Finding failure

Executive Summary
Executive. Mike DeLazzer Industry. Technology, retail Key. Failures where money is lost money make for the best business lessons.

It wasn't exactly an epiphany, but Mike DeLazzer got his multimillion-dollar business idea standing in line at a Chicago Blockbuster Video store in the late 1990s.
The line was so long DeLazzer, an admitted Type-A with little patience, started to lose his temper. “Help,” he screamed sarcastically, “I'm trapped in a Blockbuster!”

A few minutes later, recalls DeLazzer, having not moved up at all, he got really angry. “I started screaming like a madman, 'someone should put you out of business,'” he says. “Then I said 'I should put you out of business.'”

It took several years, his life savings and lots of starts and stops, but DeLazzer actually did create something that played a key role in Blockbuster's demise. That invention: Redbox, a vending machine that rents DVD movies and video games.

DeLazzer had been in the import business, where he sold speakers and other tech products. He and a business partner and co-founder, Franz Kuehnrich, created the first version of a Redbox machine through their company GetAMovie Inc. in 2001.

They initially competed with McDonald's, in a race to get to market first. Later DeLazzer and his partners teamed up with McDonald's, where the entrepreneurs brought the technology and McDonalds' brought scale. Today Redbox, under different corporate owners, has more than 45,000 self-kiosks nationwide, in partnerships with several large chains, including McDonald's, Walgreen Co., Wal-Mart and CVS.

A Chicago native who played football at the University of New Mexico, DeLazzer sold his ownership in Redbox in 2005. He and his wife bought a house on Marco Island, and he got into several other business ventures. The list includes a series of tennis training DVDs and SafeGuard Shutters, a Fort Myers manufacturer and installer of hurricane shutters that worked primarily with Home Depot.

The shutter business, he says, was one of several miserable and expensive business failures. “I lost so much money in that shutter company, I'm never buying another shutter,” he says. “Now I have hurricane glass windows in our home.”

DeLazzer, inducted into the Chicago Entrepreneur Hall of Fame in 2006, also travels nationwide to speak at conferences for young entrepreneurs. In late October, he spoke at the Collegiate Entrepreneurs' Organization's national conference, held at the Tampa Convention Center. DeLazzer spoke with the Business Observer prior to his CEO presentation. The following are edited excerpts from that conversation.

What was your mindset in going from ticked-off customer after that Blockbuster experience to new business idea with GetAMovie?
Blockbuster always said they didn't think anyone is going to rent movies from a kiosk. Years later, at an industry conference (a former Blockbuster) executive told me, 'We should have bought you guys when we had the chance.'

Did people doubt your vision and ability to penetrate the market?
When we started, nobody, not one person said 'good idea.' Everybody said, 'You're out of your mind, you're insane, you're attacking Blockbuster, an 800-pound gorilla, a $2 billion company. There is no possible way you have a road to success here.' After we put the first thousand machines in, no one said 'This is a bad idea.' So if you believe what people say you will be terrified to do anything.

What was it like for you to starting out as an entrepreneur?
The reason I love doing these conferences is for me, starting out was like the Bataan Death March. It was a road to hell. There was nobody I could talk to; nobody I could lean on for experience. I didn't have a network. I try to tell these kids that's it's not going to be easy. You're going to fail.

How do you handle failure?
If you can't stand failure, then don't do this. Because I guarantee you, you will fail. And so what if you fail? It's not fatal. It's not final. No one is going to cut your arm off if you fail.

What failures did you learn the most from?
You only learn when it costs you. Free lessons have no value. But when you lose money, that's when you learn.

What lessons came from costly failures?
You could plan, but it doesn't really matter what your plan is because reality always gets in the way of your plans. Nobody ever goes in a straight line from what they thought they were going to do to what they did.

What is one of the best decisions you've made in your business-entrepreneur career?
One of the smartest things I ever did when we cashed out of our stock (of Redbox) was to set up a trust and make my wife the beneficiary of the trust. So I have no access to the money because I would have spent it all. My level for pain has gone up on every project I've done, from $250,000 to $500,000 to $1 million, and that's kind of the natural progression for an entrepreneur. I know my limitations, so I let someone else control the purse strings. I'm like the frog in Petri dish — heating up doesn't seem to get to me.

What advice do you give aspiring young entrepreneurs?
There are two things I tell kids. Everyone wants your time and money. And I will give you one or the other. If I give you my time, I will give it to you freely and unbiased. But if I give you my money, I don't really give a crap about you. Now it's about money. So if I were you, I would take my time. You can always get money, but you can't always get unbiased opinions about things.

What do you look for in the people behind the companies in which you are thinking about investing?
I look for people who are serious, people who have a vision and some drive. If you were the prom king or the prom queen and you're the favorite son of your family, you're probably not going to be a good entrepreneur. But if you were beat down, ignored and have a chip on your shoulder and something to prove, then you have a chance. You need a little bit of angst. You have to have a need to prove something to someone that you can do something.

When I do these presentations I start with the Tom Petty song “I Won't Back Down.” Because sometimes you have to be an ass to be an entrepreneur. There are people who flow downstream and don't bump into anybody. But there are people who flow upstream and bump into people. Those are the people who make others nervous for creating friction. If you don't have that in you, then you probably don't have the drive.

What motivates you to be a better entrepreneur?
Money is so far down the list. It's anger. It's having the desire to beat somebody. I've always competed in sports and one thing I like about sports is you can instantly say 'I won, you lost.' In business I like the same thing. Somewhere down the line is money. But if that's your motivator, it will never be enough.