This email is both humorous, sad, joyous - and extremely telling of our times .. all at the same time.

I’m paying you in equity, so technically I’m paying you a fortune since it’ll be worth millions!

Every web designer or developer has heard a version of this from someone who is going to make ‘the next big thing’. And, if you’ve been around for a while, you have bought into a truly charming individual (who has the best intentions, they really do), and have wasted many hours working for free on something that will never go anywhere.

Should you Run for the Hills?

Everyone knows that 95% of web startups fail.

(Actually, I made up the 95% fail rate. BUT I’ve spoken to many many talented designer/developers and there are very few of them that are making profits with any web startup they’ve been involved in, so let’s say it’s most likely very very high.

62% of statistics are made up on the spot, so I apologize for misleading you, but I couldn’t actually find a good statistic on this… it turns out the internet can’t tell you everything afterall).

Web Apps = Work, Lots of It

Creating a new web application is a lot of work, and so very different from a plain corporate website: they’re often valued on their potential (and, in most cases, on the creator’s enthusiasm for its potential).

While I’ve found quite a few questionnaires for building a corporate websites, there doesn’t seem to be a questionnaire for a web application.

Ask the Questions

I am actually a designer of web applications, so I wanted a questionnaire. Here are a list of questions I think you should ask before getting involved in a new web application, whether they’re paying you in cash (hopefully), in equity (probably offered) or both (likely).

And, if I forgot anything integral, let me know, and I’ll add them in. Then maybe we’ll all stop taking stupid risks for idiotic projects.

1. What Does It Do (in 10 Words or Less)?

If they can’t explain it, it’s too complicated. No compromise.

If they haven’t focused their concept and they’re touting that it will do everything and cook you pasta, you’re probably looking at feature glut, constant revision, and low user acceptance rates. It’s a heart-ache waiting to happen.

2. What makes it Unique from Competitors (in 10 Words or Less)?

Being unique is important. Not only is it more interesting to create something unique, it’s very difficult to dislodge existing market players in a market they’re comfortable in. Especially when your benefactor has a tight budget.

3. What is your Plan for Profit?

Most businesses need to make money, even if it’s not quite profit just yet. Ask for their most modest estimate. Chances are, it’ll still be higher than the actual, but you can get a good guage of whether they’ve got their feet on the ground.

4. Who would use it?

Who are their customers? How many people total in that market segment and what penetration do you plan on having? You want to test if they have any knowledge of how products work and how they’re targeted.

You also want to test if they’ve really thought about who would use their product and why.

5. What is your Launch Plan?

Do they have a budget for marketing? Do they understand it is a full time job to make an application ’sticky’?

Within this, you’ll need to find out how much time are they going to be spending promoting the app.

The most successful web start-upers work very hard to promote their stuff; they build their launch plan right into their software and have the staying power to make it happen.

6. When are you Planning on Launching?

Deadlines will creep up, and it’s best if they’re a little bit flexible. If the date isn’t flexible, see if the features list is. You can’t have both!

Again, you’re looking for someone who has reasonable expectation on how much work something is, and makes sure there’s time for bug fixing and quality checks. If you have other projects on, you want to make sure they understand your other responsibilities (especially if they’re not paying you).

7. What is your Growth Plan?

By how much do you plan on growing in the first year? Second? I always look for people with realistic expectations, and those that mention that, after a certain length of time they’ll re-evaluate. That is the key: it’s not whether they’re accurate, it’s whether they have realistic expectations and plan on revising their strategy as they go.

8. What is your Software Philosophy?

Everyone works in different ways. That’s good. When you work on a web app though, it’s never done. If you’re going to be working on this continually, you want to work with someone who has a similar work philosophy.

Find out if they’re perfectionists with every bell and whistle in there from the beginning. Are they more interested in simple progressive enhancement? If your style is different from theirs, it’s going to make your life miserable.

9. Do you Plan on Doing any User Testing?

Web apps are so different from a company brochure website that user testing should be required. If they don’t plan on doing some, gently push at least some informal testing within their target market.

Suggest A/B testing to improve conversion rates, decrease bounce rates and improve any metric that will make the application better!

10a. (If you’re a Designer) Who’s the Developer on this Project?

For a designer, there’s nothing that makes working on a web app more enjoyable than working with a talented developer. They can set up your environment and make your css/html slide right into their backend.

They confer with you throughout the process to make sure that your work fits with theirs, and they’re so creative when it comes to creating really amazing user experiences. They also are a wealth of ideas. If you have a great relationship with one, they can perform miracles. Dreams do come true, even with small budgets and time frames!

10b. (If you’re the Developer) Who is the Designer?

Having a good designer is equally important. One that knows UX and can integrate a lot of those standards we all care about into their original designs. This means less restructuring for a developer later.

When you have a good relationship with the designer you can easily negotiate changes that make your life easier as often there’s multiple design solutions to a problem.

They’ll also often stem off feature creep. In essence, with designer and developer in cohorts, it’s now 2 against 1, and while you’re not going to win every battle, your odds have gone up!

11. How much Time do you Need From Me?

It’s an interesting one: When you’re involved in start-ups, it’s ongoing. It will always be ongoing if things are going well. Have they planned for an ongoing dev/design schedule?

12. Let’s Talk Money

Money is always a problem with start ups. There actually isn’t any money yet, so often with small projects they have very tight budgets (and often funded by the same individual who is hiring you), but you should still demand what you’re worth.

Even if it is an interesting project, you have to weigh that against taking on full-paid work. Your time is not free, so make sure you calculate your ‘opportunity-to-do-other-work’ costs alongside what you are charging them.

Sometimes if I find it to be a really exciting project, I’ll give them a lower rate, but never lower your prices out of pressure from them.

Another warning bell is the ’salesman’ who constantly tries to lower your quotes. After a few bad experiences, I now never lower my rates from what I give as my original quote.

If they don’t like it, they can go elsewhere (of course, occasionally you’re gutted that you missed out on something cool, but I guarantee that most of the time they’ll accept, as long as you’re being reasonable and have explained where your numbers have come from).

13. (If they want to Pay you in Equity) Would they Consider a Split?

Most in our industry know that 95% of startups never turn a profit. So you are actually often times shouldering all the risk by working for free. The thing is: it’s their project so shouldn’t they be the ones taking the risk?

By asking to be paid a portion upfront, it shows that they are now monetarily committed to working hard on this too. That’s a big thing– now they are invested and will value your work.

Some people suggest you set it up so that if, after a certain length of time without profit, you’ll get paid. This is interesting, in concept at least. Setting it up so that when there’s no profit after a year, you get paid, is tricky– you’d have to have a very frank, open relationship.

Do you have access to their books? What will stop them from just disappearing? If they didn’t have any money to start off with and haven’t made any money in the last year, what makes you think they’ll then have money to pay you?

14. Why do you Think I am Best for this Job?

I would love to ask this question: why have you approached me? Is it because 20 other designers have turned you down? Is it because something I’ve done has inspired you? Is it because you have heard great things about working with me?

15. Why do you Think you are the Best for this App?

I want to hear that a) it’s a problem they’ve had that they’d like to solve, b) they’re absolutely passionate about the subject, and c) it’s not just about ’something to do’ or ‘a quick way to get rich’.

I like to work with people who love what they do (shameless plug: I’m working with a triathelete sports enthusiast who wants to make it easy to find other people that like the same sports. And really, he wants this platform to work because he wants to use it).

Final Thoughts

Some of these questions are hard to ask.

No one likes asking hard questions, but working on a web app is hard too. Having a frank and direct relationship with a client from the start is immensely valuable.

I have found that when you start your relationship honestly, you’re much more capable of working towards the betterment of the app, having valuable arguments rather than catering to the egos of the individuals involved.

While I believe these are important questions, they’re also things you are better off talking directly to them about, integrating them into your discussions.

Good luck to all of you in your web app endeavours!

(Editor’s note: Greg Collier is the founder and CEO of Geebo.com, an online classified advertising site. He submitted this story to VentureBeat.)

When I launched Geebo.com in May 2000, the goal was simple: Provide a web-based alternative to newspaper advertising. The newspaper industry was my Goliath. That wouldn’t last long, though.

Within a few months, I saw Craigslist. I was surprised, at the time, by what I saw as its weaknesses: An outdated, all-text interface and the inclusion of “erotic” ads.

Over the next few years, of course, Craigslist grew to dominate the online community classifieds market.  Although it hasn’t always been easy operate in its shadow, Geebo.com also expanded – to 140 communities – and turned a profit. If there’s anything we have learned along the way, it is not to compete on the same terms. We do not try to be Craigslist. In fact, while the services we provide are similar, our approach could not be more different.

Holding your own against an industry giant is a tall order, but it’s not impossible. If you’re facing your own Goliath, here are a few ways to stay competitive.

Differentiate Yourself - Rather than emulate the competition, take advantage of what you perceive as their weaknesses. For example, we monitor the ads at Geebo, so we are not likely to attract the legal scrutiny Craigslist has encountered. We also periodically update both the user interface and functionality of our site and embrace other platforms (including Twitter, Facebook and mobile technology platforms). And we have developed several major corporate partnerships.

Take Alternate Routes - When you are steering a startup, or struggling in the shadow of a Goliath, traditional marketing strategies can be too expensive. One method we developed early on has turned out to be a great alternative. Advertising costs were sky-high during the dot-com rush, so we decided on philanthropy as an alternative approach to raising our profile within the community.

Our first donations were made to the Sacramento Boys and Girls Club, Sierra Adoption Services, Mustard Seed School, and the Child & Family Institute. As it turned out, the television news coverage we received was more valuable than paid ads would have been.

Today we have a robust marketing plan, yet we continue to donate. All of this costs us very little, and it helps build an image that is consistent with our community focus.

Give Great Service – One of the advantages of being small is the ability to get to know your customers. Smaller companies have no reason not to shine in this area. At Geebo, we do this by providing live customer service and monitoring the activity on our site.

A few months ago, we detected what looked like a fraudulent job posting on the site. I immediately called the credit card owner to let him know. I happened to catch him in Hawaii, in the middle of the night, before either he or his bank knew that his card had been stolen. Despite the late hour, this man was incredibly grateful. There is no doubt in my mind that this kind of service builds customer loyalty.

Offer a Test Drive - When you have a great product or service, your first inclination might be to build a mammoth sales force. In the shadow of a Goliath, however, this kind of expense could put you out of business before you realize any significant increase in market share.

We offer large organizations a free trial period as a beta partner, posting their listings free of charge for several months. After they have had a chance to realize the benefits, we convert them to paid accounts – with an 80 percent success rate. And retention of those customers is better than it would be through traditional sales.

Realize you don’t need to beat Goliath - Not every Goliath will fall – and you really don’t need that in order to succeed. Carve out a successful niche or two and, even in a market with a dominant player, your company can still record a healthy profit and a solid position.

Companies: craigslist, geebo

Shared by Thomas Eskebaek
very impressive technology - wonder how autonomous they are

Shared by Thomas Eskebaek
Another very fascinating animation - this time over the concept of time and how different perspectives on time greatly influence our lives. Great view!

The idea that “the best product doesn’t always win” is something that gets repeated fairly often, but Phil Libin, chief executive of notekeeping and memory aid startup Evernote, declared recently that it’s “complete and utter bullshit, totally wrong, totally pernicious.”

“Anyone who’s telling you this wants you to fail,” he added.

Libin was speaking last week at the Founder Showcase, a gathering of graduates from the Founder Institute for training startups. The video of his talk is now viewable on Vimeo, and I have embedded it below.

So, okay, it is literally true that the best product doesn’t always win. However, when people make that statement to entrepreneurs, Libin argued, they’re actually trying to say that you need to divide your resources between building a good product and other things like marketing. Evernote, on the other hand, has found that it pays off to invest all of its money on product, because if you’ve got a good product, “almost everything else comes for free.” And the company has a very simple business model:

1. Make an amazingly great product.
2. Charge money for it.

Libin has offered versions of this talk before, where he goes over strategies for building a “freemium” business combining free and premium services (his photo above is from the Freemium Summit). During the Founder Institute talk, he presented specific numbers about how Evernote is doing:

• Less than two years after launching, it has more than 3 million users. It’s gaining nearly 10,000 new users per day.
• Evernote makes between $300,000 and $400,000 per month on premium subscriptions.
• More than 68,000 percent of its customers, or 2 percent of its total userbase, has signed up for a premium account.
• Licensing revenue accounts for between $30,000 and $40,000 a month. It was once the majority of Evernote’s revenue, but subscriptions have grown more quickly.
• As users stick with Evernote for longer and longer periods of time, they’re more and more likely to sign up for a premium account. Or as Libin put it, “The longer you use it, the more valuable it gets.”

Founder Showcase – Phil Libin Keynote from Adeo Ressi on Vimeo.

Don’t miss MobileBeat 2010, VentureBeat’s conference on the future of mobile. The theme: “The year of the superphone and who will profit.” Now expanded to two days, MobileBeat 2010 will take place on July 12-13 at The Palace Hotel in San Francisco. Early-bird pricing is available until May 15. For complete conference details, or to apply for the MobileBeat Startup Competition, click here.

Companies: Evernote

People: Phil Libin

I’ve had this conversation so many times it’s painful.  A friend calls me up from “you name it” city: Boston, New York, Chicago, San Francisco and says, “I’m thinking about moving to Los Angeles (or SF, NY, etc) and I’d love to start interviewing.  Let me know if you hear of anything interesting.”

I guess when I hear things like this I revert back to my shock jock instincts and say, “Don’t bother.  If you’re committed to living in New York then move there.  Otherwise you’re not serious and you’ll never get the right job so don’t bother.”  Definitely gets shock value.  At least I have their attention.

Why do I give this blunt advice?

Lots of reasons.  Let’s start with the obvious.  Finding the best jobs takes a lot of commitment to taking many different networking meetings with executives, recruiters, entrepreneurs, VC’s, investment bankers, etc.  The best jobs (as you know) are found through personal connections.  The best jobs are the ones that have not already been put on a job board.  The best jobs are the ones that certainly haven’t gone out to an executive recruiter.  The reason these are the “best” jobs for you is that once it goes to an executive recruiter there will be a stack of 100 prospective recruits, 20 amazingly qualified resumes that will have phone or in-person interviews with the recruiter of which the company will meet 5-6.  So unless your last job is a mirror image of your next then good luck with those odds.

So it takes “spade work” to find the right job.  And that ain’t gonna happen from your LinkedIn messages to buddies you haven’t spoken to in 3 years.  It’s not even going to happen from your 3-day exploratory trips every 6-8 weeks.  It takes a sustained effort to get the right job.  Sure, you can land “a” job, just not “the” job.

And there are other reasons.

If you REALLY think you’re committed to Los Angeles – then just move there.  Make a life decision.  None of this wishy-washy hedging your bets.  I’ve heard every excuse – believe me.  ”Well I don’t want to move to LA only to find out that I get a job in San Fran and now I have to move twice.  I mean I’d love to live in LA but what I really want is the perfect job wherever that is.”  Yawn.  OK, so you’re going to sub optimize your job opportunities in both LA and SF?  That’s a great strategy.

Now, I will give a carve out for young execs who really don’t care about geography and are junior enough that the perfect company or job doesn’t always matter.  You can look remotely.  But if you’re more senior fuggetaboutit.  I recently spoke with a 40 year old who was thinking about moving back to LA.  Really charming guy with great experience.  And he had some complicating factors that didn’t make it easy to just move here.  But here is what he told me, “I know that eventually I want to live back in LA.  100%.  That’s where my family is.”

So my feedback was, “Then taking a job in NY right now is really life dumb.  You might find a great job but it might keep you in NYC for the next 7-10 years if it goes really well.  At least 3-5.  Why do that if you KNOW you want to move back to LA.  Choose life.  Carpe diem.”

And there are more practical reasons.  Anybody who has any operational experience and common sense will never want to hire you anyways.  Why?  If you have operational experience then you’ve likely already been burned by somebody else just like yourself wanting to get hired for a remote job.  Here’s a few flavors:

- “I’m going to move to LA but my kids are in school.  As soon as the school year ends they’re going to move out.”  Code for, “I’m going to see how I like the job for 6 months.  I can’t drag my family to LA and then have to drag them back again if I don’t like the job.”  Fair enough.  I can understand the logic.  But I want people that I KNOW are committed to living in the city I’m hiring.  If I’m interviewing and your resume doesn’t say “California” on it somewhere I’ll always ask, “did you grow up in CA?  Do you have family here?  Why would you want to live in LA?”  No plausible motive = no job.  And if I can find an equivalent candidate already living here you can be sure you’re on the bottom of that stack.

- “I’m going to move my family to LA but I need to sell the house first.  I can’t afford to take a loss on it.  So I’ll commute for the first 6-12 months.”  Code for, “OK, I really DO have to sell my house but I also have a great excuse to hedge my bets and see whether I really like the company.  Yeah, I know I could probably rent the house out – but why should I do that?  I don’t mind commuting.”  Long distance, long-term commuting usually = unhappy family life = unhappy employee = less productive employee = unhappy you.

- “My wife is finishing up her masters at University of Chicago.  So I can’t move until she finishes.”  Again, understandable.  If she’s not up for transferring to UCLA – that’s fine.  Call me in 2 years when she’s been graduated.

But wait, there’s more!

Moving when you have a family is a big, fat hassle.  If your husband is going to relo with you to Boston then there are many hassles.  He’ll need to find a job.  You’ll need to find a nanny.  You’ll have to figure out where your kids will need to go to school.  You won’t know the other parents so you’ll have to put in a huge effort.  You won’t know which parts of town to live in and you’ll be in temporary accommodations for a couple of months while you search for your permanent spot.

Your wife doesn’t work?  You sure are going to enjoy those nights you have to stay in the office until 10pm and then come home to your wife who has no friends locally and is bored.  And that business trip to SF for a week to meet customers?  Fun.

How do I “know” all this?  I’ve been burned at least 3 times by people who were moving.  I’ve moved enough to know how distracting the first few months are.  I tell people all the time and, like many of you, they kind of doubt me.  I met a company who was raising money and was going to relo the CEO from the US to the UK and they wanted me to invest.  He and his young family had never lived abroad.  NFW.  I said to them, literally, “Your wife won’t be able to work there easily – no papers.  She’ll enjoy the first 2 months of exploring around and then you’re dead.  She’ll be bored and unhappy.  You’ll be under pressure every night to get home early.  After a year if she hasn’t been able to work she’ll be angling for you to move back to the States.”  And guess what?  Obvious, huh.  It happened exactly this way with this company.

Some things are so predictable.

If you’re deeply committed to living in a city you’ll move there.  If you really care about having the “perfect” job (not everybody does) then being in-market increases your probability 100x.  Choose life.  Choose your location.  Move there.  Get settled in.  Take the time to know the city.  Get your partner bedded down and comfortable with the place without the stress of your new work hours.  And then set out to shake every hand and kiss every baby in town until you’ve networked yourself into the idea role.

Good luck.

UPDATE: Just since the comment is coming up repeatedly in the comments section – I specially carved out “young people” from my argument.  Most young people are infinitely mobile.  Also, I need to carve out mid-level developers.  They tend to be fairly mobile.  Finally, I should carve out international people.  I talk about that in the comments.

So that leaves senior execs: Directors, VP, CEO types.  This is the group I’m mostly talking about.

Today quite a variety of entrepreneurs presented their business ideas at my Online Strategy Roundtables. Several times I brought up how precious our time is and we need to treat it as such. So many people become enamored with technology and the building of the product before they ever think to validate that this is a business service or product that a customer wants to pay for.

I've seen too many entrepreneurs wasting precious years of their lives, and I sincerely try to discourage anyone from wasting his or her time on an idea that does not have legs based on concrete customer feedback. One of the entrepreneurs said he thinks of me as the Simon Cowell for entrepreneurs after listening to some recordings of previous roundtables. I think my advice is only valuable if I'm being honest and direct. Plus, I don't want to waste my precious time either!

Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies and writes a business blog, Sramana Mitra on Strategy. She has a master's degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Her Entrepreneur Journeys book series, Entrepreneur Journeys, Bootstrapping: Weapon Of Mass Reconstruction, Positioning: How To Test, Validate, and Bring Your Idea To Market and her latest volume Innovation: Need Of The Hour, as well as Vision India 2020, are all available from Amazon. Mitra is also a columnist for Forbes and runs the 1M/1M initiative.

Dawson Fercho started off by introducing Temetic Research, an software services company that offers advanced tools based on digital sociology that can offer a deeper understanding of social media buzz (beyond just words) than social listening and monitoring products currently do. Launched in January, they already have half a dozen communications firms who deal in brand awareness and management on board as clients. They offer a base analysis report as a service, and they hope those who like the report will become clients of either the software products or of their ongoing service.

Dawson asked if he should position his business as being similar to social monitoring to help potential clients fit them into a category. He tells me there are several metrics that his technology is able to track because of the algorithmic sophistication that others cannot, so my advice is to lead with those metrics to differentiate. He needs to ask customers if they are interested in measuring X, Y, and Z to validate that these metrics are indeed of interest to them.

Dawson said all of their money is going into development, and my advice is to ramp up the base analysis service to help fund their development and continue to bootstrap. I also suggested he explore partnering with SaaS PR businesses like Vocus PR who I think will find this technology intriguing. I asked him to check out my case study on Vocus PR.

Next, Griffin Boyce presented PsycView, a software to help eliminate the distance between doctors and patients. Griffin discussed how this software can help doctors manage patients over great distances, and also how patients can use it to get treatment from rural and frontier areas. Griffin is trying to do too many things at once with his business and is going in too many directions. He spoke about having an iPhone application to serve people living in frontier areas, but the iPhone is not widely used in such places. He said he thinks addicts are a strong segment to target, but I don't think people in the depths of addiction will be checking their phones for solutions.

I think there could be something interesting in Griffin's pool of ideas, but he needs to do a lot more focused work to figure out what it is. I told him it's like an uncut diamond that still needs to be shaped and pared down to get to the gem. He needs to focus his software on doing one thing really well - zero in on one idea, a specific disease or whatever. Spraying and praying does not work. I suggest using the Clarify Your Story framework to focus.

Gustavo Hernando was up next to present daFoodie, a website that allows diners in Orlando to share photos of their plate of food at a restaurant to help others decide where to eat. He sees the sharing of such photos as a growing trend and does not plan to include ratings or reviews.

I'm very concerned that there is no reasonable way to make money doing this. I question how many people base their dining decision on photos alone rather than reviews. Perhaps he could partner with some other review sites, but what will keep them from doing this themselves? I hate to discourage any entrepreneur, but Gustavo may be better off using his considerable skills elsewhere. It is very expensive to go to market in this area; OpenTable has spent a ton of money. I hope Gustavo will find an opportunity that will monetize better for him.

Then we had Rudy Santamaria who has designed a line of kids clothing called Look Mommy! Clothing. These clothes convey positive images depicting what a child would like to be when he or she grows up. He has sold 750 of these shirts by hand in the past six months, validating that this is something parents are interested in buying for their child. If he would like this business to scale, the next step is to figure out how to sell these shirts without Rudy being physically involved in the process. Since baseball player and rock star shirts are his best selling, I suggest he start exploring what the best channels are for each category and remain very focused on each niche. Personally, I'm aware of a high level effort to interest young girls in science, so I suggested he do a Look Mommy, I'm A Scientist design for girls and target the organizations that are leading this movement.

Up last was Matt Walters for Sports Spray, a line of water resistant spray products to help amateur and professional athletes excel. His product line includes a stick spray (to enhance grip), slip spray (for under padding and blisters), no sweat spray (antiperspirant for hands or feet), more sweat spray (enhances workout and weight loss), and shoe spray (to keep from slipping). He is ready to go to market but is wondering if he should lead with a product whose competition retailers would already be familiar with or should he introduce the slip spray product, which is totally unique.

I suggest he start with the new, more differentiated product, the slip spray, and manufacture that first. He should focus all the branding around this new product and getting it reviewed by bloggers and social media influencers interested in sports. We discussed very targeted advertising to coaches since he believes it is a cost-effective and reasonably priced channel. I suggested he validates that the demand for this product exists by selling online before chasing retailers to get broader distribution.

I started doing my free Online Strategy Roundtables for entrepreneurs in the fall of 2008. These roundtables are the cornerstone programming of a global initiative that I have started called One Million by One Million (1M/1M). Its mission is to help a million entrepreneurs globally to reach $1 million in revenue and beyond, build $1 trillion in sustainable global GDP, and create 10 million jobs. In 1M/1M, I teach the EJ Methodology which is based on my Entrepreneur Journeys research, and emphasize bootstrapping, idea validation, and crisp positioning as some of the core principles of building strong fundamentals in early stage ventures.

In addition, we are offering entrepreneurs access to investors and customers through our substantial channels. Our newly launched 1M/1M Incubation Radar series this week profiles La Grande Dame, and you can also read about several other 1M/1M entrepreneurs on my Forbes column, These Companies Are Built To Enjoy.

You can find the recording of this roundtable session here. Recordings of previous roundtables are all available here. You can register for the next roundtable here.

People make strategy much harder than it needs to be. For some, the problem is that they focus too much on the tools: environmental scans, SWOT analyses, customer analyses, competitor analyses, financial modeling, and so on. Other people get into trouble because they think it's all about the broad, conceptual, future-oriented, big picture stuff — not to be confused with tactics. Still other times, people think that strategy is what happens when we think about changing directions.

The reality is that strategy is at some level about all those things, and you can't do a satisfactory job with your analysis alone, or your big picture alone, or your changes alone. You have to do a bit of work on all of them.

That's actually a lot easier that it sounds. My preferred approach is to treat strategy- making as developing a set of answers to five interlinked questions. The questions — which cascade logically from the first to the last — are as follows:

1. What are our broad aspirations for our organization & the concrete goals against which we can measure our progress?
2. Across the potential field available to us, where will we choose to play and not play?
3. In our chosen place to play, how will we choose to win against the competitors there?
4. What capabilities are necessary to build and maintain to win in our chosen manner?
5. What management systems are necessary to operate to build and maintain the key capabilities?

The trick is to have five answers that are consistent with one another and actually reinforce one another. Aspirations & Goals to be a great international player and a Where to Play response that is domestic doesn't match well with a How to Win on the basis of proprietary R&D — because the competitors with global aspirations will almost certainly out-invest and outflank you. Winning on the basis of superior distribution is unlikely to happen if you don't have a concrete plan to build the capabilities and a management system to maintain them.

So where do you start? Most organizations start at the top with some kind of mission/vision exercise that drives participants around the bend. The reason it drives them crazy is that it is extremely difficult to create a meaningful aspiration/mission/vision in the absence of some idea Where to Play and How to Win. That is why those conversations tend to go around in circles with nobody knowing now to actually agree on anything. Any mission or vision will do when you don't have a thought-through Where to Play or How to Win.

That said, if you think entirely about Where to Play and How to Win without consideration of Aspirations & Goals, you may end up with a strategy that is effective for its intended goal but isn't something you would actually want.

What this means is that to create a strategy, you have to iterate — think a little bit about Aspirations & Goals, then a little bit about Where to Play and How to Win, then back to Aspirations & Goals to check and modify, then down to Capabilities and Management Systems to check whether it is really doable, then back up again to modify accordingly.

While it may sound a bit daunting, iterating like this actually makes strategy easier. It will save you from endless visioning exercises, misdirected SWOT analyses, and lots of heroically uninformed big thinking. Crafting your strategy in relatively small and concrete chunks and honing the answers to the five questions through iteration will get you a better strategy, with much less pain and wasted time.