliver on why you’re doing this [technical issue], you need traction, meaning getting that toehold in your audience, and getting crisp on who you are, why you’re doing it, and for whom. From there, you can take that momentum. It’s all about starting someplace and getting momentum. Then you can branch out.
I’ll give you an example near and dear to my heart through the Innosphere and how we played this out over 20 years. I will give you a metaphor to picture in your own mind as to the difference. With Innosphere, we started out specifically supporting bioscience and life science companies that are technology being spun out from University of Colorado. Its purpose 20 years ago was to help the scientists at CSU to figure out whether their experiments could be commercialized. They had no way to vet them. That was the original core purpose. That was how we were going to deliver on job growth in Fort Collins.
Fast forward 20 years. We now support clean tech, enterprise software and mobile companies, digital health companies. We do that in Fort Collins, Boulder, Denver, Parker, Colorado Springs. We didn’t get there by trying to do that at the same time. That’s the key point. You start somewhere. You get focused on what your initial starting point is. That allows you to create momentum that you can then leverage and build out from there. You can build out to offer more services. You can broaden your geographic reach. But the more you’re able to focus on that initial problem or value you’re trying to deliver, the reason your constituents would care and want to support you, and then you build it from there.
I’ll come back to the metaphor. Imagine getting into market, establishing your nonprofit to be known at all. It’s a bit like trying to get through a brick wall. There is a lot of resistance to be able to get some traction and momentum going. You can do it by taking a wrecking ball and trying to smash through the brick wall. Eventually you will get there. It will take a lot of energy. There will be a lot of collateral damage. You may or may not survive because you can’t fund yourself. The other way you can do it is take a quarter inch drill bit and drill a hole into the wall. It’s a lot more efficient. Takes a lot less energy. More precise. Once you have the hole in the wall, you take out a half-inch drill bit and widen the hole. You can build out from there. That metaphor is exactly back to the point to how creative entrepreneurs, “Hey, I want to do this. I will go at it on multiple fronts at multiple times.” Your success is much higher the more you can get focused on that initial market or purpose, and then build it from there. It’s not about containing creative juices. It’s much more about channeling those juices in a way you are able to create momentum and a brand. Then you can build out once you have a set, established position in your market.
Hugh: Russell, I’m sorry I interrupted your effective line of questioning, but I have one more if I may. Bud, you threw out a bomb. Your brand. Go back to this “I don’t need that.” Nonprofits especially don’t go through the discipline of creating their brand image, their brand promise. They think a logo is their brand. That is related to the why and your unique value. How is this related?
Bud: That’s right. We can pick our favorite brand. It will immediately connote in our minds who that organization or company is, what they do, why they do it. It allows you to decide whether you support them or not. You talk to me about the social enterprise.
One of the key things I think that nonprofits have going for them is generally speaking, the value is an emotional one. I’m doing it for a bigger cause. It’s a community value, as opposed to the economic return for doing it. [technical issue] A profit must have a brand so that their audiences can really understand who they are, what they stand for, and whether this is an organization I want to spend my time with, volunteer with, align myself with. Your logo is one manifestation of your brand, but it’s just one. Your brand and your brand promise is everything to do about how you present your nonprofit to the community. Unfortunately, there have been many examples of late where the organization stands they stand for and what their members do are two different things.
One of the biggest ways you can completely destroy your brand is inconsistencies in what you say and your behaviors. Your brand means that your organization’s culture becomes a very real part of your brand. Certainly you would be marching to the high order purpose, but your brand is a way for them to distinguish who you are, and is this an organization I want to have my personal brand be aligned with? It’s a two- or three-hour conversation on its own. The key thing to remember is most people think of a brand as being the logo or trademarks. That’s just one manifestation. Your brand encompasses every image, every part of your organization that you put forward, including how your team members react, how they present themselves in the community. It all has an impact on whether I can support or believe in your nonprofit.
The final thing is trust. We all at the end of the day align ourselves with people and organizations we trust. The brand connects back with the trust. Can I rely on this organization to be who I think who they are and who I want them to be? Gets back into behavior. A brand is a broad topic. It usually boils down into a nice logo and good colors. But it’s much more than that. You need to be thinking about that. It ties back to its key theme. Does your brand align and support your mission?
Hugh: Key item. What do you think, Russ?
As we’re moving down the list here, factor in. You talked about strategy and brand. You talked about how the brand is actually represented by the people in your organization. We’ve had David Corbin on here who has a book called Brand Slaughter, how one person can totally ruin the image of an organization. We know of famous situations from big companies. We won’t mention names. But their initials are United. One person can really spoil the image. They’re really not acting within the core principles. We define core values, and we put them away, and they don’t affect our culture effectively. Our strategy then develops guiding principles, how we make defining decisions, which is in line with who we are in our culture, which is defined by our brand. Looking at your road map, which is your strategic plan, and looking at the implementation of it, what are some of the biggest challenges you see for the leader, the person who is trying to get it done? What is the biggest challenge for the leader taking this piece of paper, which is the strategy, and making it become real?
Bud: There is an old Chinese proverb that says, “A vision without a plan is a daydream. A plan without a vision is a nightmare.” The connection point for any organization is do you have an operating plan that is supportable by the resources you’ve got, the people you’ve got, and is tied into [technical issues] who you are in the community? The biggest challenge I think for any leader is staying on course because there are innumerable opportunities to go try this, go do that, go start this.
I think one of the most effective tools to help a leader stay on course is a concept called the parking lot. You get into planning meetings, and you will be meeting with a new donor. I love everything you’re doing, but you should be doing this one more thing. Thing #1 is you should have a mechanism to take those ideas and put them into a framework where you and your leadership team can discuss them and prioritize and get back to the notion of, “This is an interesting idea. We can do this part of it, but we need these other people to help us do this other part to make it happen.” It starts with a parking lot. If you are executing on your operating plan, you’re doing stuff that at one point you decided was the right thing to do. The fact that this next shiny object comes in or new idea comes in doesn’t or shouldn’t usurp the time you put into deciding what to do now. What it does do is introduce new possibilities. You put those into a parking lot. A parking lot could be a whiteboard. Note it in a notepad. Put it in an Excel file. Put it somewhere that you and your leadership team on a regular basis, usually monthly, certainly every quarter, you come back to. Are we operating against our goals and what we needed to do? Yes. What else can we do? Let’s take a look at the new ideas that have come in that are in the parking lot. You can quickly say, “Ok. Around the room, here are 10 ideas. Let’s talk about three of them. Pick three.” You can process them. If you start that discipline on a monthly basis, you will have a good combination of executing against your plan because the idea of the parking lot is just because it’s a good idea doesn’t mean you should start doing it now. Put it in the parking lot. Put it to a place where you can come back to it. Critically analyze it, including scoping out what it will take to deliver on it. Do we have the resources? Is this an extension of what we are doing today? Or is this a brand new thing? If it’s a brand new thing, how are you going to deliver on that?
That method works pretty well. It is a good balance between saying, “All you creative folks out there with new ideas, we’re not saying no, we’re putting it in a place where we can come back later and analyze it.” Work it out with the team. Figure out what it’s really going to take. Ideas start out as daydreams. When you put a plan to it, you can execute it.
Hugh: You’re on a roll there, Bud. Go back to where you develop all of this knowledge. How did you get fluent in all of these things you’re talking about? Did you study or learn from another discipline? How did you get here?
Bud: I am a voracious reader. I don’t read fiction. I read history, books written by people who have whose credibility is in making a bunch of mistakes and writing about them so people don’t repeat them. I have been at his for 40 years. I did go to graduate school, but I can tell you what I learned [technical issues] really doesn’t apply here to people who are doing this. There is a group that we at Innosphere are affiliated with called True Space. They do what we do, but they are a for-profit doing what we do. They just completed a four-year study with Gallup to look at what are the critical success factors of an organization? Why do some succeed, and why do others fail? The #1 differentiator is are you a learning organization? What does that mean? Do you have a systematic way to take what you’ve learned and put it back into your organization? [technical issue] I assume not to make mistakes that others have made if I can know about them ahead of time. But I love this stuff.
Hugh: Russell, can you hear us? I think we have lost Russell’s contact.
Bud, we are entering the last few minute of our interview. Help me think through what is a piece we haven’t addressed that you want to put on people’s radars, especially in the early-stage companies? What is something we haven’t talked about yet?
Bud: The magic in all of this is really not magic. It’s fairly pedantic. It’s doing it. We can talk all day long about the concepts and ideas and theories. I believe firmly that getting success has a lot more about saying no than saying yes. The core theme in my mind in that regard is discipline. Do you as a leadership group of your organization, are you committed to what you say you’re going to do? You obviously have got some level of plan. Shooting from the hip is a plan. It’s not effective, but it’s a plan. Are you committed? Are you disciplined enough to stick with your game plan, to pick how you’re going to start and promote and develop your brand holistically? Do you really understand how you are going to fit into the everyday lives of your constituents? They are going to wake up in the morning whether or not you’re there. The question is are you adding value to your lives? If yes, how so? What products or services are you going to offer? We talked about getting focused. That comes down to the discipline of doing it.
What other piece around all that? How do you drive discipline? There is this concept of working in your organization versus working on your organization. Most of what I do as a business advisor is I force the people deeply in the weeds to step out and work on your organization. You spend your life in it. You’re making the phone calls, you’re talking to the donors, you’re developing collateral. There is a lot of stuff that you’re doing, which you have to do to be successful. But if you’re not stepping out of it on a regular basis, at least monthly, and revisiting, are we delivering on what we believe we should be doing? Are we staying committed to the investment and time and energy we made to get to this point? Are we continually checking in with our parking lot to make sure there are not new opportunities for us to expand and deliver better services and more services to more people? That’s all working on your business. You have to commit time to do that. if you are not doing that at least two hours a month, carve out the time, make the commitment. It’s not that you won’t be successful. It’s you’re going to spend a lot more time and energy getting there. You’re going after that brick wall with a wrecking ball.
Hugh: Very well put.
*Sponsor message from SynerVision Leadership Foundation’s online community*
Bud, you get the last say here. What do you want to leave people with, a challenge, tip, or thought?
Bud: Here is my challenge. What are you as the leader of a nonprofit going to take away from this and go do? Are you going to reach out to your community of other nonprofit leaders and for-profit leaders and connect with them, get their ideas? To Hugh’s point, you’re not alone. All of this is interesting, but it’s candidly interesting but irrelevant if you don’t do something with it. Take it. Go get your team together. Get a package of sticky notes and have everybody on your team writing down their values. Put them on a whiteboard. Then vote. Vote on the top five or six values. That will tell you who you really are as an organization. It will help you drive your culture. It will help you define your brand. Step out of the weeds, and go do something about working on your organization to give it its direction. You’re the leadership. By definition, everybody else is following you.
Russell: Setting that direction. That’s what we love to talk about. I love hearing a tech guy talk about the power of non-tech tools. Thank you, Bud Michael. It’s been a pleasure. I was just looking at my notes from the talk you did back in December. Unfortunately, I had a few glitches. People will be able to find out how to reach out to you.
Thank you for joining us this week.