I was recently asked by reporter to comment on why IT projects, particularly government-sponsored IT projects, are so prone to failure, and it got me to thinking about the lessons we've learned from other kinds of failures. With today's headlines screaming about how government is taking a much larger role in our economy -- and by extension in our lives -- I thought it would be helpful to consider what we know about why governmental projects tend to flop and what we might want to consider doing about it. Many of these lessons are equally applicable to IT flops of other kinds, but since almost every major program involves a technological component, they are particularly of concern for the guys who are now going to have billions of dollars to spend pretty much as they see fit.

Government IT projects are prone to failure for 6 very predictable reasons:

1. Lack of good governance structures - often, large projects fall between agencies or between units of agencies and it is hard to achieve consensus on what each wants. What often happens is that decisions then get made by committees and there is little accountability. This leaves the teams building the systems to figure things out on their own without a clear decision structure, which can lead to inevitable problems.

The solution? Make sure that there is a clear set of rules for who is in charge, what results are desired, and how decision-making is going to take place. I, for one, would feel a lot more comfortable if Treasury and the other agencies involved in the financial bail-out were very transparent about these issues.

2. The "waterfall" method of systems design - in this approach, the system is scoped out in terms of desired outcomes, users or analysts prepare specifications, and these are then given to the programming team who create the code, which is then tested by a testing team and put into production. You can see that this is a relatively linear process. It creates all kinds of problems, beginning with the fact that often users and analysts really don't know what a system should do until they get the chance to play with it, coders operate on specifications which may not lead to a desired result and the project can be way down the road to development before people realize it should have been done differently.

A far better approach is to iterate - mock up the functionality to get a basic process flow, and then build it out little by little, working intimately with future users so that when the system is finally delivered, it's exactly what was wanted. The problem with this for governments is that it is almost impossible to write an RFP or requirements document that allows for iteration and non-specified deliverables. It's an exact replication of the process we propose for any kind of uncertain new project in the new book. You don't want to be basing plans on assumptions - far better to spend a little to convert assumptions to facts and go on from there.

3. "All at once" funding - in any large-scale project, you're better off getting just enough funds to get to the next major milestone, at which time a mini-post mortem can reveal problems before a lot of expense has been incurred, and the project redirected or stopped while it is still inexpensive. With government projects, however, it is such a pain to get funding approval that the temptation to get funding all at once is irresistible - what that means, unfortunately, is that projects can get very large and very expensive before anyone has a good hard look at them.

The solution is to allocate the money, but don't allow it to flow freely until certain conditions -  milestones or checkpoints - have been accomplished. While it does increase the review burden, it dramatically decreases the program's risk. Another reason I'm a little uneasy about $700 billion being laid out as available in one fell swoop.

4. Scope creep - there is a tendency in government to want any new system to meet all possible needs with people thinking that if they don't get their feature on board with this system, it will never happen. So the scope of projects gets larger and larger, and if you don't have good governance to put a stop to that, it can cause a project to become extremely costly and unwieldy.

A better approach is to plan projects as a series of additional functionalities, so that people don't feel they have to get their feature in the first release - think of it like trains leaving a station rather than one big bang.

5. Automating before redesigning - a common problem with government projects is that the system is designed around processes as they are, rather than around processes as they should be. So essentially, you end up automating a dumb way of doing things without making any real operational improvements. This frequently happens because people are unwilling to put the serious design effort in up front and want to get right to the programming.

6. Finally, failing to budget for 'cleanup.' This usually occurs in the implementation part of the process, when people suddenly realize that the data they are working with has to be moved from the old system to the new system and that it can't be done easily. I estimate that a good 40% of an IT project's budget could go into just making sure the information in the system is clean, accurate, and representative of what it is supposed to do.

In terms of whether governments fail more than the private sector, there are plenty of stories of failed IT projects in the private sector as well. In fact, there are entire companies who have blamed poor performance or even bankruptcy on failed projects. The difficulties are the same - but in government there is often much less accountability so the losses pile up and are more visible.

To use these ideas pragmatically, if you are facing a large and ambitious IT project, you can simply ask yourself the following questions, giving yourself an agree/disagree score of for each set of risks. Any "agree" scores should prompt immediate attention on your part.

1. Our project team reports to a committee with representatives from different parts of the company; the committee makes most operational decisions.
2. We try to have complete specifications from the business owners of the project before we do any programming; changes to the specifications need to go through a controlled change process
3. We believe in providing all the funds a project needs at the point that it is launched
4. This project is so substantial and important that we will probably never do something like it again
5. We don't have time to do a complete business process redesign before getting the project going
6. We've allocated 10% or less of our total budget to data quality and conversion issues

Anyone have any similar experiences with issues like these?

He was worried, he said, about proposed 'card check' legislation (more formally known as the Employee Free Choice Act or EFCA). In a nutshell, the legislation would allow workers to unionize if a simple majority sign authorization cards. In his view, it would be all too easy for union organizers to coerce workers into giving their signatures, and far easier than it is today to unionize operations. The consequences would be a far less flexible workforce, higher costs, lower productivity and a loss of management discretion over workplace decisions, all of which in the long run would be bad for the economy.

Since that conversation, the EFCA has gotten a tremendous amount of press, most recently in Business Week and in Wall Street Journal columns that express alarm at how few senior-level executives in the US are paying attention to and are aware of the implications of the legislation.

Regardless of the merits of the legislation, which Democrats on the whole support and Republicans are less enthused about, it's interesting to speculate on why pro-labor policies are becoming increasingly palatable.

In my view, it's one fairly predictable outcome of a change in the zeitgeist, resulting from the erosion of the implicit contract that many workers in America endorsed. Work hard, be productive, and you too could aspire to your own version of the American dream. Or so the story went when I was a young college grad in the early 80's.

When I took my first job in 1982, I was forced to pay union dues (although I never did officially join the union at the City of New York, my first employer). That allowed me to be covered by a collective bargaining agreement that had been negotiated by the union on behalf of all the workers in my title. Now that I look back on it, the deal was pretty good. Right off the bat, I got 4 weeks of vacation, some number of personal days, 13 public holidays, and although I didn't get overtime, I was entitled to 'comp time' which meant that when I worked more hours than my standard 35 per week, I could take that time off at a later date. I also got health benefits, of course, and contributions to a government pension fund, which would have materialized after some decades of dutiful service, had I remained in that job. In fact, when I did leave, I recall getting paid for something like six months due to the accumulated comp time I'd received.

But despite the attractive employment terms the union had negotiated, bright young things back then felt that being part of a union was sort of quaint, and even a little distasteful. We were, we thought, going to go out there and forge our own futures, grabbing our piece of the American dream through hard work and pluck. Our employers would recognize our merits - why let some fusty old union boss speak for us? Reagan was in the White House and America was going to shake off it's 70's era slump. The future looked bright. We didn't need unions -- or so we thought at the time.

Fast-forward 30 years, and what happened to that attitude? Well, it's still there among many (particularly the highly skilled and highly compensated who are doing better than ever, thank you very much).

Among others, however, there is a creeping feeling that no matter how hard you work, or how much of a contribution you make, the deck is stacked against you:

• Take CEO pay. The Institute for Policy studies note that in 2007, compensation for the CEOs of the S&P 500 averaged 344 times the average US worker's pay. Thirty years ago, the ratio was about 35 to 1. That money is coming from somewhere, workers realize, and one possible source is their own paychecks. Indeed, The Center on Budget Policy Priorities found that "the share of national income going to wages and salaries in 2006 was at its lowest level on record, with data going back to 1929. The share of national income captured by corporate profits, in contrast, was at its highest level on record."
  

• What about the bailouts of financial firms? Whatever the merits for the case that these companies needed government backing, the symbolism is of super-smart Ivy Leaguers being protected from the consequences of their own mistakes, while ordinary people deal with the fallout of the credit crunch. That's hard to overlook.
  

• Add in off-shoring, the willingness of employers to downsize at the first whiff of an earnings miss, and the erosion of benefits -- such as health care and pensions -- that were once taken for granted. It's not hard to understand why employees would find it increasingly attractive to have some more power on their side. Even if you're not a huge fan of unions, they offer the promise of security, known and agreed-upon workplace rules, and predictable outcomes. Not terribly exciting, maybe, but I suspect a lot of workers would come running at the chance to have such buffers from the vicissitudes of an increasingly volatile global economy.

To me, it's a powerful testament to the laws of unintended consequences and the idea that every action prompts an equal and opposite reaction. If the ways in which large corporations wield power over their people is increasingly seen as unfair or even illegitimate, we can expect a lot more momentum on the part of labor.

Is that good? Bad? Are there alternatives? What do you think?

Over time, those things that customers once tolerated and put up with can become gradually less and less acceptable -- often when competitors come up with ways to prevent customers from having to deal with the problems. For instance, who today would find it acceptable to be unable to see what you were working on, exactly as it was going to appear on a printed page? And yet, WYSIWYG is a relatively recent innovation in the great scheme of things -- today, its absence would doom a prospective offering.

I was reminded of this when perusing a recent New York Times story on the emerging battleground of software pre-installed on our Windows-based computers. Over time, manufacturers and providers of software have struck deals -- a LOT of deals -- that allow trial, test, limited and other initial versions of their software to be pre-installed on your computer. So when you buy a shiny new computer, you don't just get the software you thought you were buying, but a whole lot of other software, much of which you don't want and don't need. And guess what? Getting rid of it is fiddly and time-consuming and exposes you to the risk of deleting something you really do need from your system. No wonder authorities such as the Wall Street Journal's technology guru Walter Mossberg have taken to calling such software "bloatware" or the even more damning "craplets". This sort of thing, which some people tolerate, creates major dissatisfaction among others, and positive rage among still others.

Any enraging attribute creates opportunities, which is one of the best things about enraging features. Into this fray, enter Best Buy, with its offer to eliminate all that excess and unwanted software for a mere $30. As an in-store display makes clear, you can take your new PC home and mess about eliminating applications you didn't ask for and don't want, or for an extra $30, you get a nice, clean, machine which only has exactly what you wanted. No slow starts, no baffling come-ons for software you don't know you need (or do you?) and no confusing competition among three (or more) programs that do the same thing.

The lesson here is that over time, there are predictable dynamics in the world of customer engagement. If a practice (such as pre-loading trial software) is lucrative, companies will engage in it. The more lucrative it is, the more they'll do, to the point at which customers rebel. Why? Because yesterday's tolerable features become less and less tolerable as they become more intrusive and customers more impatient. And if someone can make money getting rid of the tolerated feature, they'll do it, creating the next battleground of competition. Be warned, banks that are gorging on charging customers fees, phone companies that load up on special service charges and technologies that require that you buy add-on products (such as printers that come without cables, and products that come without batteries).

I always encourage companies to think about whether the new things they are adding to their offers really benefit the customer or not. If not, it runs the risk of being a tolerated, disliked, or ultimately hated feature that can put your company at a competitive disadvantage.

All too often, when the numbers look bad, managers who seem to possess certain qualities of ruthlessness, toughness and a 'take command' persona are handed the reins, without really thinking through the cultural, symbolic and organizational consequences of the decisions they are making.  It seems natural -- after all, when the news is grim, why wouldn't you turn to someone who generates the comforting feeling that waste will be rooted out, efficiency promoted, and that a more 'shipshape' organization will be the result? 

The subtlety is that there is a difference between being prepared to make difficult choices and arbitrarily hacking away at the connections that form the lifeblood of an organization.

Consider, for instance, the contrast between Andrea Jung at Avon and Bob Nardelli at Home Depot.  Jung, who had presided over six years of growth and success at Avon, had to confront the struggles of stalled growth and investor disenchantment.  The company missed earnings two quarters in a row and needed fast, difficult, transformation.  As she herself later described,

One of the most memorable pieces of advice came from a friend, Ram Charan, during a period in 2005 when Avon was really struggling...On a Friday night at nine o'clock, Ram came into my office, looked right at me and said, "They all love you. But in about 90 days, if you don't turn this thing around, they'll have to fire you. So, if you don't go home tonight as if you were fired, and come back on Monday as if Heidrick brought you in as a turnaround queen, you aren't going to make it.  But if you can take your 13 years of equity and relationships and still be as fresh as if they took you out and put you in a new company, doing the tough stuff to your own people and your own strategies, you can be one of the best leaders going forward. That's the decision you have to make."

So that's the key: Fire yourself, hire yourself. That advice completely changed me.

Despite the need for tough choices, involving cutting staff (30% of her own hand-picked managers were let go), changing marketing programs, reversing course on investments she had previously advocated making, Jung never lost sight of her deep understanding of what Avon is all about.  She recently described the heart and soul of the company as "empowering women one woman at a time to learn how to earn."  When she speaks about this passion in public, you can feel the emotional energy, the intensity.  It wasn't about being soft or ignoring reality -- rather, about re-igniting the ability of the company to achieve its purpose.

Mr. Nardelli, in contrast, didn't seem to have a passion for the heart and soul of Home Depot at all.  While he clearly made interventions that were absolutely necessary, ranging from establishing a more rigorous strategy process to bringing the company's IT infrastructure up to state-of-the-art standards, he seemed to overlook what made Home Depot a cherished partner to the do-it-yourselfers and contractors who formed the core of its customer base.

The original Home Depot strategy depended on extremely knowledgeable service staff who would go that extra mile for customers and who could really help them understand how to accomplish their own goals.  In the name of efficiency, Nardelli cut coverage, replaced quite a number of the experienced old-timers with part-timers, and put the whole organization on a tight, numbers-driven, almost military program.  Again, many of his changes were for the better - yet the cultural, network, and experience losses eventually caught up with the company and Nardelli was replaced. 

Conventional wisdom is not altogether wrong - there is no escaping the need to react to economic pressure.  In a downturn, you will need to cut costs somewhere.  You will need to make changes that you might prefer not to make.  You will need to limit expansion moves and try to rein in costs like employee benefits, pensions and health care.  The difference lies in whether you do these things with a clear understanding of what makes your organization unique, what keeps your people engaged, and why customers do business with you. 

See the Complete Downturn Survival Guide

We enjoyed hunting down examples of this type of competitive differentiation. For example, consider the ordinary light bulb - you wouldn't think there was much to get emotional about there, would you? And yet, pink-shaded bulbs for make-up mirrors (for those of us who are no longer in the first blush of youth), piercingly bright lights for security purposes, and lately of course the "feel green" appeal of compact fluorescents are all examples of adding a formerly emotional tag to a fairly mature product category.

Some companies of course have known this all along - after all, with one sneaker being pretty much like another, it's the feeling of a Nike swoosh that makes for major advantage. And the Kodak moment? At one stage those soppy commercials could bring me to tears.

We call positive emotional appeals "exciter" features in our book, and encourage companies to think about how they might leverage the potential of an emotional element. It seems that more and more organizations are finding that as technologies are copied instantly and the web levels the playing field on things like local pricing, emotions remain a strong differentiator. What made me think of this was a recent article in the Wall Street Journal entitled "For Olympic Marketers, Emotions Pay." The reporters note that unlike events such as say, the Super Bowl, or the World Cup, the Olympics are fertile ground for emotions. Surprising upsets, stunning victories, proud - if disappointed - losers are all delicious backdrops to the power of emotions.

So how do you get at the power of emotions in the things you offer?

First, think hard about your customer segments. Good segments reflect behaviors - remember that even customers who are demographically similar may have very different behaviors and preferences.

Second, you need to think deeply about the customers' situation as they are interacting with your offer. What's on their minds? What are they worried about? Looking forward to? Would they rather be doing something else than dealing with whatever issue you solve for them?

Third, consider what emotions you might legitimately play to - I'm definitely not advocating anything that is manipulative or inauthentic. Then do some brainstorming with members of your team - what could they come up with that might trigger that connective feeling.

Lastly, experiment - try the appeal out on representative members of your customer segment and observe how they behave. By the way, observation is absolutely key. Customers often won't - or can't - tell you what is really driving their behavior.

So what do you think? What are your favorite examples of a product that brings on an emotional appeal?

But who is overseeing the long-run development of these key people? Who makes sure that over the course of a career they are exposed to the right experiences, get the right development opportunities through formal and informal executive education and mentoring, and are considered for the next job when it comes up? Often, these critical tasks aren’t actually done by anybody, or they are left to the vagaries of individual managers to handle the careers of the people reporting to them. A strategic HR focus, in contrast, really does look at the careers of highly talented people in a holistic way, and sees that depth, adaptiveness and engagement are being built into the way careers unfold.

HR people always complain that they aren’t viewed as strategic partners. But perhaps that argument is coming from the wrong angle. Perhaps rather than viewing themselves as HR professionals first, they should get some experience as business people first. For the company leaders running HR departments, it might be time to re-think the seriousness with which you take its role.

So what about your companies? What do you wish the HR folks would do to help develop your own careers? Do you think the HR group in your organization “gets it” with respect to building the right people to deliver on your company’s strategy? If you could whisper a word of advice to your CEO about his or her HR department, what would it be?

What do we conclude from all this? For technology companies, the ranks of potential leaders are depleted disproportionately of female talent.

Turning now to the chaos of mid career, Louann Brizendine makes that case that embedded career patterns also disproportionately damage the prospects of women. While all managers with the potential to reach “C Suite” positions go into overdrive in their late 30’s and 40’s, women are more likely than men to have many other commitments to honor. Among these are pre-adolescent and teenage children, who need unpredictable and varying parental attention, much of which falls to women to cope with. Sports, activities, teen issues and other distractions at home mean that a lot of women’s mental capacity is chewed up by coping. Stepping forward to take on even more responsibility at work can seem overwhelming at that point, reports Brizendine.

What happens is that women as a group in their 40’s are far less likely to push themselves forward to the next level – they have enough on their plates. Again, they vanish from the pipeline simply because the window of consideration in many companies slams shut before they are ready to take that next leap. I’ve been talking about this for years, in the context of women and men having different life cycles, while organizations are built around men’s life cycles. So again, we have a lot of women who will never be considered for more senior leadership positions, a missing group of talent.

Then, map against this exodus of talent the fact that many companies have no systematic process for managing succession and building bench depth even when it comes to men! Further, the basics of developing and retaining talent seem to escape many companies. Where does all this leave us?

• Poor track records at keeping and promoting half the qualified management talent (assuming such talent is distributed across the population)
• Poor practices for developing people
• Poor practices for developing succession plans

So where does this leave many companies? At the end of the day, forced to look outside the organization for an external CEO "saviour" because they haven’t done the hard job of developing internal talent. So how does this fit into runaway CEO Compensation?

I was recently privileged to be at a conference at which Jack Welch, the former GE CEO, was present. He observed that both the succession crisis and higher CEO pay are related, noting that McInerney (hired at 3M) got a “Brinks truck” full of extra pay. Bob Nardelli (who went to Home Depot) got two Brinks trucks. Meanwhile Jeff Immelt, who got the internal promotion got "a pat on the head and 20%." His essential argument is that CEO talent commands a huge price premium when boards haven’t done their jobs to develop people and succession plans.

Which brings me to the last bit of data that ties all this together – John Cassidy of the magazine Portfolio notes the continuing escalation of CEO compensation, today reinforced by individual employment contracts which make it "almost impossible" for a Board to fire a CEO without paying him (or her) a kings’ ransom. His solution is for Boards of Directors to grow spines and start to demand more accountability for performance.

To me, spineless Board members are hardly going to solve this situation. Rather, developing significant pools of executive talent are more likely to be the answer. Imagine hundreds of thousands of highly qualified women who remain in the workforce with the potential to join the C-suite. Imagine if every company had an intelligent way to develop its leadership talent, using on the job training, executive education and enriching feedback. Imagine, as my colleague Linda Hill from Harvard has proposed, if you could find leaders in less conventional ways than the up or out hierarchies we traditionally rely upon? Guess what – fewer companies would have to rely on expensive outsiders, there would be more talent available and the ability of a few highly regarded players to demand extraordinary compensation could be diminished. Maybe that’s a more constructive plan than hoping for Board members to exercise discipline in the midst of a frenzied bidding war.

Corporate cultures, they suggest, can be understood in terms of the basic assumptions about the way the world works that are then reflected in behavior. They simplify things into two dimensions: one, the extent to which the cultures operate on the premise of collective, or group, interaction. The other, the extent to which a culture is driven by "hard" facts and data, or by more subjective interpretations of information and what the world means. This gives us a framework that can prove quite useful in anticipating and dealing with cultural disconnects.

Creation cultures (like most startups) depend on individual brilliance and favor acts of creation. The people in such cultures thrive on "living the dream."

Competence cultures, similarly, look to individual, brilliant drivers of outcomes, but the people in them are motivated by competition – within the company and also with external players.

Collaboration cultures take teamwork for granted, and indeed, can’t conceive of doing anything without a team or group sensibility. At their best, they thrive on collaboration with customers to produce useful outcomes. Loose, informal structures suit people in collaboration cultures just fine.

Control cultures, while similarly group oriented, tend to drive things from well-planned activity and rely on hierarchies to get things done. Making plan and being orderly are big values in such cultures.

Which brings me back to HP and EDS. I’ve had the good fortune to work with HP and to interact with HP people. They are unfailingly collaborative. Even when introducing themselves in class, if there is more than one of them they will unfailingly acknowledge the other, and verbally give respect to one another's point of view. EDS, different story. Equally great people, equally strong performers, but boy oh boy is that a control culture. At classic HP, people sort of work together to figure things out. At classic EDS, you look in the book. If the answer isn’t in the book, you ask your supervisor. If your supervisor doesn’t know, there’s some process to sort things out. So I think we can anticipate some pretty hilarious (at best) and potentially distressing (at worst) moments when parties from the two cultures, each operating with their own view of the way the world works, try to come together.

What would I do if I were involved (and I’m not currently working with either firm, to give full disclosure)?

I think the first thing is to make the different cultural assumptions explicit, so that people from either side don’t misinterpret what are fundamentally cultural assumptions.

Next, I’d figure out where it matters that the cultures come together (in executive decision-making, customer service or complex, large engagements, for example) and where it doesn’t (in standalone units without a lot of interdependence).

Then I’d probably have some kind of facilitated process of helping the two interact until the two organizations find a way of working together.

Moore and Schneider anticipate that most companies will eventually settle on a dominant overall culture, although there will always be sub-cultures within the organization. My bet would be on the HP culture eventually holding sway – it’s a natural in a flat, networked world with an emphasis on total solutions and customer care. Let’s see if that’s what happens.

Years ago, former Harvard Business School professors Steven Wheelwright and Kim Clark (who also served as Dean) documented a catastrophic decline in the amount of value-added time people bring to work once they are assigned to more than two projects. By the time the respondents in their study reported that they were working on 7 projects, their productive time at work dropped to about 15% (See attached chart). Ironically, the more "stuff" one takes on, the less one seems to accomplish.

So what can you do to get more value-added productivity into your days? A few suggestions:

Develop a set of screens or scorecards that can help you systematically winnow the attractive opportunities from the less attractive. I’ve got one that I use for considering new clients, and it helps to set priorities clearly.

• Try to bring old projects to some kind of closure before new ones get on the list.
• Make sure to book some time with yourself for those strategic, but non-urgent tasks (like thinking, or writing) that tend to get crowded out by urgent demands. I have one client who has a mythical person named “Joe” – meetings with Joe are for thinking, and it’s understood that they are not to be interrupted.
• Check email only twice a day (promise- it won’t kill you!)
• Try to make the consequences of your tradeoffs clear to those (like a boss or colleague) who may be creating excess work for you.
• Match your strategic priorities with how you spend your time – and question activities that don’t drive those priorities.
• And finally, do question the value of every activity – if it simply didn’t get done, what would happen?

WildTangent drives profits two ways
In the world of creating substitutes for player-based games, a company called WildTangent offers about 500 free-to-play titles that draw 12 million U.S. visitors to its website each month. Offering graphics that are far less than one might get on a videogame console, but which are probably acceptable to many kinds of casual users, the company makes its money in two interesting ways. First, by displaying ads. Second, by offering ways of avoiding the ads! The first way of avoiding the ads is to buy a $20 version of the otherwise free games. The second, and this is innovative, is to buy a prepaid card at (you guessed it) Target that allows you to turn off the ad displays during the games.

The Wii
And no mention of developments in the world of gaming would be complete without noting that the Nintendo Wii, a cheaper, less graphics intensive platform has been wildly popular since its introduction. A classic disruptive technology, the Wii meets more sophisticated players at acceptable levels on some dimensions (such as graphics) but introduces a new dimension of performance competition, the ability to physically interact with the machine, which also makes new types of games possible. Further, it took hold among entirely new groups of users (what Clayton Christensen famously calls “non-consumers”) such as girls and women who turned up their noses at the gory combat games favored by their male peers.

In our book, MarketBusters, we talked about how innovations such as these in gaming can either change the "unit of business" for an industry and/or change its "key metrics," which are the measures of how processes work that ultimately drive profitability. Clearly, in gaming, there are entirely new business models afoot which might drive the next generation of breakthrough growth.

In an uncertain economy, one of the things you can predict is that there will be people who lose their corporate affiliation – either through downsizing, or because they elect to take early retirement, or for some other reason – and decide explore the self-employment instead of joining a new organization. Many will become consultants (pretty typical) or go into real estate (not that I would advise that just at the moment) or otherwise start something entrepreneurial in retail. I’d suggest a couple of cautionary notes before making that big leap.

Losing the infrastructure

First, you need to be aware that the transition to working for yourself can be traumatic. When you run your own show, a lot of the support infrastructure of the big corporation is no longer available. Things like logistics, mail, travel arrangements, computer set up and so on can take a lot more time and cost much more than many newly self-employed people expect. It can be lonely – you’re no longer part of a work team. Working from home, which many do, is a whole lot different than working in an office on a schedule. It takes a lot of discipline to resist the distractions that can inevitably intrude on the home environment – not to mention the non-professional noises (crying babies, barking dogs) that don’t exactly go with the high profile image you may be trying to project.

Startups take time to develop

Secondly, remember that most of the time it’s going to take a while for your new venture to be self-sustaining. Don’t expect any new business to start throwing off cash immediately. That means you better have a source of income or savings to sustain you while you’re going through the start up phase. Loving spouses, savings, and an initial contract with your former employer that will pay the bills are all good. Throwing money on your credit cards is not.

The purpose of a business is to create a customer – nothing else matters nearly as much

Third, recognize that many newly self-employed people haven’t got the foggiest idea how to create a viable business. So they’ll invest money in brochures, business cards, fancy office equipment and so forth, but fail to recognize that these things don’t make you a viable business. Only customers willing to pay for your services make you a viable business! They often totally under-estimate how long it’s going to take to generate real new sales. If one can, a much better route is to try to replicate the services you performed for your old company for a new one, and ideally set that up before you are out on your own. I can’t tell you how many times I’ve watched in dismay as people sink the rewards of a lifetime of working into a "cute" retail concept, a restaurant, or some other fun-sounding business without realizing how much work and how long it’s going to take.

Resources that can help you

There are many of resources available to you as you think about going out on your own. Here are some that I often provide to would-be entrepreneurs:

Small Business Development Centers
Small Business Development Centers are usually associated with universities. These offer training and consulting services, courses, and sometimes contacts and connections to venture capitalists and angel investors. The main web page, including a location finder, can be found at: http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html

SCORE program
Score is a program also sponsored by the Small Business Administration that uses retired and experienced executives to counsel new entrepreneurs. Their main directory page is at: http://www.score.org/

Entrepreneurship programs at universities
Most universities have a program of study in the area of entrepreneurship, often in connection with their business schools. Look up the university web site to find whether your business might be suitable for a student project or for student consulting.

Angel Investor Groups
Here is a great guide to a number of angel investor groups who are interested in early stage technologies. Angels are often experienced entrepreneurs who can take an idea forward on an advisory/mentoring basis. http://www.gaebler.com/angel-investor-networks.htm

I would also recommend subscribing to Inc magazine – it’s intended for entrepreneurs, and often has some good tips and ideas.

Finally, don’t be unrealistic about how much enthusiasm you can generate from customers before you’ve tested the waters. A good idea is to allocate a ton of time to marketing and outreach – probably more than you expected, particularly in the early days. I of course would recommend that you build yourself a discovery driven plan that allows you to plan to test your assumptions. (See my personal blog and search on the topic “discovery driven planning.”)

Technology handouts: One of my telecommunications manufacturing clients used to routinely give the latest handsets and toys to its key executives, just before or along with commercial launch of the offers. As a result, these folks never had to go into a phone store, never had to deal with inefficient or even hostile distributors, and never had to compare their offerings with competing products. They only compared their own products to previous versions of their own products. It was only when the company radically changed this policy and forced its folks to go directly through the same channels customers had to use that they realized that their once-unassailable advantages with customers were starting to erode. This in turn prompted significant strategic changes, including relocating major operational centers to different markets and shifting the way customer segmentation was done – all stemming from the insights of direct experience.

The executives can hear, even if you can’t: One of our clients, a mobile telecommunications operator, routinely had its operations staff make sure that the cellular signals in the headquarters office, main travel routes and residential areas inhabited by senior executives were strong, reliable and consistent. Imagine the surprise these executives felt when friends and relations expressed their infuriation with spotty coverage, dropped calls or weak signals -- after all, this never happened to them! Even more astonishingly, the senior people didn’t know that they were experiencing the modern-day equivalent of a “Potemkin Village” – they thought their services were far better than consumers did. This in turn led them to dismiss quality, coverage and service level data that reflected how infuriated consumers were as ‘inaccurate’.

The message? Sometimes, buffering senior people from exposure to ordinary experiences unintentionally gives them a false sense of security with respect to the quality, reliability or convenience of your offerings. This in turn can breed dangerous complacency and a lack of urgency with respect to underlying problems. In best-practice companies, in contrast, there are mechanisms to make sure that direct contact with customers is a part of every executives' normal job.

A better approach. At Amazon.com executives routinely spend time on the phones with customers. At Ikea, a few times a year executives and line-level staff work together in what they call "anti-bureaucracy days." At Continental and Southwest airlines, it would not be unusual for executives to spend time at the ticket counter or handling baggage. Proctor and Gamble executives spend a lot of time following consumers around, watching how they do things, and looking for unmet needs. In a great recent story, Irene Rosenfeld, the CEO of Kraft Foods, was flabbergasted to be offered a drink made of their orange flavored mix, Tang, only to learn (to her discomfort) that in China it is served hot, like tea!

Time spent with customers in real-life situations can give you insight into your own offerings, competitive offerings and the changing marketplace in which you compete. Time buffered from reality can create dangerous blind spots.

The one big bet syndrome. In highly uncertain environments, it’s nearly impossible to predict with any accuracy which innovations are likely to succeed and which are not. It makes sense, therefore, to test out a number of different approaches on a small scale, proceeding forward only when you’ve validated enough assumptions to move ahead with confidence. The logic of real options supports this approach: essentially encouraging companies to take out a couple of different projects aimed at a promising market or technology, without huge risks. “Big bet” ventures in our experience seldom work out. Remember such supposed first-moving winners as WebVan and Pets.com? Their particular bets were wrong, yet the viability of Internet-enabled business models has now been demonstrated. Keeping some resources for multiple tries might have allowed those projects to succeed later on.

Escalation of commitment. A second dilemma is that projects can come to take on a life of their own, creeping forward even after a great deal of evidence has accumulated that suggests that the original concept isn’t going to work out. The failed “Iridium” satellite phone venture is a case in point – over its 10+ years in development, changes in mobile telephony made many of its most salient features irrelevant. Motorola and partners nevertheless launched the venture, only to see it wind up in bankruptcy within months. Taking an options approach forces managers to constantly ask, “does it make sense to proceed to the next step?” and stop or redirect the venture if it doesn’t.

Unrealistic expectations. One of the saddest outcomes for an innovation project is when the program succeeds in an objective sense – creating new products, or happy customers, or whatever – but fails because expectations from the parent company were inflated. A recent example that looks a lot like this to me is Revlon’s “Vital Radiance” line of cosmetics aimed at older women. If you search the web, you’ll find scores of fanatically happy customers, yet the products didn’t provide the breakthrough growth Revlon management was after, and they ended up dropping the line. Viewing innovations as options instead of corporate saviors can dampen excessive expectations and allow venture to develop in their own time and way.