Unanticipated events, challenges, and their consequences roil our everyday lives. Yet we are inexplicably blind to real threats to our ventures and livelihoods. In last week’s news headlines, we learn that Eastman Kodak, once a Fortune 10 market leader, fully anticipated the impact of digital imaging on its core business 20 or so years before the threat came to pass, yet failed to respond and adapt with meaningful change. It just filed for bankruptcy protection. Why?

A core reason is the inability to hear the market through the cone of silence and positive affirmation we managers erect in our leadership team, advisors, and company cultures. As founders of early startups frequently realize too late, the blind 500-lb. gorilla that is ignoring our market can suddenly surprise us with an overwhelming rifle-shot focused on our opportunity. Conversely, we fail to see, hear and anticipate what the consumers’ fickle tastes now want, what our key competitors are doing to thwart our expectations, or how business conditions have changed since we first hatched our ideas. We are too deep in our code, too busy crafting the perfect elevator pitch, too oblivious to early customer feedback, too blind to pivot when we desperately need to do so.

Looking over the horizon is an acquired skill. It’s not reading tea leaves, gazing at crystals, or reading the Tarot. It’s a never-ending quest to listen to and evaluate the views of those outside your inner circle, spanning wide ranges of expertise, skillsets, and subject areas tangental to your core interests. If you have your head down working in network infrastructure, you may be surprised to learn about developments in intellectual property or nano science that will rock your boat. If you have a shallow network, it’s a cinch that you’ll only be able to predict within a narrow window of perspective.

So what advice can I share? Take advantage of those panel discussions, meetups, networking events, beer-and-bull…. sessions—they’re held nearly every night of the week somewhere close to where you work, live, or commute. They are mainly low-cost, and they’re extremely valuable even if you only make a single new contact or hear a lone piece of information that fits into your picture. In many cases, you’ll gain several. And don’t limit your participation to groups in your narrow focus area. Take advantage of the opportunity to intersect your focus with other elements of the marketplace and triangulate to see possible paths the future might take. Then test your hypotheses by asking your network what they think. Build strengths on strengths.

Sure, you may be trying to finish your beta and pulling 18-hour days-nights. Or, you may be watching your run rate converge with your bank account hitting zero and trying desperately to raise a new round. How can you take time away from those things to rub elbows in a noisy bar or meeting room with a bunch of people interested in something you know nothing about? Well, ignore the advice at your own peril.

Whatever you are doing, look up, look out, and listen. There’s no need to be blindsided roadkill. You have a wide circle of advisors to expand your ability to see your possible futures from your single pair of eyes to their many. Ask.

Bob Dolezal—Consultiq’s CEO and strategy expert

In the past two years, venture capital funds invested US$24 billion more than they raised in new funding. In 2010 alone, they invested $26 billion against raises of $14 billion, nearly a 2X deficit. Contrast this with IPO statistics: in 2011, approximately 50 VC-backed firms went public compared to 75 in 2010—and 2010 was not a peak year for VC-backed IPOs. CALPers, host of the California state employees retirement megafund, has cut back its allocation to VCs from 8% of its alternative pool of funds to 1% it will make available for VC investment. What’s going on?

A recent Wall Street Journal article (Some Venture Funds Hit ‘Pause’ on Big Deals) quotes super-Angel Mark Andreessen as saying he has “taken a step back” from high valuation deals and is now turning his focus to those where “pricing is still under control.” How do you say, “repeat of the bubble,”—at least among those of us old enough to have lived through it?

Putting a bet on the table has become a high stakes game at the same time as lots of young startups have stars in their eyes after seeing Reid Hoffman cash out big on LinkedIn and licking their chops over estimated valuations for high profile names like Facebook. There’s just one problem: as more and more startups are reaching the critical A-round and expansion B- or C-round funding stages, investors are looking at their prospects for making above-T-bill returns from high-risk venture capital investments, shaking their heads, and putting their money in other investment categories (or holding it in cash reserves to await a clearer economic picture).

This portends a wind-down is in the offing, and some solid performers may hit a stone wall just when they need to accelerate their growth with cash infusions. As for the weak ones? Uh-oh.

Word to the wise: if you are presently in the game with a venture, take steps now to line up your rounds and reduce your run rate or otherwise polish your margins. Delay new initiatives, defer those that are non-essential, and find non-cash paths to continue operations through the funding drought.

Batten down the hatches, sailors. It’s looking like those easy voyages to high-valuation funding are being postponed and a maelstrom of stormy times are in the offing for those with ventures underway.

But what happens when those ideas are cast in stone and fundable? Experts at the National Venture Capital Association conducted a survey in conjunction with Dow Jones & Co., and found that almost 75% of U.S. startups plan to raise a traditional A round or a mid-size angel debt round in the coming year. Unfortunately, they will be asking for critical growth funds just as VCs experience a severe capital shortage.

The survey reports that 69% of VCs expect their investments to stay the same or decline next year, not grow. That’s a 21% increase from a similar survey last year. Add to that sobering statistic the fact that VC firm numbers are in double digit decline, from 1,312 in 2000 to 844 last year. Their numbers dropped nearly 5% in the past 12 months.

Last month’s SVASE-East Bay Series focused on what categories are expected to be hot for VCs–medical, hardware, and non-traditional (read: not high tech software or eCommerce) startups headed the list.

What does this mean to startups on the verge of an A-Round quest? Hard to say. We also heard that good ideas that proved out were not seeing a cloud of competitors emerge around their premise, as was often the case in earlier years. So a startup with that elusive “traction”—customers, revenue, and (gasp!) profit margin—may well find their way to growth and expansion funding. Those with less to show may be forced to close their doors, and that’s not good for our now-famous innovation economy.

Phil noted that whether you were talking about the economy, an individual, or a business, the rate of innovation and the rate of change in the environment defined the state of and potential for adaptation to changing conditions. A glance at the graphic shows his perspective. When innovation keeps pace with change, growth results. If change slows but innovation continues to grow, the entity enters the comfort zone. When both innovation and change lag, the entity becomes stagnant. And, when change continues but innovation ceases, uncertainty breeds transition.

This simple but powerful model unlocks for me insights into the cause of fear, uncertainty, and powerlessness felt by many who find themselves or their companies in transition. It also provides a useful prescription of how to remedy matters that would otherwise fall outside our understanding.

Changing things without doing things differently—”rearranging the deck chairs on the Titanic”—is no solution, it’s change for change’s sake, and as a reminder, not all transition is good transition. Similarly, innovating without change creates the appearance of activity without real progress. Even an outsider, though, can tell when innovation and change are resulting in growth, so that becomes a yardstick that the entity has entered the right mix of innovation and change.

Bringing this all back home, we sometimes find Consultiq’s clients out of balance. (We rarely see those in the Comfort zone seeking out services—though they clearly are failing to live up to their Growth potential.) It’s far more likely that they seek outside help to manage a Transition or a kick-start to get things moving after they have become Stagnant.

I’ve heard over and over from successful serial entrepreneurs and those who invest in them that the most effective founders and CEOs stand ready to make significant changes—pivot—at a moment’s notice. They pivot when they get unexpected feedback from their customers. They pivot when resources become tight. They pivot and find a new path when a product development effort runs on the rocks. But very rarely do I hear of them ramping up innovation to convert their ability to change into a powerful driver for growth.

Give it some thought. There’s much to learn from the Kauffman Fellows Program and Phil Wickham’s insight. How does it apply to you and your life—and to your company’s?

Setbacks are all too common. In business, perhaps a deal falls through, an expected promotion is denied, or a deadline is missed. In our personal lives, we lose a job, face an unexpected serious illness, have an accident, or a relationship goes to pieces. What’s the best way to pick yourself up and recover? How do you get firing on all cylinders again when you are caught up in a wave of regret, guilt, or fear of the now-uncertain future?

My client evaluated pro-level sports for instances where a team had just been sacked, had an interception, missed a critical point, or lost a key player to injury yet came right back and dominated their opponents. They conducted interviews with pros like Tiger Woods (then at the top of his game), Joe Montana, and Magic Johnson. They asked what was going through their mind and how they managed to achieve when they had just been dealt a bad hand.

What they learned was that those athletes had common coping strategies. They recognized that dwelling on what had just happened to them was fruitless. What was past, was past. They couldn’t change it.

They also realized that the future had lots of potential outcomes that could come to pass, but that none of them were set in stone. They were, in a real sense, beyond their control and all of the wishing in the world for success or fear of bad things happening was wasted energy.

Instead, they focused on the immediate present, and they relied on formulaic rituals and routines to keep them in the present. The present, they knew, was something they could control and, if they did what they had always done when they were successful, the likelihood was that they would be successful this time, too. They put the past and the future out of their mind, and concentrated on the now.

We’ve all probably seen the basketball player at the free throw line getting ready to make a shot. They are there because they or their team was fouled, perhaps injured in the preceding play. The crowd goes silent, and they and all of their team and their opponents are looking at them. You’ll often see the ritual kick in at this point. The player will look intently at the basket, then down at the ball. They’ll carefully dribble it down and catch it—perhaps once, perhaps two times, even three. Then they’ll take a breath and look up and make the shot. Swish!

What happened? In that few seconds, the crowd vanished. Their team vanished. The opponent team and its taunting vanished. The past was forgotten. The future was ignored. They did something that was so routine and so formulaic that they didn’t have to even think about it. They repeated the routine, and they concentrated on the ball, the bounce, the feeling in their fingertips, and the shot. And they made the shot.

Those who missed the shot either didn’t do their normal routine, or they were thinking about the foul, or they were thinking about how much making the shot counted. They weren’t there mentally.

I’ve often said that it’s best to be fired on a Monday. Firing someone on a Friday condemns them to stewing over the past and worrying about the future all day Saturday and Sunday before you can do something about making things better.

So next time you’re dealt a setback, take a moment for that regret of what didn’t work, a moment to recognize that the future is uncertain, but then put them out of your mind and do the routine that has made you successful. Concentrate on the “right now” immediate present. Put a foot in front of the other and take a step. Then another. You’ll be on the path to recovery and will soon be excelling again.

Townsend described how many—certainly a majority—of the decisions he made while at the helm of his company turned out to be wrong. Those that were right helped him succeed, but he credited those that he got wrong with teaching him how to improve and, more importantly, kept the momentum moving. Contrast that with today’s collaborative mind-freeze when it comes to making decisions that count.

Let’s start by admitting, we all want to get our decisions right. Sometimes the data are confused, conflicting, or sparse. Voices around us push us against our better instincts, or towards them. Making a decision to not make a decision is sometimes okay, sometimes not. But there’s never an excuse for not making a decision simply because you’re uncertain or fear the outcome might not go well. That puts your entire team, sometimes your organization, and all of your customers on hold. Regardless of the decision you make, stalling everyone and stopping workflow is always a bad decision.

Remember Bob Townsend. Follow his advice. Make the decision, then move on. (Don’t forget you made it, check in, but move on to the next item on your priority list while the impact of your decision becomes clear.)

If the decision turns out as you hoped, all the better. If not, notice it quickly and execute plan B. Be decisive. Follow your instincts, but read the tea leaves in the data too.

And one more thing…when you approach a higher-up for a meeting, understand that they expect your time together to be used for one of two purposes: to explain what’s happening, or to have them make a decision. Give them the information they need to take either action.

You’ll be a better employee and they’ll be a better manager for your consideration.

Set aside the Gantt charts, scrums, and to-do lists for an hour each week, close your eyes, and visualize your customer, using your product. How does it enhance their life or workplace…what does it mean to them…how does it change their world? How does the way they use your product look? How do they feel as they use it? Is there a smile at the corners of their eyes, or a furrow in the middle of their forehead? Then open your eyes and look at your product through their eyes, touch it with their hands, and hear it through their ears. I promise you, you’ll have a revelation every single time you put your customer avatar on and let it play in the field of your product.

All of this comes from watching the stumbling answers I receive to seeing someone’s demo and asking the simple question, “How do your customers feel about it?”

It’s truly remarkable how many times they pause, look confused, then start again to describe their product’s wonderful features, how masterfully the code executes, and how everyone in the room loves the way it works. They’ve solved its problems, not a customer’s problems. And, sorrowfully, sometimes they haven’t even made a down payment on the problem they set out to solve in the first place.

Perspective is like gold dust–it easily blows away in the wind to be lost forever. It’s even more like falling down a steep mountain, an endless slide without a sudden stop at the end. Once you’re at the bottom, you have to slog endlessly and toil to get back up to where the air is clear and you can see again. Yet, make your customer your sherpa guide, and you’ll be surprised how easy it is to take your eyes out and see with theirs. Your customer is never wrong, no matter how much they ignore, abuse,  or disdain your software baby.

They’ll choose the wrong menu item every time, punch every incorrect button, be endlessly distracted by something you didn’t expect, and will come up with mistake after mistake to confound your program’s logic and tie your UI in knots. Once in awhile, they’ll even crack a smile as something only you knew about makes a connection with their real world. Because that’s what it’s all about—your customers’ real world, not your lab petri-dish culture of self-amplifying feedback loops.

I once worked in a shop that put a artist’s rendition of our customer on every desk. I looked long and hard at that face over a period of many months. It’s remarkable how often that picture mocked my progress and tore up my carefully contrived assumptions. Today, I don’t need the picture to see that face—or the faces of other customers for other products. They are deep in my head, looking over my shoulder, tapping me on the elbow for recognition and input, straightening out my path.

Where’s your customer? Are you building your users and their world into your products, or are they just afterthoughts?

Take last week, for instance. I spoke to a founder with a product in the marketplace—yes, and dogs eating dog food—who understood that his customers wanted more from his product. He was systematically testing concepts and getting customer feedback on improving his product, an interactive-design, tool-driven service. He understood that his resources were too limited to employ a scattered approach, and he was well on his way to improving his product and determining the optimum price point his customers would pay through a program of careful customer testing and surveying. That was heart-warming for me to see. He had his head in the right place to get a successful venture that will grow and become profitable.

Still, he benefited from hearing me repeat how investors view risk in a young startup. Eventually, he asked a question than any startup advisor constantly hears—”How much “traction” or “revenue” is enough for investors?” I had to explain that the answer to that question is always, “It depends;” not something that he or any other founder wants to hear. So here’s my explanation:

A conceptual startup is 100% risk to an investor–it has no product, no customers, no team, etc. At the other end of the curve is the mature startup about to cash out through an IPO or other exit. Nearly all of the risk is known, and that risk which remains unknown is quantifiable. Investors know what they are buying, in short. In between, it’s no-man’s land. At any point, the venture has some quantifiable and some unknown risk. Investors first try to figure out the level of unknown risk. If it’s too high, they pass. If some has been quantified and made predictable, they move forward to learn more and make a judgment call on whether the investment is right for them. OK so far?

Here’s the deal: Over hundreds of assessments, nearly every startup fails this simple test if it doesn’t have a product in the public marketplace—the only exceptions are for strong teams with a superstar founder and a track record of personal history with the investors. Most fail the test if they haven’t started charging for their product or service and had some customers buying it at that (or any) price. By contrast, the odds start shifting toward making the investors’ grade when the product’s cost is known, its revenue is known, and enough customers are buying to predict a trend towards break-even and profitability. By the time the venture is making profit, it has an even better chance of attracting an investor. And those odds improve again when growth accelerates. At each of these points, some additional risk has moved from unknown to quantifiable and become more predictable.

Yet, for some reason, I see far more teams concentrating all of their energy on fund-raising in the impossible-to-fund stages than I ever see of ventures with leaders focused on getting their product to market or selling it to customers. I call it the impossible equation—no matter how much time, energy and resources you expend, nothing makes your venture fundable until the risk is quantifiable and predictable. Diverting your attention from hitting those critical benchmarks just means that the startup is more likely to fail and its founders (and often, their friends and families) will be hurt before the team realizes that they missed the boat.

Give it some thought. If you were an investor, and you had a field of potential places to put your bets down, what would you be using as your criteria? Hot idea or growing revenue? Enthusiastic, smart team or strong net margin on each item sold? Wish list or customer applause? Competitors trying to enter your space and take market share, or stealth and silence? Founders, it’s your venture, your vision, and your execution to choose. Make your milestones count.

Large advertisers with large campaign purses to spend also face frustration in their social media spend but will take advantage of fire-sale pricing that stems from small thinking built into many social media startups from their inception.

The first thoughts a founder should have after they conceive their venture’s basic product or service should be, “How will I get my customers to pay for it and what’s the margin for us on each sale.” It should not be, “How can I get lots of customers to use my product or service for free?”

While it’s not quite a given in the real world, you can usually give stuff away for free and get lots of people to take the offer. When they have to pay any amount for those products or services, they become much more choosy. As the price gets increasingly steep, they become choosier yet. Conversion—the direct marketing term for “converting someone with interest into someone who buys”—is the name of this game—turning triers into buyers. That, and margin on each new customer, so the company doesn’t go broke while it builds a paying customer base.

Facebook seems to have confused its open-to-all, free audience-building offer with its paying-advertising customer offer. While it took in US$ 1.6 billion in the first half of 2011—double the prior year—most of that revenue came from small advertisers, not the big guys (says ComScore). A Wall Street Journal article on November 2, 2011 recounts a Ford Motor Company campaign that spent US$ 95 million advertising its Focus model in traditional media, but less than 5% of the presumably much smaller total online ad budget on Facebook. In part, Ford’s Scott Kelly said that their small Facebook ad buy stopped entirely after the Facebook ads caught fire and went viral. Ford spent the remainder of its online budget on non-Facebook ads to keep the viral fires burning.

Moral: Facebook is penalizing itself for being highly effective with consumers and for its advertisers  by not structuring their offerings to large companies in ways that maximize Facebook’s revenue and profit. All of the consumer traction in the world—and Facebook can fairly claim that distinction for now—won’t pay stockholders dividends if a venture doesn’t build profit into their model from the get-go.

Consider it an object lesson if your startup venture is building traffic and you expect to talk about revenue and profit later.

As Bloomberg reports, from 2006 to 2010, over U.S. $535 Billion flowed into Clean Tech startups from venture capital firms, private equity, and IPO, fueling 4,236 ventures. What they didn’t count on was a combination of blindsiding by technological innovation, market forces, and irreducible physical laws that KO’d many of these startups before they could emerge to liquidity events.

Then the first hammer fell—Solyndra went under and brought a glaring spotlight on the dual questionable practices of trying to beat a foreign government intent on dumping solar panel prices and milking public policy for loans unsupportable through due diligence. Within weeks, several more Clean Tech giants were under intense scrutiny.

Simultaneously, worldwide oil price benchmarks—having stabilized after skyrocketing to over $100/barrel on Middle East uncertainty, supply interruptions, and global debt crisis speculation—suddenly flattened out. Bloomberg’s article implies that one reason for this paradox was the discovery and deployment of new fracking technology that vastly expanded the recoverable natural gas supply worldwide, but especially in the U.S.A. Without fuel prices marching upward, the economics of Clean Tech couldn’t compete.

Where does Clean Tech go from here? Not back to the venture capital well for more infusions, if the sentiment on Sand Hill Road has any say. I’d put a vast majority of those 4,236 ventures on the slate for write-down, sale, consolidation, or old-fashioned fire sales.

There’s a lesson to be learned here for everyone who tried to milk this cow that refused to stand still and obey their predictions. Imbalances in the market tend to be self correcting—and markets are never as reliable as regulators in keeping markets in check. So, there’s no Sarbanes-Oxley repeat in Clean Tech on the horizon—rising energy prices answer to more than a federal mandate to spend compliance dollars. Take those moral certitudes to the bank.