Ten Tips For Start-Ups

Start-ups can be scary. Whether you're heading up a new division of an established company or launching your own meeting planning consulting firm, uncertainty comes with the territory. So many variables are involved—from business trends to employee personalities to investor pressures—that your new creation will take on a life of its own.

Still, as the co-founder of Neoforma, a health-care business-to-business e-commerce firm that in four years became a $3 billion publicly traded company, I've seen that there are common threads transcending time, place, and type of business. To wit:

1. 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 how to present the company to potential investors. They wanted to hear that my partner, Jeff Kleck, and I planned to pursue fast and furious growth. I wanted the growth to happen more "organically." As Jeff writes, "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 per year. We didn't doubt this was possible, but we would have been quite happy to sell a few million dollars' worth of software per year."

2. Hire for culture first, experience second. Delegate hiring only after you've hired the first hundred employees—and then only very carefully. Early in the staffing process, I learned the value of listening to my gut. I offered a job to a man I disliked but felt had the necessary experience. He accepted the offer, but made Neoforma wait two months before he could start—then quit the first day. 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 personal qualities, like an arrogance born of insecurity that would have made him difficult to work with, even if he'd stayed.

3. Communicate empowerment. At a young company, it's easy for employees to feel helpless or isolated. All employees powerfully influence a company's success. Let them know they're valued and heard—often and in many ways. Don't waste anyone's potential. "By far the most common, frustrating, and damaging issue I had to deal with in those days of frenzied growth was disempowerment," writes Jeff. "Within this unstable environment, employees were convinced that their voices were not being heard. No matter how much we tried to ensure that they had access to me and other executives, many felt undervalued." Don't underestimate the importance of communicating empowerment to your people. It's one of the most critical functions of a leader.

4. Learn to release, without letting go. When you delegate (and you must), make your plan clear and monitor progress regularly. If you hired well, everything will work out. In 1998, I hired Larry and Emma and told them to take control of their respective departments. They took this to the extreme, disregarding my suggestions. When I discussed this with them, they complained behind my back. Afraid I was being a control freak, I let them continue their behavior. In retrospect it's clear that I should have nipped the situation in the bud. Not only were they ignoring what I wanted, but they were creating a culture of division.

5. Balance isn't always 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. In a classic leadership dilemma, I had to decide whether to make the popular decision to cut Picasso (a capital investment solution that I loved) and thereby alienate the people who had remained loyal to our 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. We'd keep the Picasso program going, but only allocate it just enough to stay alive. My half-hearted decision conveyed uncertainty. The effect was deeply disheartening.

6. Do one thing well, and then do it better. Then, while you are still improving that first thing, consider doing one, and only one, related thing well. And so on. Neoforma had a powerful catalog and messaging system on its Web site that was used by thousands of medical professionals. To further expand our reach and potential, the team decided to "add a few new features," which ended up overwhelming Neoforma's resources and completely obscuring what was good about the site. Traffic dropped overnight from tens of thousands of visitors per day to hundreds. We had tried to be everything to everyone—all at once. In the process we turned our obedient child into an adolescent monster. On the surface, it looked larger and more grownup than before, but it was raw and unstable underneath.

7. Wear your customers' clothes. Most entrepreneurs come from the industry they're trying to serve, but lose touch with their customers when confronted by the challenges of running a business. The Neoforma Web site was known for its state-of-the-art virtual reality tour of medical facilities. To create this technology, we spent days photographing the interior of the Center of Advanced Medicine in Chicago. The task gave my team and me 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," Jeff 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."

8. The unsatisfied customer is the most important customer. Therein lies all opportunity. In the early days of Neoforma, I was showing off our new Web site to my father-in-law, a dentist. He 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 call. He added that if he could send messages to several vendors at once, that would save time. I 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, 20,000 messages per week were being sent from buyers to sellers. We knew we had significantly improved the lives of many people. I felt very good about that, even though it hadn't been my idea.

9. Never let 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 a major competitor, Medibuy, who told Zollars that WebMD was not going to renew its agreement with Neoforma when it expired, but was instead going to go with Medibuy. Zollars recognized the deal as a ploy to take the wind out of our sails. Had he not done so, he might have been tempted to pay an exorbitant fee to renew the agreement to keep it out of the competition's hands. 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.

10. Listen to all advice, but trust what you know. As you confront obstacles, don't make the mistake of questioning your core beliefs. Be patient: Ideas that require customers to change behavior often take 10 or more years to implement. In the midst of our fundraising activities, Jeff and I hired a Stanford Ph.D. and MBA named Sasa to create a business plan. Sasa insisted that Neoforma should emphasize the health-care supplies market (which the founders knew little about) over the equipment market (which they knew very well). I had misgivings, but I capitulated. After two months, Sasa delivered a hefty document that defined our long-term business plan. 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 shift away from our core expertise triggered a very subtle division between us and our customers, and, perhaps more importantly, their company.

Wayne McVickers is an architect and entrepreneur. He has 25 years of experience in the design, health care, and IT industries. His experience as co-founder, board member, and president of Neoforma is the basis for his book, Starting Something: An Entrepreneur's Tale of Control, Confrontation, & Corporate Culture (Ravel Media). For more information, visit www.startingsomething.com.