Businesses can stumble badly in their financial projections if they over-estimate customer adoption rates. And if you work in product marketing or sales environments where everyone must “drink the Kool-Aid,” you’re potentially at risk, especially in B2B markets.

In consumer markets, where the decision maker and the end-user are often the same person, motivational issues are less likely to affect post-sale adoption rates (unless the product is a “lemon”).

By contrast enterprise employees have relatively little control over the choice of technology-related tools they must use at work. Faced with a mandated change, employees may have all sorts of conscious or unconscious reasons to stall or minimize use of the new tool or application. Especially if it requires behavior or process changes, or new learning. Passive resistance flourishes — which is bad news for sellers counting on rapid uptake of their “Kool-Aid.”

People are resistant to change, for lots of reasons, including unconscious biases. One such bias is people’s tendency to highly overvalue the status quo.

Entrepreneurs and salespeople also suffer from biases, what I call “the Kool-Aid factor,” a form of irrational optimism. This can cause them to over-estimate the speed as well as the degree of adoption for new enterprise applications or other types of employer-mandated tools and resources. Sellers often have inflated views of the value of what they have to offer, relative to the prospective end-user’s perception of its value. Add in the end-user’s inflated perception of the status quo, and you have a sizable value gap.

As shown here, the combination of these flawed assumptions can lead to almost a ten-fold value disparity (thanks to Joyce Hostyn for the infographic):

Why? There are significant cognitive biases and psychological barriers to adoption that sellers overlook at their peril.

A thoughtful post by Open Text’s Customer Experience Director, Joyce Hostyn, outlines her thinking on the stages that people must pass through before they’re willing to change habits or adopt new applications at work. Joyce also points to several must-read articles on the topic.

Her visualization of the stages people must pass through before they become advocates or champions of the “next new thing” is quite helpful. Although aimed at customer experience designers, Joyce’s diagram of the experience journey offers a useful POV for people who forecast revenues tied to assumptions about adoption scenarios within enterprise environments.

If you must “drink the Kool-Aid,” take note of your customers’ motivational climate, and factor in how their adoption journeys will affect your product/service uptake.

Lately I’ve been coaching some entrepreneurs as they prepare their investor pitch to prospective angel investors. One of the recurring challenges with their draft pitch is a lack of clarity on:

• who needs the product (and why)
• who can pay for it — who has the budget and/or the authority to pay for it
• what customer segments do they plan to target, and how might this evolve over time
• the paths the company plans to go to market: how will they sell and support the product, direct via their own employees or indirect through some distribution or partnership model (including online models)
• how money flows through this market ecosystem, if that’s not already abundantly clear

Because entrepreneurs are fueled by passion for their product, that’s where they focus their attention during the pitch. Lavishing us with all the details about why the product is so cool, and why the competition won’t have a chance… But investors want to understand how and why there’s money to be made if they invest in this emerging company.

And that means we need to understand the market dynamics: who the customers are, what’s their compelling reason to buy, and where the money comes from.

Particularly in complex markets (like life sciences or healthcare) it’s incumbent upon the entrepreneur to insure the investors understand these issues. Follow the money.

Without a vibrant market of paying customers and efficient routes to market, investors will never get their money back. And until they believe there’s a solid market opportunity, most investors will shy away from funding the entrepreneur’s venture — no matter how unique or sexy the product.

Last night I heard Daniel Pink, author of A Whole New Mind and the new book Drive, speak about the most powerful wellsprings of human motivation: the intrinsic motivators autonomy, mastery and purpose. If you haven’t read Drive, here is Daniel Pink’s TEDTalk on human motivation. An entertaining 18-minute summary of what behavioral scientists know about human motivation, but ignored by business and management theorists for 40 years.

Pink struck a responsive chord with his Seattle audience by contrasting today’s dysfunctional 20th century institutions, with their outmoded management and reward-punishment mechanisms, with the 21st century model: what happens when you unleash the power of engaged and motivated employees. He summarized a number of experiments that proved the failure of “contingent motivators — if-then rewards and punishments” to drive the best performance from people who do anything other than rote, mechanical tasks.

In an economy fueled by “the marketplace of ideas” and intangible services, intrinsic motivators like autonomy, mastery and purpose are far more effective than external carrot-and-stick motivators. Employee engagement flourishes, says Pink, when people have more influence over what they do, when they do it, how they do it, and the team they work with. The lack of this autonomy was a contributing factor for the past “decade of truly spectacular underachievement,” asserts Pink.

To make his case for the superior power of intrinsic motivations, Daniel Pink cites the impact of the open source movement, as well as “20% time” policies on spurring new product innovation and new business models. 3M’s biggest hits (like PostIt notes) and 50% of Google’s new products all have emerged from the unstructured 20% time when employees are allowed and encouraged to work on things they feel passionately about (versus things they are required to do as a defined part of their job).

Putting It into Practice

Today while reading Jive Software’s manifesto, “The Social Business Imperative,” I find myself asking, what if enterprises truly embraced Pink’s ideas, and were empowered to do so? What if they invested in the processes and technologies to enable these changes? What if they thought, and acted, differently about how best to inspire and motivate their people? What if they discarded their outmoded theories of what motivates people?

Could this accelerate the reinvention of the world of work within large enterprises and institutions? Could we thereby unleash the power of the human imagination, and channel people’s passions and creative energies into more worthwhile products and services? Instead of believing the mantra “more is better,” might we shift toward “better is more?”

Yes, people who live their lives online are all in a frenzy about this thing they call “social.” But human motivation is even more fundamental. What if we linked the power of intrinsic motivators to right-brained work in the context of marketplace or intra-company conversations and learning? And enabled it with one of these so-called “social platforms?”

Jive’s social business manifesto asserts:

When your best people work on your best ideas in an open, transparent, collaborative way, they create a completely new kind of asset called Social Capital…. Social capital is what your company gains when its best people with the best ideas can take the right actions, actions that speed all sorts of time-to-business outcomes — from reducing costs to driving new product innovation and increasing sales and marketing effectiveness.

If you believe Daniel Pink’s assertions about the power of autonomy, mastery and purpose to fuel employee engagement and passion, what if your best people were enabled to work (at least part of their time) on their best ideas? What if they were really engaged, spending time on things they believe could truly make a difference, and had the opportunity to bounce their ideas off the best and brightest, or most experienced people in your customer and partner community? Or with fellow employees in other regions?

What might happen then?

How will your business address the enormous business opportunity that lies within the so-called “female economy?” Did you know that:

Women now drive the world economy.

As a market, women represent a bigger opportunity than China and India combined — more than twice as big.

On a global basis women control over $20 trillion in consumer spending each year, potentially growing to $28 trillion over the next 5 years.

These assertions were published in the September issue of the Harvard Business Review, based on a global study commissioned by the Boston Consulting Group in 2008. (For details refer to “The Female Economy,” Michael J. Silverstein & Kate Sayre, HBR, 9/2009. Or get a copy of Silverstein and Sayre’s book, Women Want More.)

Where Are the Biggest Opportunities

Based on purchasing power, American women represent the lion’s share of this opportunity, because we control or influence almost $6 trillion in consumer spending. Japanese women are the next largest segment, with power over $1.6 trillion in annual spending.

According to the HBR article and the BCG study, some of the largest near-term opportunities fall within the investments and financial advisory services sector, the life insurance business, and payments/rewards processing. Another area where women are hugely dissatisfied with current offerings is the healthcare sector.

The BCG study found that:

Financial services wins the prize as the industry least sympathetic to women

I must admit: that research finding does not come as a surprise to me…

Despite the enormous opportunity within the “female economy,” few companies have effective strategies to serve women’s needs and preferences. Many who try stumble at first, falling into the classic “make it pink” trap – a sure sign that the product planners are looking for superficial shortcuts or have under-invested in needs-based research.

Potential Root Causes

So if this opportunity is so huge, why do companies so often under-serve women? Here are some of my hypotheses:

• Ineffective segmentation when it comes to needs, attitudes, lifestyle drivers and purchasing power
• Not enough women in true leadership positions, exercising authentic control over the world’s largest enterprises
• Too many men driving product planning and targeting decisions – case in point: think about the fashion industry…
• Not enough intelligent or insight-seeking market research
• Not enough women with the courage or authority to dissuade their male colleagues from falling into the traditional “make it pink” trap
• Too much conventional thinking: “If it’s good enough for men, it works for women too”

In a future blog post, I’ll describe some of my recent experiences as a consumer where I’ve encountered situations of missed opportunities or female-dumb marketing.

I’m on the coaching committee for a Seattle area angels network, and have been struck lately by some of the traps that fledgling entrepreneurs can fall into when pitching angels:

• They “sell” us as if we were prospective customers
• They fail to describe their proposition for prospective investors (i.e., what their financing terms are)
• They lack a differentiation strategy

And very often,

• They forget to describe how their revenue engine will work.

If you’d like to increase your chances of securing financing from angels, make sure you take the time beforehand to have good answers to the questions you can expect to hear from potential investors. No matter which angel group you pitch, they’re all likely to ask similar questions.

What Fuels Your Revenue Engine?

Angel investors are increasingly cautious about where to invest their capital, so they tend to subject entrepreneurs to more scrutiny than in boom times. Except for those with money to burn, angels won’t invest in your company unless they understand:

• How and why you will make money
• How they will make money on their investment

What angels want to understand is how you plan to turn your ideas into money, and what evidence you have that there’s a market for your particular product or service. They really want to believe that you’ve thought through the key components of your “revenue engine” and that its mechanics are sound.

Tell Us More

For each of your potential revenue streams, angels want to know:

• Who will want to buy your product or service
• Are there enough other people like that to sustain your business over time
• Why is your proposition compelling to your future customers – what “job are you getting done for them,” or what needs will you satisfy – and how is this better than their alternatives
• Why will they want to buy from you instead of your competitor(s)
• What value do you deliver to customers, and what will they want to pay for your service
• How often do they tend to purchase your product or service: once a month, once in a lifetime

Your answers will be more convincing if you have some early market validation, and evidence of paying customers.

How Will Customers Buy

What’s your distribution strategy, and how will you sell your products or service? Will customers need a trial experience, validation by trusted sources, or other proof points before they’ll be willing to buy your product? (Questions like this help angels understand what it’s going to cost your business to acquire new customers – a key driver for how entrepreneurs tend to burn through investor capital.)

Where and how will customers want to buy your product? Will you need direct sales people or manufacturers’ reps to provide presales support, or will customers prefer to conduct the whole transaction online? Will consumers need to see or touch your product with supporting merchandising in a real-world retail environment?

How do you plan to recruit your sales or distribution partners? Will they need any special training, credentials or other “enablement” to equip them to sell and support your product?

Do you have a controlled roll-out and distribution plan, starting in a limited number of markets, or do you want to “get big fast”? Can you finance your inventory if demand exceeds initial forecasts? Can you finance the implications (generally multi-million dollar) of get-big-fast strategies?

Note that angels tend to be cynical about grandiose nation-wide distribution plans when a start-up has no prior track record…

Why You

Me-too products and services aren’t very interesting to angels, because it’s hard for investors to believe they’ll (a) ever get their capital back and (b) earn a multiple on what they’ve invested. Trusted brands and known suppliers have a huge advantage over start-ups unless there’s a clear and compelling advantage to your product or service – one that is readily apparent and meaningful to customers.

What sets you apart? How do you prove it to would-be customers? Is it easily explained, or must customers experience the product first before they understand its advantages?

Can you sustain this advantage over time? How significant is this “edge” to your customers? Will they pay a premium for products with this advantage – or be willing to take the risk of doing business with a start-up?

Because there’s a risk in buying from fledgling companies, your differentiation has to be compelling enough to customers to help them overcome the perceived risk in doing business with a company that might fail – a situation that could leave them unable to get service or spare parts.

You may also find it important to think through your differentiation strategy as a part of what it takes to recruit sales people, biz dev folks, or channel partners. Like angels they want to understand how doing business with you – or joining your company instead of others – will translate into money in their bank accounts.

Where Can You Get Help

Start by doing some homework online – there’s a huge amount of information scattered across the Web.

When you’re ready to engage in dialog or seek help from people, there are lots of resources for entrepreneurs – at least in major urban areas. Perhaps your state or country has entrepreneurial or economic development zones, with supporting incubation services. Maybe there are incubators with advisors in your city. Check out the community colleges to see if they offer classes in entrepreneurship.

Look for professional associations like Seattle’s Northwest Entrepreneur Network, or “universities” that are run periodically by leading angel networks. These associations are generally set up to share best practices, war stories, and help entrepreneurs connect with founders who’ve been successful with prior start-ups. They can also help introduce entrepreneurs to service providers who focus on the start-up world.

There are thousands of consultants who are willing and able to help – but figuring out how to pay them may be a challenge for very early stage companies.

And for people who really want to think through their revenue engine, there’s a wonderful book by serial entrepreneur Steven Gary Blank, The Four Steps to the Epiphany: Successful Strategies for Products that Win. There are many business books on the market, but this is one of the ones that’s most insightful for the special challenges of early stage ventures.