SOPHISTICATED FINANCE

Overcoming Startup Fear?

Social media tends to follow themes. I think it has something to do with the phases of the moon, but I am still researching. Recently I saw two good posts on overcoming the fear of doing a startup (here and here). Both writers basically talk about the fear that almost everybody has of a startup and illustrate their success in overcoming the fear.

Most people are afraid of failing. As you get older you realize that failing is part of life and you just need to start over. The more logical fear is the fear of losing the money invested in the project. Again, life shows that money can be replaced. The other common fear is related to what your peers or friends will think of you if you fail. Most good friends will admire your courage to strike out on your own. So go for it!...but first read every post on SF about knowing the customer need and determining the size of the market opportunity.

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Management Insights from the Israeli Army

I have written about the military 11 times on this blog, with these two posts the most popular (here and here). I find the military to be an excellent source of management techniques and lessons. Today I read a terrific post (terrific being my highest level of praise) from the Israeli Consulate in Los Angeles. The post is titled "Soldiers of Fortune-How the Israeli Army became the most prolific innovation engine on earth". Setting aside the hype, this article is worth about three blog posts. You definitely need to read the full article if you have even a passing interest in management. Very valuable also if you are in a resource constrained environment.

The management lessons to be learned from the Israeli Army are:

1. Flat organizations work best when you are resourced constrained
2. Put the most talented person in charge of a mission, not the most senior person
3. Foster open communications that ignore organizational rank

The economic development lessons to be learned are:

1. Universal military conscription fosters a country-wide set of values
2. Everyone serving in the military creates more cohesiveness because people are exposed to all social classes and are forced to work together
3. Mandatory military service creates more mature, experienced and serious students when they later enter university

The human resource lesson to be learned is that participation in elite units, such as military intelligence, is a very good indicator of future performance. Elite organizations, whether it be MIT, the Seals or JP Morgan, all screen for certain qualities that will also benefit your organization. Pick people from elite organizations.

Another interesting thing about the article is we could have changed Israel for Singapore and the story would have been identical. The only difference is that in Singapore they encourage the most talented people to stay in the military for 20 years and then to retire into senior positions in the leading quasi-government companies. Singapore is also more hierarchical. Nearly the same model for another successful small country.

So if you are running something small with limited resources--such as a startup--there are many good ideas here from the Israeli Army. Next post we will talk about innovation and the Israeli Army.

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Miami: New Incubator

Courtesy of a tweet from @bobwhite7, I am pleased to announce that Miami has a public incubator run by EDC, a non-profit development organization focused on South Florida. EDC also runs an incubator north of Miami at an "unnamed" state university with whom I am not affiliated ;)

More information on the new incubator is here. Appears challenging to find a phone number or email for EDC but maybe someone can provide that info in the comments.

UPDATE: Complete contact info for EDC is now in the comments

Talent Rarely Matches Ambition

The ambition and passion of young entrepreneurs is rarely matched by their talent and experience. The Netsetter has a good post entitled "Replace Yourself--A Guide to Delegating Your Workload" which encourages founders to trust employees and delegate. This may speak to the point about supplementing talent but it is a less effective solution in filling in for the missing experience.

Venture Hype has a new post that shows that the average high tech founder launched their business at 40. VH stated the following advantages for the older founder:

• They offer a lot of experience

• They are more cautious

• They are likely to have their own funding

• They have nothing better to do

• They have credibility with bankers and customers

Bottom line, experience comes with time, which young entrepreneurs can rarely make up. The good news is that many of you will live to be 100. Maybe taking ten years off to work for a really good company before you start your business is not such a bad idea. As St. Augustine said:"Patience is the companion of wisdom".

Webinar Slides: How to Develop a Business Concept

This week I did another webinar for the Pino Entrepreneurship Center at FIU. The topic was "How to Develop the Business Concept". This is the link to download the slides. Download WEBINAR-NOV-09-BUS CONCEPT-2.

If you would like the webinar content in .wmv format send me an email.

VCs Think of Themselves as Mentors

It is well recognized by both academics and practitioners that there are three keys to early stage company success:

1. Pick the right market opportunity
2. Mentoring
3. Access to capital

Through a tweet today from @vcwatch I found a very interesting survey by Dow Jones Venture Source---A Study of Venture-backed Company Boards. The slides are here. The most interesting slides are 22-29, but if you are not familiar with venture capital read all the slides.

Based on the survey, venture capitalists see their value to their early stage companies (ranked by the percentage of respondents) as follows:

1. Network of contacts
2. Mentoring
3. Follow on financing
4. Exit strategy

Remember the VCs already confirmed the market opportunity (in their mind) when they made the initial investment.

Early stage entrepreneurs backed by VCs see the value of the VCs as follows:

1. Network of contacts
2. Follow on financing (tied with 1.)
3. Exit strategy
4. Mentoring

Maybe if the entrepreneurs saw more value in mentoring 7 out of 10 VC investments would not be a total write off. One could always argue if the VCs were better mentors, they would have fewer write offs. I am inclined to think that the entrepreneurs are typically at fault in the mentoring relationship given my 30+ years of dealing with entrepreneurs, my thousands of hours spent with entrepreneurship students and my clients over the last five years, but I could be wrong ;)

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Miami, FL

Why Entrepreneurs Lack Focus

My Twitter reading this morning of Spanish posts on entrepreneurship highlighted a post on Loogic (SP)-- "The Difficulties of Entrepreneurs to Focus" (Spanish language post is here). Lack of focus or the inability to focus by the founder/CEO is one of the biggest reasons that early stage companies fail. I may not have enough evidence for a journal article in academia, but I see the focus problem almost everyday.

The writer cited three reasons that explain the lack of focus:

1. To focus requires clear goals
2. To focus requires faith in the strategy being pursued
3. To focus requires the ability to say no to offers of deals, partnerships and other "home run" opportunities

My thoughts on the lack of focus of entrepreneurs are very similar to the writer, but what caught my attention was the concept of faith.

By "faith" what we are really talking about is self-confidence. Many entrepreneurs lack confidence in the strategies they thoughtfully prepared for their new business, especially after one or two setbacks. An example may illustrate the point.

The founder of a website that sells a specialized piece of software budgets $20 for customer acquisition on a product selling for less than $50. When I asked why such a high budget, the founder told me "I am not confident about my marketing strategy so I added a cushion".

Rather than having confidence in the original plan or re-thinking the marketing plan, the entrepreneur changes the whole marketing approach by changing the spending levels. A lack of focus is brought about by a lack of confidence.

To improve self-confidence in business decisions, three tips follow:

1. Bounce important plans and decisions off your mentor(s)
2. Research competitors for how they executed similar projects
3. Look for analysis of similar issues on blogs (VC blogs are particularly useful)

How do you know when to use these techniques. As any sailor will tell you, "when in doubt--reef the mainsail". When in doubt about a major decision, use the three techniques above. For those of you who believe that entrepreneurs must use their intuition or gut instinct, always remember that intuition is just "facts that you can not articulate". The facts will come from 1-3 above.

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Miami, FL

BOLD THINKING--CINCINNATI

Please feel free to send this post to 1000 of your closest friends living within 300 miles of Cincinnati, OH. Alternatively, you could rent a plane and thrown out hundreds of copies of this post anywhere in Ohio. Suitable pictures of you and the plane will be posted on SF.

Previous thoughts on Bold Thinking are here.

Entrepreneurship Weekend Workshop  CINCINNATI October 24 & 25 Which win do you want for YOUR company? Traditional Thinking Most workshops equip you with checklists and a on-size fits all approach.  The result - you leave all revved up to go, but after attending, what real changes or impact have you really been able to create?  BOLD Thinking A Bold Thinking Live! Workshop is framed in a context that reveals the vital decisions you, the entrepreneur, must make to achieve true advantage in your marketplace. We believe entrepreneurship is the essence of advantage. The Bold Thinking Live! Workshop Basics Value Creation Understanding your company concept on a deep value creation level and translating it into a value capturing business model that makes your company truly competitive. Value Capture Breaking down your business model into an actual and usable financial model that will reveal your company's true revenue drivers, hidden costs, and new opportunities in your market. Value Proposition Harnessing the power of the your company's marketing message so that you are selling benefits that your customers not only  understand and want, but will actually pay for. The Bold Thinking Live! Workshop Team Dr. Jeffrey Stamp, Bold Thinking Founder Dr. Stamp has brought together a nationally renowned team of entrepreneurial mentors with over 70 years of collected experience, both doing and teaching business.  Dr. Stamp himself is a world recognized author, professor, inventor, entrepreneur, and creative guru.  He has worked in over over 300 markets, holds multiple patents, and founded over seven companies.  Some of his innovations include: Baked Lays Potato Crisps, Merwin Business Simulation Model, OPERA Method for Discovery Thinking, Syllabets - Syllable-Based Reading Method, and many more. Robert Hacker, GH Capital Founder Robert Hacker is the founder of GH Capital Partners, headquartered in Miami, but serving clients worldwide. Through GH Capital he creates the strategies to grow large companies and raises the capital to support these strategies.  In addition strategy and funding, Hacker has also earned a reputation for his experience in the operational execution of strategies (much of it in emerging markets).He also teaches entrepreneurship at Florida International University and serves on the Board of the Pino Entrepreneurship Center at FIU. Much of his thinking and teaching material on business development can be found on his blog: Sophisticated Finance. Colleen Post, Bold Thinking Managing Partner Colleen Post has worked within the university education system for nearly ten years.  As part of the nationwide Kauffman Campus Initiative, she coached over 250 student business start-up teams and over 100 professional start-up teams.  Her background is a mix of business, theatre, generational dynamicsand perfecting the art of communication.  Many of her thoughts and 'tough love' advice for entrepreneurs can be found on her blog: Millennialland .  Elizabeth Edwards, InOneWeekend Founder  At Neyer Holdings, Elizabeth finds, evaluates, and funds start-up companies in the consumer and technology sectors.  Prior to Neyer Holdings, Elizabeth was a strategy consultant with the Strategy & Innovation group at Deloitte Consulting, focused on innovation, commercialization, and strategic marketing for Fortune 500 companies, mostly in the life sciences sector.  Elizabeth is also the founder of InOneWeekend and Cincinnati Innovates.Learn more about InOneWeekend, Cincinnati Innovates, and Elizabeth at her blog: InOneWeekend. The Bold Thinking Live! Workshop Details We take care of every detail - nutritious food and beverages available all day long, tools, materials, parking, and gourmet meals. Hosted at Cincinnati's newest innovation space: 538 Reading Road - Downtown Cincinnati Saturday, October 24 and Sunday, October 25 8:00 a.m. to 6:00 p.m. Click here for more information or to register. Special Bonus: As our pioneer group in Cincinnati, you will also receive a full-year membership (a $750 value) to our Online Bold Thinking Institute.  This is our gift to you for making the decision to invest in yourself and your business. For more information, please visit our website: www.boldthinking.com or send us an e-mail: info@boldthinking.com

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Robert Tuchman: Determination is Not Enough

 

Robert Tuchman is the founder of a successful sports marketing company, TSE, that was acquired by a private equity firm. He is also a columnist for Entrepreneur magazine, a writer for a series on ESPN and the author of Young Guns. I will be reviewing Young Guns, Robert's new guide to becoming an entrepreneur, in an upcoming post. Robert's guest post follows.

The decision to change my life and my career path gave me much more to work with than I realized at the time. It gave me a personal stake in a life built around doing something that I loved doing. And it made all the difference. Suddenly, I was building something for me. Something big. Out of this came my tenacity for studying sports marketing which eventually helped me create my own company. However, as determined as I was in the process. It just is not enough these days, you have to have detailed knowledge of the company you want to build, imagine it succeeding, take charge of your idea, and be confident that it will succeed.            

My love and passion for sports as well as my knowledge of the business world helped me continue to see a future in the company I was building, and now I still see the ongoing success we have today. Determination is very important in succeeding as an entrepreneur, but today with technology the way it is and new businesses popping up each day, it is just not enough. You have to have the knowledge, a set plan, goals, as well as outlets and other people to advise you along the way.

If you love something invest time in it each day, look at all the possibilities and make it work for you. Take one task on every day and let it be the building blocks for laying a foundation for your company. Make your goals measurable, don’t expect to always accomplish big goals in a small amount of time; take on as much as you can, when you can. Also make sure the environment you are working in is comfortable for you, and that support your goals. Mine was the sports packaging idea, I was comfortable, confident, and knew that I had struck on something big and that it was going to connect me to the world of sports, which I loved.  I was excited to see where it would go because I knew it was positively right for me. This is the question you need to ask yourself, what’s right for me? So while being determined continue to do, and invest time in what you love, because if you don’t wake up ready everyday to make your business succeed, you will just sit back and watch it falter; don’t let that happen to your dream.

If you would like to submit a guest post on Sophisticated Finance, contact me.

Entrepreneurial Opportunity

Israel Kirzner

A tweet this morning caught my attention--"Do entrepreneurial opportunities (business ideas) exist before discovery or are they created by the entrepreneur?" I will resist the urge to do another epistemology post and instead will discuss how to find entrepreneurial opportunities. Much of my thinking on the subject comes from Israel Kirzner, who criticized traditional micro-economic theory because it failed to take into account entrepreneurs and their asymetry of information. (I discussed Kirzner previously in a post on New Business Ideas.) To find entrepreneurial opportunities, requires a four step process:

1. Passion  You need to be passionate about a subject to maintain the determination to understand something in-depth
2. Information Collection  With a field of interest identified, one then must learn as much as possible about the field...but information collection is not an end
3. Analysis   Information needs to be systematically analyzed to arrive at knowledge, such as through my four (now five) step process to develop a new business concept.
4. Asymetry  In the course of the analysis one should discover a market anomaly, an opprtunity for arbitrage, an asymetry of information--the unique insight about the customer or the industry that forms the basis of the entrepreneurial opportunity

"To do the impossible you need to see the invisible" Marcel Prevost

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Miami, FL

Ohio Entrepreneurship Workshop

I am taking my show on the road. I am joining the folks at Bold Thinking to do a two day advanced workshop on entrepreneurship in Cincinnati on October 24-25. The "advanced" workshop is for company founders who are already in business but are probably struggling with their growth strategy or value creation. Bold Thinking's approach is summarized in this quote:

"The most important tool that today’s entrepreneur must possess is the ability to make value sustaining decisions that directly relate to their enterprise’s ability to remain competitive.  The Bold Thinking methodology provides a proven framework for decision-making designed to enhance the creation of value and strengthen competitive advantage." 

The workshop will combine lectures with case studies to improve business owner decision making. Also, each attendee will be able to work one-on-one with each of the workshop presenters to refine their business model and value creation strategy.

Bold Thinking was founded by Dr. Jeff Stamp and Colleen Post. Jeff is a widely recognized expert on innovation and creativity. He has worked with companies such as Pepsi and American Express on new product development and consulted to large companies around the world. He has also started four or five companies. Colleen and I worked together at the Pino Entrepreneuraship Center at FIU and she was instrumental in encouraging me to develop my workshop series on business model and financial planning. Colleen's area of expertise is in helping companies understand how their customers see them, a valuable but rarely discussed subject.

For more information on the workshop, send an email to post@boldthinking.com or contact me.

Business Opportunities in Cloud Computing

Chip Hazard, a partner at Flybridge Capital in Boston (VC firm), has a new blog which focuses on IT. His first post is about opportunities in cloud computing, a topic which I have discussed as recently as yesterday (and here and here.) Hazard identifies four major types of new business opportunities from cloud computing:

1. Enable enterprise data centers to be more cloud like (enterprise IT will operate using a cloud computing model)
2. Bridge the cloud and enterprise boundary (enterprise computing will use cloud computing to handle peak loads)
3. Provide tools to better manage cloud environments (self-explanatory)
4. Develop SaaS applications for vertical markets (Hazard believes that horizontal SAAS (CRM, ERP, etc.) is closed but industry specific applications are wide open

Hazard's last point is perhaps the most important for entrepreneurs--create companies enabled by the cloud.

"One of the aspects of cloud computing that excites us the most is that it is a huge enabler of innovation.  Cloud computing makes it so easy to develop and deploy applications that it levels the playing field for start-ups versus large, well capitalized, competitors.  As an entrepreneur, I can now buy access to world-class data center infrastructure for dollars an hour that would have previously cost me millions to purchase and deploy.  As a result, savvy start-up executives can look to create companies that would have previously been too capital intensive to contemplate."

Think about the perfect business model from a financial/economic perspective. It would have three characteristics:

1. Low initial capital requirement
2. Low fixed costs
3. Marginal cost to scale the business

Cloud computing allows the entrepreneur to meet all three requirements. As additional technology is added to cloud computing (e.g. Oracle, Calais, etc.) it will only get easier and more attractive to start new businesses.

I found Chip Hazard's blog through a tweet by @bussgang, his partner at Flybridge who writes a terrific blog.

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Miami, FL

Open Calais on Oracle

Much coverage is given to semantic search but few of the examples cited have much merit so far. One technology that is increasingly getting more attention is Thompson-Reuters' Calais, which I first wrote about in February 2008.

"The Calais Web service enables publishers, bloggers and sites of all kinds to automatically metatag the people, places, facts and events in their content to increase its search relevance and accessibility on the Web. It also lets content consumers, such as search engines, news portals, bookmarking services and RSS readers, submit content for automatic semantic metatagging that is performed in well under a second." (Thompson-Reuters)

Last week Oracle announced that it was integrating Calais into its database products to provide "semantic document indexing". As Oracle looks to build more functionality at the database product level, it's interesting to me that they chose Calais. Now combine this with Oracle available on Amazon Web Services and you have some powerful technology to start exploiting for new businesses.

If you are not following Calais, I think you should.

I found this story on Semanticweb.com

FIU Fall Entrepreneurship Workshop Series

The Pino Entrepreneurship Center at FIU has a full series of entrepreneurship workshops planned for this fall (see below). A new workshop on the Venture Capital Process by Nick Robbins should be particularly interesting. For additional information click here. All proceeds go to Pino.

Knight Foundation Business Competition

The Knight Foundation is perhaps the largest philanthropic organization based in Miami. They have been a long time supporter of the Pino Entrepreneurship Center at FIU, which as a Board member I very much appreciate.

The Knight Foundation has just announced the 2010 Knight News Challenge, which awards up to $5 million for the development of the most innovative business concept using digital technology for community news. If anybody is interested to form a team from south Florida to win this competition, please contact me or leave a comment below.

I found the announcement on ReadWriteWeb.

Miami, FL

Entrepreneurship Class II--Identifying Customer Need

I believe that the hardest part of the new business development process is to identify and understand the customer need (and then to determine if it is a large market opportunity). I teach my students a number of techniques or processes to use to find the customer need. One of my favorite techniques is Gerald Zeitman's seven metaphors, which I discussed in this post from June 2008. Another technique I like is what I call the Nintendo Approach, which I discussed in this post. This weekend I came across another technique--Abundance Scarcity (link).

If you are looking for a new business idea, first look at what is abundant. Automobiles are everywhere in the U.S. so let's use automobiles. Now let's look for the scarcity. Auto sales people have the lowest integrity rating of any profession in the U.S. according to several polls. People hate the process of negotiating to buy a car. The scarcity is an enjoyable, honest process to buy a car. Voila! Auto Nation! Auto Nation provides high quality used cars at a fixed price (no negotiating) and is the market leader in their industry. The customer experience at Auto Nation is much more than just "no negotiating" but the entire process reinforces an enjoyable, honest car purchase. Google might be another example. An abundance of information but a scarcity of what you wanted...until Google. This logic is still valid as evidenced by all the companies focusing on content aggregation.

Some people start entrepreneurship courses by focusing on creativity. Dr. Jeff Stamp is a good example. He has a new venture called Bold Thinking which combines his extensive experience in creativity with the value creation process in a new business concept. (More on Bold Thinking in a future post.) I prefer to start the course with techniques or processes, which I call "originality". Originality might be defined as taking existing things and putting them together differently (think Auto Nation). Few of us are going to discover penicillin or the theory of relativity, which would clearly be examples of creativity. Many of us have the ability to take things we understand and re-organize them into new concepts, particularly if one tries the techniques discussed above.

Whether you focus on creativity or originality, Marcel Prevost's quote is still true.

"You have to see the invisible to do the impossible"

If you do not understand Prevost, read about Israel Kirzner's "asymetry of information", the special skill that separates entrepreneurs from the rest of us.

Entrepreneurship Class 1

Yesterday was the start of a new semester at FIU. I have about 65 entrepreneurship students including 15 students participating remotely by video from another school. All the video will be archived, so I am thinking I may be able to do a video series of my entrepreneurship lectures.

I begin the semester by trying to dispel the illusions the students have about entrepreneurship. First, I explain the difference between self-employment and entrepreneurship. Entrepreneurship is about company building and ideally large companies.

Then I explain that entrepreneurship is not about epiphany moments but rather based on a rigorous analytical process, which is the five step process I teach and that forms the core of the course. I quote Peter Drucker, as follows:

“Entrepreneurial management is not natural, creative, or spontaneous but instead is based on a systematic, thoughtful approach….”

I then develop the theme that financial reward is a bi-product of entrepreneurship and executing one's passion should be the focus. Consistent with this theme is the idea that entrepreneurs should be building companies that are socially responsible and not just focused on profitability. The quote to illustrate this point comes from Eric Ries, a Venture Advisor at Kleiner Perkins (a world renown venture capital firm).

"Every startup has a chance to change the world, by bringing not just a new product, but an entirely new institution into existence. That institution will touch many people in its life: customers, investors, employees, and everyone they touch as well. I believe we have an obligation to ensure the resulting impact is worthy of the energies we invest in bringing it to life."

To conclude the first lecture, I show the TED video of Richard St. John on the "8 Secrets of Success". Richard's eight factors are recurring themes through out the semester. Just watch this very entertaining video to discover the 8 key factors.

Corporate Culture Understood

I will admit that I have never understood all the academic and professional interest in corporate culture. In my naive view of the world I always believed in five simple concepts:

1. Always be ethical
2. Always act in the best interest of the company
3. Work really hard
4. Hire the smartest people
5. Promote from within and develop your people

I always knew that many companies just paid lip service to culture and values. Until yesterday maybe I had seen one believable description of a culture or value system (Chase Manhattan Bank circa 1977). Yesterday on the NetSetter I read a presentation on the corporate culture at Netflix, a successful, publicly traded company. The thought that went into this presentation makes the culture believable. The clarity of thought actually makes it an incredible tool to understand what is meant by "corporate culture". The value system espoused is spot on correct. I would probably not change a word in this presentation. This presentation will become a classic in the teaching of corporate culture. Read all 128 slides, then study it.

The presentation is also an excellent introduction to human resource management. Reading it from that perspective should also be beneficial to any start up.

Miami, FL

Guest Post: Who is Managing The Business of Your Business?

With so much success from the Rickert Warnelid guest posts (here and here) on project finance and financial modeling, I have been actively seeking out new guest bloggers for here at SF. I met Deborah Koch, Senior Vice President of Gibraltar Bank in Miami, at a breakfast networking event. Gibraltar Bank focuses on serving small and middle market private companies and entrepreneurs. Deborah's understanding of entrepreneurs impressed me so I asked her to do a guest post, which follows.

Remember your first and probably second years in business?  You wore many hats --- CEO, Sales Manager, HR Director, Operations Coordinator, Purchasing Associate, and Receptionist, just to name a few.  You took on these diverse roles to efficiently launch your dream; either you couldn’t afford to hire professionals for these jobs, or just wanted to do it your way.

 

In short, you ran the business of your business.  Somehow, you carried this off in addition to delivering the special skill that drove you to start your company, whether it be as an inventor, consultant, writer, plumber, or chef.  

 

This is a common entrepreneurial dilemma…how do you maintain and grow your business and deliver your unique value proposition?  Can you be adept at both?  

 

We all know success stories that make the answer to this question a resounding YES; however, these people are not successful by accident.  A close friend who runs a CPA firm told me it was years before he trusted anyone else to make business decisions, but eventually he was so busy being a CPA that he had to hire a professional manager for the firm. In those early years, he spent many late hours tending to routine responsibilities necessary to keep the firm on the right path --- everything from ordering office supplies to paying the bills and hiring staff. 

 

When you are ready to share your dream, here are a few tips to help you grow into your role.

Trust.  Hire smart people whom you trust.  Letting go is much easier when your staff is empowered to perform.

 

Delegate.   If you trust your team, let them do what you hired them to do.  They may do it a little differently than you would have, but you never know, it just may turn out better.

 

Plan.   At least once annually, take time away from the office to plan for the next year, next five years, next ten years.  Include your management team however large or small the group.

I like the clarity and elegance of Deborah's advice. Maybe we can have her back for more guest posts.

Social Media Correlates with Faster Revenue Growth

ReadWriteWeb reported on a study that documents a correlation between faster revenue growth and increasing use of social media by the top 100 international brands. "Those brands that were the most engaged saw their revenue grow over the past year by 18% while the least engaged brands saw losses of negative 6%."

The companies in the study are both consumer and business oriented and include Starbucks, Dell and SAP. "The study grouped the brands into one of four engagement profiles that related to the number of channels they're involved in and how deep that involvement is", as shown below.

The study includes detailed case studies on some of the companies with the greatest use of social media, such as Dell and Toyota. There is a link where you can rate your company's use of social media. You also have the option to enter your company information in the database and become part of future studies.

If the big companies are using social media effectively, then they will be training customers to expect customer service responses from Twitter complaints, forums to discuss new product feature wishes and many informal channels of communications between employees and customers. Startups will need to come out of beta stage with these customer services in place or they may not get the traction they are expecting.

The full report is here. Download ENGAGEMENTdb_Report_2009