Framing: Creating the Right Mental Impression

George Lakoff, a professor at Berkeley, is a renowned expert in cognitive linguistics. His particular expertise lies in applying linguistics to the study of public political debate.

His core thesis is that metaphors and concepts are the building blocks of thought and the mechanism by which we process reality. He says, "Our ordinary conceptual system, in terms of which we both think and act, is fundamentally metaphorical in nature."

In Lakoff's vernacular, we think in "frames." He writes," Every word, like elephant, evokes a frame, which can be an image or other kinds of knowledge. Elephants are large, have floppy ears and a trunk, and are associated with circuses, and so on. The word is defined relative to that frame." When I say "elephant," you cannot help but think of the characteristics noted above.

This is very important as it argues that every word we choose to use carries with it related associations, emotions, imagery, correlated ideas, values, etc. He argues that we can control the way people think and relate to our positions by the words we use and the frames (ie. related meta-associations) that we choose to employ.

In politics, he credits the Republicans with a mastery of framing - for example, the concept of "tax relief" implicitly suggests that taxes are a burden and any opposing position would be pro-tax and pro-burden.

Why is this important? How is it relevant to start-ups and the venture process?

VC is fundamentally a patter recognition and classification exercise. Every time you pitch a VC, they are, in real-time, classifying the company and opportunity into a master taxonomy. VC is an exercise in decision making by metaphor - this company is Salesforce.com for X, Youtube for Y. The evaluation process involves first classifying the opportunity into a conceptual bucket and then quickly associating the company with the attributes of the given bucket.

If you can indeed control the associations, both positive and negative, that are an inherently part of any frame, then it is vital that we choose our words very carefully. Entrepreneurs must carefully consider the frames and buckets they choose to use to describe their businesses recognizing that each chosen word carries with it either "positive" or "negative" connotations and baggage. It should be the goal of every CEO to ensure "positive" categorization.

In the VC lexicon, there are certain buckets that are minefields or "third rails." It is important to control the categorization exercise and preemptively "frame" the discussion in your favor.

Example "third rails" or "negative frames" can be either failed markets (ASP, P2P file sharing, egovernment), business models ($50m to break even), or team dynamics (husband and wife team, 15 founders, etc). These frames all evoke negative emotions, memories of capital loss, and a desire to quickly end the meeting.

When you describe your business, unconsciously the words you employ are raising a set of memories, emotions, inclinations...in the mind of your listener. Be mindful how best to control the reaction of your audience by anchoring off positive tailwinds, successful companies, and other anchors that ensure your name evokes a smile not a smirk.

Isolating Causality: Bad Market or Bad Company

Cervantes famously once said that, "proverbs are short sentences drawn from long experience." In venture capital, one often hears industry veterans say something like, "bad markets make for bad investments."

The importance of the growth, health, and timing of a market to a start-up's postive outcome is both vital and well-known. Cliched and yet, as with many proverbs, true.

When a company is behind plan, an investor must ask is it the market or is it the company? A frequent challenge for an investor is to isolate causality in a given investment. Isolating market (exogenous) or company (endogenous) causality is vital with respect to the appropriate remedial action. If it is the market, there is little chance that more money or new management will change the outcome. If it is the company, additional resources (both capital and human) may indeed impact the outcome and be reasonable.

I have seen some of the smartest people work the longest hours, code round the clock, make the most sales calls, and reap no reward. When the market does not care about your solution, or, worse yet, does not exist, no amount of management talent, hard work, or capital can remedy the situation.

If the market is the challenge, additional investment is a dangerous example of escalation of commitment that will result in capital loss. Often the signals as to the health of the market are ambiguous - are the data points in question indicative of the market's development and health or more random and indeterminant?

I have observed several key indicators that help identify market failure and that suggest further investment is a challenge:

1. 3 VP sales...
   
1. when the plan is missed, the favorite scape goat is the VP Sales.
   
2. A single misfire may be legitimate, but every time that I have seen multiple VP Sales fired in a short amount of time the core problem is not sales management but the fact the market does not care nor exist.
1. VP Sales turnover is a classic red herring.
2. no competitors
1. company's operating in non-existent markets are often unable to point to direct competitiors.
   
2. While competitors may exist on the margin, the names vary from account to account and no clear enemy, or set of enemies, emerges. Lack of competition is a sure sign the market does not care.
3. no RFPs
1. no customers are soliciting the company and there is a dearth of inbound requests for proposals.
4. no repeatability in customer deployments
1. while good teams can generally get 2-3 customers, an early warning sign of a bad market is that there is no consistency in customer need, no common abstraction of use case, and no way to build a repeatable marketing, sales, and product positioning against a common set of needs.
5. no partners
1. companies in dead markets cannot explain where they sit in the market ecosystem and are characterized by no legitimate partner activity
6. no energy
1. the company culture begins to calcify and visitors can feel the lack of energy and nothing appears to change month to month - ie it's like groundhog day...
   
7. no one knows what the company does
   
1. companies that suffer from the above challenges are often the ones that cannot simply and clearly explain what they do. after 45-60 seconds of buzzwords, the listener is left bereft of any sense of clarity and their eyes begin to glaze over.
   
2. when i first started in vc, i remember thinking..."wow, these guys are so smart, i have no idea what they just said." after a few years, i began to realize that if i have had no idea, then i could be damn sure the customers wouldn't either.
8. thrashing
1. the company begins to thrash, with constant changes to the positioning, core problem being solved, and the productand there is no longer a core mission or center of gravity
2. tempers fray as the lack of common mission leads to each executive articulating their own and failing to agree on a direction
   
9. companies that are in healthy markets close enough business to:
1. develop a clear value proposition
2. build repeatable marketing, sales, and delivery models around common uses cases
3. know their top 2-3 competitors cold and see them in every account
4. are solicited for business
5. have real, active partners engaged in common customer accounts
6. have highly energetic cultures where the changes month to month are signficant
   
7. can explain what they do so that almost anyone can understand
8. share a common mission that everyone in the company can articulate
   

If the market is dead, there is no hope. More money, yet another VP sales...will accomplish very little save to ensure further capital loss and wasted effort.

If the market is healthy, then there may in deed be logic in additional funding and new management. Understanding which of the two situations exists can help avoid unnecessary pain and capital loss.

All start-ups iterate their product and value proposition as they hone in on the eventual mission...the challenge is when to know if the challenges are part of the natural evolution or a symptom of operating in a market vacuum.

Krillion Launches

What do you get when you marry local search, an $18bn consumer durables market, and major off-line retailers? Krillion.

Krillion, backed by Hummer Winblad, provides a Localization Engine™ that scours the Web to find, integrate and present actionable local search results for the ready-to-buy consumer. As of this week's launch, Krillion has over 275 million pages of relevant local search results displaying local product information for major appliances in over 40,000 U.S. cities and towns.

For example, if you are looking for a white GE refrigerators within 10 miles of Mountain View, the query returns the following page. A landing page for each query result is dynamically generated, optimized for SEO, and placed into the indexes of the major search engines. By product, by location landing pages provide consumers with actionable information regarding where to buy the product in question and the price ranges across various retailers. See this page as an example result of a discrete SKU.

Why is this important?
Despite the fact that 75% of those who buy big-ticket items do all their research online and make over 90% of their purchases offline, today’s search engines typically are unable to find and deliver results pinpointing specific local stores with specific products. Krillion provides a bridge between the two worlds and helps drive big-ticket consumers into local big box stores.

Krillion delivers search results category-by-category and the first category to be covered is the $18 billion major appliance category: refrigerators, ovens, ranges, washers and dryers, and dishwashers. Moving forward, Krillion will deliver search results for additional categories such as consumer electronics, lawn and garden, seasonal appliances and others.

Congratulations to the team and please see Search Engine Watch's coverage of the Krillion launch here.

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