BIO: Andrew Pek is an internationally recognized authority on innovation, design thinking, and entrepreneurship.
STORY: When Andrew started his first business, he hired the best of the best who also came with high salary expectations. The startup could not handle the payroll, and so Andrew had to let almost everyone go.
LEARNING: Starting a business from scratch requires you to be smart and strategic. Have the proper organizational structure to support your business model.
“Fail fast so that you can keep on winning.”
Andrew Pek is an internationally recognized authority on innovation, design thinking, and entrepreneurship. From start-up to mature companies, Andrew has helped organizations such as Bayer, Citi Group, Pfizer, and Steelcase become more innovative.
Andrew has been invited to speak worldwide, and his views on innovative leaders, change management, and design thinking have been featured on ABC, NBC, CBS, Fox, The New York Times, Investor Business Daily, and Chicago Tribune.
Worst investment ever
When Andrew started his business, DXD Partners, a big design thinking and innovation consultancy, he decided to hire some of the most intelligent and most interesting people. He went for people he had a good affiliation with. Andrew believed that these people would take his business to the highest heights.
A payroll larger than he expected
While his hires were great, they also came with high expectations in terms of salary. Andrew invested a ton of money bringing them on board.
A bloated payroll combined with the market crash in 2008 created the perfect storm for Andrew. He couldn’t keep up with the payroll and had to go through the painful process of letting everyone go except for his administrative person. It was brutal.
Being more strategic when hiring people
Looking back, Andrew admits that he should have been more strategic with the people that he hired. He should have made sure they were the right fit in terms of experience, skills, and even salary expectations.
Starting a business from scratch requires you to be smart and strategic
When starting a business from scratch, understand what your customers want, have the right business model, and then develop the proper profitable structure.
A successful idea is desirable, doable, and viable
For your product or business idea to be successful, it should be desirable, doable, and viable. Besides understanding what your customers want, you should also have the proper organizational structure to support your business model. The wrong setup will affect the viability of your business.
6 top mistakes startups make
- Bad hiring decisions
- Poor management of time and people
- Ineffective teamwork and collaboration
- Waiting too long to start selling
- Weak accounting and finance
- Low product quality
Invest your time in understanding who your customer is, then come up with a minimum viable solution.
No. 1 goal for the next 12 months
Andrew’s number one goal for the next 12 months is to scale a new product that he is working on. His strategy is to scale it through partnerships and licensing agreements, his online program Consulting Unplugged, and other mentoring systems,
“Always stay present, dream big and make each day count.”
Andrew Stotz 00:01
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning in our community. We know that to win in investing, you must take risk, but to win big, you've got to reduce it. And I bet you're exposed to investment risk right now. To reduce it, go to my worst investment ever.com and download the risk reduction checklist I made specifically for you, my podcast listeners, based on the lessons I've learned from all of my guests, fellow risk takers, this is your worst podcast host Andrew Stotz, from a Stotz Academy, and I'm here with featured guest, Andrew Peck. Andrew, are you ready to rock,
Andrew Pek 00:44
rock and roll?
Andrew Stotz 00:47
Yes, something behind you for the audio for the people who are listening to the podcast and not viewing the video. There's a guitar behind Andrew. So let's rock and roll. Well, let me introduce you to the audience. Andrew Peck is an internationally recognized authority on innovation, design, thinking and entrepreneurship. From startup to mature companies. Andrew has helped organizations such as Bair, Citigroup, Pfizer, and Steelcase become more innovative. Andrew has been invited to speak worldwide. And his views on innovative leaders change management and design thinking have been featured on ABC, NBC, CBS, Fox, The New York Times investor Business Daily, and the Chicago Tribune. Goodness, Andrew, take a moment and introduce a little bit more about yourself.
Andrew Pek 01:44
Thank you, First, Andrew, for having me on your show. It is an absolute delight and pleasure to be here. Boy, when you listen to that sort of biographical sketch, I'm sort of embarrassed actually, you know, you work so hard to achieve these sorts of things. But really, I'd like your listeners to get to know me a little bit more personally and better. I live in New York, in the Hudson Valley area, just about 18 miles north of Manhattan have a beautiful wife, four kids, two of whom are have already left the house and out and doing their careers. And soon to be a proud owner of a Hungarian, visually energetic Hungarian v. sled dog. If you're familiar with
Andrew Stotz 02:27
that, I'm not familiar what does it look like?
Andrew Pek 02:30
It's kind of like a waimarama for those of you that German dog shorthaired. But it's kind of reddish, brownish color, very sort of lean, athletic body, which I love to exercise. I'm where I live in the Hudson Valley, there's all these trails. So it's great to keep yourself fit with a dog that is equally energetic. And why the Hungarian? Well, my parents are originally from Hungary, they were immigrants to the United States, they came to the US in the 1950s. They came to Cleveland, Ohio, which is a strong ethnic it, you know, Eastern European sort of hub, where I grew up, that's where I was born, but then came to New York been here for 37 years. professionally. Well, you kind of heard a little bit about that. I'm a dyed in the wool entrepreneur and innovator around design thinking innovation change management, been very privileged to work with some of the top corporations and top leaders on almost every major continent, with the exception of Antarctica. I've worked with some really interesting people and blessed along the way, I've written a few books on the subject of creativity and innovation, which is always fun and have my own podcast like you, which is like, really cool, because I get to hang out and talk to interesting people like yourself. So thanks for having me.
Andrew Stotz 03:51
Yeah, it's great to have you with us. So many different things that I had thought about, you know, my family immigrated from Germany to the US, but it was in 1839. They went to Pittsburgh. And then I grew up outside of Cleveland, in a little town called Hudson. But yes, all the communities of Cleveland are so many different ethnic groups. And, you know, that's one of the kind of cool things that I enjoyed about Cleveland. And yeah, the other thing I'm just thinking about, you know, in this day and age, innovation, you know, and design thinking and all this stuff, it's like, it's a huge subject area, I guess maybe you could just tell us just a little tidbit of something about what you've learned about that, or how we should think about that. You know, I'd love to hear, you know, some just any of any of the thoughts that you have about that subject.
Andrew Pek 04:45
Sure. I mean, it's, you know, in short, it's a discipline, discipline process. Oftentimes people think of design thinking or innovation as brainstorming, we go to the whiteboard and do all kinds of post it notes. Yes, there's an aspect of that, but In short, it's a discipline process of creativity and critical thinking structured, where you, you use market data insights, business data, cars, consumer insights to really sort of suss out what are the opportunities, and then through some creativity and critical thinking, make the right invest choices. Which is sort of ironic, because I know you'll be asking me, you know what my worst investment is, I was not practicing what I preach.
Andrew Stotz 05:30
So we all have our weaknesses at times.
Andrew Pek 05:32
Yes, exactly. The shoemakers. Children don't wear shoes, you know.
Andrew Stotz 05:39
So by the way, before we get into it, just tell the audience about your podcasts and what they should expect when they go there.
Andrew Pek 05:45
Yeah, so you know, as I mentioned, I'm a dyed in the wool consultant, and entrepreneur and author in the area of design, thinking and innovation. That's my sort of subject matter of expertise. But because I was a partner at Accenture many years ago. And I've been an advisor to many. And it's interesting, because years ago, because I teach at many different universities in the States, they asked me, would you teach a course like consulting, and I love that sort of challenge, because they said, there wasn't really anything around there for the brethren, if you will, and so and so that gave birth to a program, an online program and podcasts that I developed called consulting unplugged. So my website is consulting unplugged.com, where I speak to many interesting entrepreneurs, innovators, executives, advisors, designers, creatives, you name it, actors even, and how they, you know, use consultative skills to influence others to commit to action. And so it's great fun to get there, that sort of that behind the scenes look at some of the challenges that they face and whispering into very powerful influential executives and others, and how they support and advise them around their business challenge. so fascinating.
Andrew Stotz 07:07
Yeah. For the listeners out there, we'll have all that links to the podcast to the website, and all of that in the show notes. So check it out. Well, now it's time to share your worst investment ever. And since nobody ever goes into their worst investment, thinking it will be. Tell us a bit about the circumstances leading up to it. And then tell us your story.
Andrew Pek 07:31
You know, I gave us a lot of thought I said, Is it fair to say my first wife, because I was divorced. But we won't go there. I let me tell you about my worst investment ever. Because I really thought of this. It had huge financial consequences. But it really dealt with the wrong choices of people whom I had hired when I first started my business. Very interesting. So give you context. As I mentioned, I was a partner at Accenture I was used to I had global responsibility, big staff, big team, big budget, all that sort of thing. Then I went back into corporate life where I was responsible for innovation at Pfizer, same thing, really used to it really bright people that I was surrounded with an arsenal of resources at my beck and call. And so I was very naive. When I started my business DFC partners with focused on I thought, I'm going to build a big design thinking, innovation consultancy, right? And I said, I'm going to hire some of the smartest, most interesting people who I liked, had really good affiliation with and I brought them on board thinking we're going to do just gangbusters. But they had high expectations in terms of salary, wages income, I spent a ton of money investing in bringing them on board. And that combined with the market crash in 2008, it was like the perfect storm. You know, I couldn't believe it that I had no idea that trying to keep a payroll. I had about eight people. You could imagine that the wages you know, we did pretty well. I was the Rainmaker. I knew how to sell work, which was what my skill was, but to be able to sustain that and not have other rainmakers or other people, all great smart individuals. So it's nothing against them personally, but they were just not the right fit. And boy, oh boy, I learned the hard way, and had to go through the painful process of letting everyone go just about everyone, with the exception of my schedule an administrative person. It was brutal.
I can feel it.
Andrew Pek 09:51
Yeah. And when
Andrew Stotz 09:51
can you remember the day that you realize that you had to do that?
Andrew Pek 09:58
Yeah, it was a You know, February of 2009? Hmm. You know, the prior year, I had like, really incredible earnings head book coming out, you know, like, I was like on top of the world. And I had several contracts. I remember two or three very good relationships came to me and they said, Listen, we're gonna have to cancel. These are legal costs, you know, I but what negotiation power? Did I have? None. And it was just brutal. And then I was all of a sudden looking at six, seven months, no cash, no contract. You know, and it was like crickets, too, when you heard, nobody was returning calls, because everybody was scrambling at that period of time. I had a couple things like later in the year that like, Well, okay. I, you know, and of course, where does your concern go in the concerns of the people, the difficult conversations, my own personal finances, like holy smokes, it's just now I'm gonna have to really dip into savings I had on a lot of real estate at the time. I mean, it was like a house of cards. Tough.
Andrew Stotz 11:16
So how would you summarize what you learned from this?
Andrew Pek 11:20
Well, form follows function. What I did not do enough. And they alluded to that earlier practice what I knew in terms of business development, and innovation, you know, the essential to success and coming up with any new idea, business model, or otherwise, or product is what's desirable, doable and viable. I had, I think, understood, generally speaking, what customers wanted. But I didn't have the right organizational structure to support that the right resource and business model, because that affected the viability of my business. I remember one of the mentors who was supportive to my early work, Ken Blanchard, many people know about the one minute manager, one of the things I asked him when I was sitting in his office and San Diego, he, I said, Well, what did you learn? I was thinking he's gonna give me some extol some virtues on leadership, and, you know, following your heart, and he said, cash flow. And I like, wow, no kidding. And that's what I learned is like, if I had spent more time really understanding what my customers want, what's the right business model, which will support it, and then coming up with the right profitable structure, it is so essential when you're thinking about starting something from scratch without any seed money. You know, if you have a technology, maybe you can raise money and get some capital going, and you can mitigate some of that risk. But even then, you have to be smart about how am I going to be successful.
Andrew Stotz 12:57
All the capital in the world can't overpower negative cash flow, eventually negative cash flow when?
Andrew Pek 13:05
So I mean, there's a lot of there's, you know, a lot of great ideas there. But, you know, actualizing them is another thing altogether.
Andrew Stotz 13:15
So let me summarize some of the things I take away from your story. I've been feverishly writing now, what was the thing is a doable desire with the three things you said there?
Andrew Pek 13:26
The dual, desirable, doable and viable, desirable, as I'm really, who am I serving? And what did they want? Or what is unmet to them? Do is the you know, the the capabilities of technology, the resources to do it, right? Oh, I can't actually serve this need. Yeah. And the viable is like, Can I make some money on this? You know, how do I monetize that now? It's, yeah, it's critical to think in that way. And of course, I didn't apply that in. You know, I went more from the heart, I brought in people I loved. And we had a great time, but it was, it was a mess.
Andrew Stotz 14:10
Yes. So some of the things that I'll share my worst investment ever, in fact, and that was I don't haven't shared it much, I should probably share it more. But my worst investment ever was a friend of mine who came to me with a very good idea of a internet based company. And I invested in it. And he worked through it. And eventually there came a time that I just realized that if we were going to take this to the next level, we need to raise three to 5 million US minimum, to compete with the big boys. And most importantly, he had to be the right person to execute on the plan. And I kind of realized he just wasn't that. So it really got me to think about what went wrong for me and I always describe it. Like this, first you need trust, you're going to invest in a startup or do a startup. And I definitely trusted him and I still do to this day. So I had trust. If you don't have trust, you might as well stop right there. First I had trust. And the next question is the idea. is the idea any good? Well, the idea was pretty good. The next question is, okay, if you gotta trust in the ideas good. Can they execute? And if that third, so it's a little bit a little bit like what you're talking about. And then the fourth thing, and this is all kind of pre revenue, startup stuff, so I haven't even thought about the product fit, you know, what you're already doing in some of that. But then the last thing is, this is their capital, or am I the only capital provider here. And I realized that you get trapped if you're the only capital provider. Now, if it's just your company, you have no choice, but just to retreat, and, you know, take care of the home base. So that's a first thing that you reminded me of, I think the other thing is, I, as an analyst, as a financial analyst, all my career I build a successful career working for investment banks. And when I quit to set up my own company, I thought I can figure this out. Yeah, it's easy, you know, come on, how difficult can it be? Right? starting my own business was way more difficult than I thought, my core premise of what I thought I was going to sell, I went out to the market. And I proposed that I offered it, and I got zero sales. And I realized, there was a little thing I missed here that these guys really can't pay for this from some independent startup company. And that brings me to the final thing, which is, I've had a lot of people come on the show, and they've talked about losing money in startups. So I decided recently to go more deep into that, and I went to all of the episodes that were related to startups, I try to find out if there's some commonalities. And so here they are. And I, I saw some of them and what you said, So number one, most common mistake of startup is bad hiring decisions. The second most common mistake of the startups that I've interviewed is poor management of time, and people. Number three, ineffective teamwork, and collaboration. Number four, my absolute favorite, waited too long to start selling. Number five is weak accounting and finance. And number six is low product quality. So I heard some of those come through as I listened to you. And so I brought that list up to revisit it, but you have any thoughts on the things that I've just shown?
Andrew Pek 17:35
Yeah, no, absolutely. It's brilliant that if you did the reduction sauce, that's exactly what would be left in the pan, you know, you'd see those aspects in all and I experienced them, and, and even to this day, you know, remember that and still try to work very hard and try to apply that same thinking, because it's easy to sort of get caught in that same loop. Right, huh. So that's what I love about your, you know, when you fail fast, right, you know, so that you can keep on winning, you're gonna make mistakes. And that is, I think one of the essential lessons is forgive yourself, hopefully, it's not too catastrophic, that you can recover. Yeah, but but try not to repeat them?
Andrew Stotz 18:23
Well, you know, that's the benefit of this podcast is that we get to go through that. And I think the other thing is that it helps people to understand why they should listen to you. And I believe that the person that comes on this podcast, is willing to go through and step through their mistakes, evaluate them. And I believe that, that tells us that that person's a better person to rely on than somebody who's just talking about the winners. So for the listeners out there, you know, listen up, get in touch with Andrew, and all the informations in the shownotes. So feel free now, based upon what you learn from this story, and what you continue to learn what one action would you recommend our listeners take to avoid suffering the same fate? I can just imagine some people out there that are right at the cusp of starting their own business.
Andrew Pek 19:12
Right, right. No, exactly. I, you know, again, I come back to that Venn diagram. really understanding who your customer is, you know, who is it that you know, you can provide a service to in grasping that it's important to invest that time to grasp that and I like to sort of refer to them as your ideal avatar, right? That you are trying to support? And then say, Alright, what is it going to take and come up with the minimum viable solution to that I have a tendency to get away with my imagination run some mock. And I think of all the, you know, elegant possibilities, that's partially because of my creativity. And then but also the experiences that I've had I've had at my beck and call big organizations or workforce, so they have plenty of resources. You can tap into when you try to do it on your own, keep it simple. And then say, Alright, how can I make money on this in? And even if even if it's part of your strategies as a loss leader, you know that how is it going to turn a profit? Eventually? Yep. So if
Andrew Stotz 20:20
if creativity or sorry if curiosity killed the cat tivity creativity killed the startup. Right?
Andrew Pek 20:29
It's exactly right. Nobody, you know, I, you know, I've had plenty of great brainstorming sessions and you know, pizza and bottles of wine, you know, come on, you know, things that would save the world. You know, but then, you know, when you sober up, so to speak the next day and say, Alright, shoot, how am I going to make me back
Andrew Stotz 20:47
Andrew Stotz 20:50
Fantastic. All right. Last question. What's your number one goal for the next 12 months?
Andrew Pek 20:54
Well, my number one goal is exactly what you know, the lesson is to think very simply, how am I going to scale and monetize a solution. So I'm in the process, I have a very good product. But it's not yet widely known. So I'm coming up with a strategy to scale it with through partnerships and licensing agreements, a my online program consulting unplugged, and to support that through some other mentoring systems, much like you, I am, you know, often referred to as the consultants consultant. And so I want to empower others to help apply some of these lessons in efficient sorts of ways. And so my goal is to scale these products through these different channels in a profitable way.
Andrew Stotz 21:43
And that's the key in a profitable way. Alright, listeners, there you have it, another story of loss to keep you winning. My number one goal for the next 12 months is to help you, my listener to reduce risk in your life. So go to my worst investment ever.com right now and download the risk reduction checklist and see how you measure up. As we conclude, Andrew, I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?
Andrew Pek 22:22
Well, I should do you know, always stay present, dream big and make each day count.
Andrew Stotz 22:30
Amen. I'll leave it at that. That's a wrap on another great story to help us create, grow and protect our well fellow risk takers. This is your worst podcast host Andrew Stotz say. I'll see you on the upside.
Connect with Andrew Pek
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points