Posts Tagged ‘demand’

Do You Have a Job or a Business?

Tuesday, February 19th, 2013

I don’t know who first asked that question, or when.Business owner's strategy determines job or business

I do know that there are lots of business owners who either have never heard it or who have heard it but choose not to think about it.

How do I know? Because we meet them and, if you think about it, so do you. In fact you may even be one.

How do you recognize them? They fit one of 2 groups.

The first is the “solopreneur”. A solopreneur is someone who starts a business but never grows it beyond the point of having only 1 employee – themselves. (If I seem a little nervous it’s because, a few years ago, I came uncomfortably close to being one.)

Some people do it deliberately. They’ve often had successful careers in large corporations with large teams reporting to them. They reach a point where they’ve had enough of managing people and playing politics and want to get back to just doing the work they love.

Others do it by omission. They want the rewards of building a larger company but either won’t take the financial risks or they share some of the characteristics of people I’ll talk about next.

The second group is people who can’t get out of their own way. Their companies have grown, but nothing can happen in the business without them. For example, only they;

• Know the key contacts in every customer and supplier.
• Can fix things if a customer is unhappy.
• Understand how products are produced/services delivered.
• Can conduct interviews “properly” and offer jobs to new hires.

As a result they work as close to 24 hours a day, 7 days a week as is humanly possible – for years.

And, despite what they tell you, they are not happy.

The irony is that, even when they collapse because of exhaustion, no one will buy their company because without them it doesn’t exist.

Andy Bailey, who is a reformed member of the second group, recently wrote an article about it. He describes the 4 steps he believes make the difference between building a business and having a job.

1. Define the company’s purpose (tip – begin with why the business was started) and hire people who buy into it. That will build a strong culture.
2. Replace the people with all the knowledge in their heads with systems and processes. This is what Michael Gerber talks about in “The E Myth”.
3. Create demand instead of always chasing sales. Consistently deliver quality products/services on time and build a reputation for the brand.
4. Create a strategic plan which produces results via prioritized action plans involving everyone.

These 4 steps are a neat précis of the advice in books like “Built To Sell” by John Warrilow. And they separate the owner from the company and a job from a business.

Why is that important? Because you can’t sell a job when you’re finished with it. But you can sell a company.

So which do you have – a job or a business?

 

If you enjoyed this post you’ll also enjoy 8 Things That Hinder Growth.

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6 Challenges Fast Growing Companies Face

Tuesday, August 28th, 2012

I’ve mentioned Inc. magazine www.inc.com several times before. It’s a great resource.

There’s a well-researched article in the current issue about 6 challenges fast growing companies face. They’re all about execution – and if the owner doesn’t deal with them well any one of them can be fatal.

1. Your business outgrows its staff. One or more hard working, loyal employees who had the skills required to make a great contribution when they joined the company can no longer deliver. Owners are torn, knowing that the business wouldn’t be where it is without Joe or Mary – but that they just can’t cope and are hurting the company now. The solution needn’t be just to let them go but the owner needs to deal with the situation quickly and honestly.

2. You wait too long to hire.  A classic dilemma. Hire people before you need them and you add to overhead and risk having to lay them off if the orders you thought were coming don’t. The alternative is to risk service and credibility if the business does materialize. One solution – hire all-rounders who you can train and slot into more than one position.

3. Your business lacks the right systems. Two potential causes here. Either you don’t implement processes and systems quickly enough or the system you chose doesn’t work as advertised. I know which one frustrates me most – the latter. There’s nothing worse than dealing with implementation problems and delays – so have a solid contingency plan in case it happens.

4. You run out of money. We’ve said it before, and I’ll say it again, the most important document for a business owner is a cash flow forecast. Keep it up to date, study it often and it will provide the information you need to stay out of trouble. Because growing companies have to invest before invoices are cut, never mind paid, they become less, not more, liquid.

5. You can’t keep up with demand. This is the most dangerous point for fast growing companies according to the article. The owner takes on debt to finance additional capacity – or people – and the demand doesn’t appear. According to the author the best solution is to manage growth so that it happens in small rather than large increments. But that’s not always easy to do.

6. The problem is the owner. If you’ve built a company – i.e. been successful – why would you have to change? That’s a reasonable question. But I notice, after 15 years of working with business owners, that the ones who grow their companies successfully are the most open and willing to change themselves. If the business can outgrow an employee, why can’t it outgrow the owner?

You can read the full article 6 Classic Ways to Crash Your Company here.

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A “BEMI” – Does It Work And Is It Really New?

Friday, October 21st, 2011

In the last 2 weeks I’ve seen 3 blog posts talking about growth, all more or less claiming that their concept is the best or only way to grow companies in the future.

But do these concepts really work (in anything smaller than a global corporation)? And are they really new?

The first one is all about “big-enough market insights” or BEMIs¹  and is based on the argument that real, rather than incremental, top-line growth can only occur when there’s a significant change in the nature of demand.

That change is caused by either a shift in customers’ circumstances or in their thinking e.g. when the housing bubble burst or when tablets became simple, affordable tools for use at home and at work.

1.    What is a BEMI?

When a business owner can see the connection between a change in demand and the lucrative market the change will eventually create she has found a BEMI.

That Insight becomes the foundation for either a blockbuster product or for a suite of offerings.

2.    Identifying a BEMI

BEMIs are usually spotted first by employees at the fringe of the organization. For example in the 80’s, a Toyota executive in California saw that increasing affluence and the growing number of yuppies was creating an opening for a new kind of luxury car – the Lexus.

More recently, the Air Wick Freshmatic originated with a brand manager in Korea.

Closer to home, one of our clients realized in the late 90’s that, as cell phones began to be adopted, users would want cases, rechargers and extra batteries for them. Consumers would be more easily upsold if these accessories were packaged in a kit rather than sold as individual items.

3.    Embracing a BEMI

BEMIs often face a lot of resistance from inside the company. Many critics opposed the Lexus because e.g. setting up a separate network of Lexus dealerships, had the potential to alienate existing dealers. They also attract opposition if the company doesn’t have the necessary expertise to develop the product e.g. Reckitt Benckiser had little experience with the electronic technology required for the Air Wick Freshmatic.

In the late 90’s the cellular carriers were the major distributors of accessories via their retail outlets. Our client had to overcome the carriers’ resistance to kits by acquiring the technology and resources to design, assemble and package for them.

4.    Exploiting a BEMI

Pursuing a BEMI can take a lot of perseverance because they rarely lead to a surge in revenues and profits over the short term. That’s because they originate in an understanding how shifts in current trends will change markets – and using that insight to create an opportunity for the future while sidelining competition.

Pampers disposable diapers, introduced in 1961, took advantage of the growing desire for greater convenience, and the fact that women were increasingly joining the workforce. But they had to be made by hand, making them uncompetitive with diaper services. It took years before P&G could mass-produce them and that did not come cheap. However Pampers created a multi-billion dollar market.

5.    So do they really work and are they new?

It took time to launch cellular accessory kits but consumers really took to them and sales took off. So I’d say that the concept works equally well in any size of organization.

However I’m not sure they’re new. I think strategists and business owners have been doing this for a long time but just calling it something else (trends analysis springs to mind).

But regardless of what you call it – it works and works well.

__________________________

¹Where Top-Line Growth Really Comes From HBR, 6 Oct 11

3 Ways To Test Your Strategy

Tuesday, January 18th, 2011

An article I read recently showcases 10 tests of a strategy that apply some of the best thinking that’s been done on the topic.  It was published in the McKinsey Quarterly and is called “Have You Tested Your Strategy Recently”. You have to register to read the full article but it’s worth it.

I want to focus on 3 of the tests which I think are particularly valid for business owners.

The first one asks the question – does your strategy put you ahead of trends? That new trends develop in any market is a fact. The issue is the length of time it takes for them to become apparent. A major technological breakthrough or a significant change in, e.g. the economy/demand or regulations/legislation can drive a rapid transition.

But most trends develop so slowly that business owners only react when their profits are affected. At that point it may be too late to respond effectively (think about the travel agents who ignored the rise of online competitors). The cost of missing a trend can be heavy, but seeing it early can pay off.

So how do you spot new trends? Keep an eye on customers who have been quick to adopt new products in the past. What are they doing? Think about the impact the new trends would have on your financial position – and the decisions you would make if you were certain they would happen. How do the results of those decisions compare with your current priorities?

The second test looks at how well your strategy deals with uncertainty. A challenge for business owners is to know which choices to make now, given that the outcomes will take place in a future they can’t control. The authors suggest breaking uncertainty into 4 levels.

The first gives a reasonably clear view of the future with a range of outcomes tight enough to support a firm decision. At level two, there are a number of identifiable outcomes for which a company should prepare. The possible outcomes in the third level aren’t specific but fall into a range resembling a probability distribution. And level four features total ambiguity, where even the distribution of outcomes is unknown.

Most companies assume they are facing either levels one or four while they are usually dealing with level two or three. The authors suggest quickly ruling out impossible outcomes and then looking for those which are either mutually supportive or which are unlikely because they undermine one another. A tool like scenario analysis can be applied – by the owner, management team or consultants like us – to the remainder.

The third test, asks if the strategy balances commitment and flexibility. Commitment and flexibility are opposites – if you’re very committed to a course of action you may have very little flexibility.

Making the best trade-off between them requires understanding that, of all of the decisions a business owner has to make, only strategic decisions result in commitment – through hard-to-reverse investments in long-lasting, company-specific assets.

But in this world of uncertainty, strategy is not only about where and how to compete, it’s also about when. Committing too early reduces flexibility, leaving it too late can allow competitors to gain advantage.

A market beating strategy will do 3 things. Take big bets, or make commitments aimed at gaining significant long-term competitive advantage; make no-regrets moves, which will pay off whatever happens; and maintain options, that involve relatively low costs now but which can be turned into a higher level of commitment as changing conditions warrant.

Why did I choose these 3 tests? Because they are, I think, the most relevant right now as a result of the fall-out from the financial crisis and recession and the hardest for business owners to deal with. (Although I was tempted by Test #8 – Is your strategy contaminated by bias?)

If you would like someone to talk the tests over with, drop me an e-mail or give me a call. I’d be happy to spend half an hour chewing them over with you

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