Lessons I Learned Today 5/21/09 – Avoid the path of the dodo bird

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Testimonials Let Customers Praise Your Good Graces … by Debra Jason

Whether you’re a well-known company that’s been around for years or a “new guy/gal on the block,” establishing credibility for your company is vital.

“Every potential customer wants to know the benefits of doing business with you (i.e. “what’s in it for me?”). Then, once their interest has been piqued and they’re seriously considering your product or service, they want to know that your company is a viable business, one they can count on.”

“Readers find the endorsements of fellow consumers more persuasive than the puffery of anonymous copywriters.”

Setting up a methodical testimonial-soliciting program, can increase the effective use of testimonial. Here are some suggestions:

• Get permission from the person you’re quoting before you use their comments in any way, shape or form.
• Don’t use testimonials without names, if you can at all help it. They lack credibility. You can use a person’s:
  • a) Full name along with a city and state and/or company name.
  • b) First initial and full last name with city, state and/or company name.
  • c) First and last initials with city, state and/or a company name.
  • d) A person’s title, again with a city, state and/or company name.
• Use specific testimonials.
• If you can afford to have a well-known celebrity back your product/ service, be sure that it makes sense for him/her to endorse you.
• Ask people for their input. There’s nothing wrong with doing this. Put together a short letter asking your clients for their feedback.

“When you’re looking for ways to market yourself and wondering just what you’ll do next, turn to your customers. Give them the chance to praise your good graces. And don’t be afraid to ask them for “constructive criticism” as well — it will help you provide better service in the future.”

 

*How to Use Market Research in a Recession by John Quelch

Recession-challenged consumers are buying less, looking for deals, or switching to different brands, product categories, or stores. Some are even changing long-held attitudes toward consumption. To many folks, filling the home with more stuff or keeping up with the Joneses is no longer appealing.

The article recommends that CMOs take the following seven steps to minimize the impact of reduced spending:

• Stay focused
• Enlist trusted partners.
• Value experience and judgment.
• Seize opportunities overseas
• Go online with a dash of skepticism.
• Don’t cut across the board.
• Keep an eye on the new consumer.

 

*The Five Competitive Forces That Shape Strategy by Michael E. Porter

In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly, as if it occurred only among today’s direct competitors.

Competition for profits goes beyond established industry rivals to include four other competitive forces as well: customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry. As different from one another as industries might appear on the surface, the underlying drivers of profitability are the same.

The five forces that shape industry competition are:

• Rivalry among existing competitors
• Threat of new entrants
• Bargaining power of buyers
• Threat of substitute products or services
• Bargaining power of suppliers

The strongest competitive force or forces determine the profitability of an industry and become the most important to strategy formulation.

Understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition (and profitability) over time.

Understanding industry structure is also essential to effective strategic positioning.

 

*Is Your Company Brave Enough to Survive? by Freek Vermeulen

The market is Darwinian: the strongest ones survive. And an economic downturn is like winter in Alaska; many animals can live a happy life in Alaska all through spring, summer, and fall, but when winter comes, it’s not a great place to be. It’s a much tougher environment — and only the fittest survive.

There are a few survival techniques from looking at firms’ downturn survival strategies, although they are not for the faint-hearted.

What firms are better off doing, is opening up; exploring new sources of potential revenue and experimenting with bottom-up processes to generate such ideas and innovations.

Quite a lot of firms display “threat-rigidity effects.” When under threat, facing a shortfall in performance, firms are inclined to more narrowly and firmly focus on the one thing they do well (e.g. their core product or service), stop doing other things, and become more hierarchical and top-down in terms of management control.

This often makes things worse, or at least prevents you from coming up with any solutions. To combat this you can initiate some processes for all employees to start generating ideas for potential new sources of revenue. Most ideas may be rubbish; some ideas were so-so, but a few ideas may be really good! You may only need one of these ideas to realize a substantial new source of revenue.

 

*Need Growth Ideas? Ask Everyone by Julie Gilbert

“Now is the time to stop and take a fresh look at your assets, and engage the people — right in front of you — who have the most relevant point of view for reinventing and innovating a better future. It only takes one simple act of leadership: ask for their help, their perspectives, and their voices at the table. Invite them into the discussion.”

Having your voice heard is the ultimate sign of respect and can be a powerful call to engagement. To actually implement this strategy:

• As a leader, lay out a vision of where you want to be (not the how, just the what)
• Stay true to the essence of your organization
• Lay out on a white board all the assets you have in the organization especially those you may have taken for granted or utilized in a defensive way vs. offensive
• Map out your capabilities
• Identify trends in the communities where you do business and be realistic about the new populations, previously ignored, that exist in your business
• Ask for help from employees and customers using your insights from the previous steps and let them unleash the magic they have in them

The trick? You must have a genuine and authentic belief in the people…not just a select few, but all people.

“You will identify big ideas that reinvent the future, and you’ll come out of today’s environment stronger than ever — with employees and customers cheering at home and in the parking lots.”

 

* How a simple 3-steps home business plan keeps personal enemies away by Annemarie

Home business entrepreneurs face “apparitions” in both quiet moments and hectic paces, such as “what have I got myself into, what am I going to do next, what will others think.”

A home business, built on strong network marketing principles, can be well fortified by a simple basic business plan, built upon strong pillars:

• education first so you know the main facts
• self-empowerment to believe you can win
• exciting change that is welcome and anticipated

 

*Work from home steps #1-4

I posted the first four articles in a series of five (couldn’t locate the fifth) about the process of developing an opportunity to work from home. This series from the BabyCenter was obviously intended for mothers, but many of the points can apply to any entrepreneur who is considering leaving their day job to create a home-based employment situation. The self-inventory article, for instance, suggested answering these questions:

• What do you enjoy doing? You never know what you might find.
• What are your talents and skills? There’s a market for everything.
• What experience do you have? This can be professional or volunteer.
• What education and certifications do you have?

The five steps are:

1. Brainstorm your goals
2. Take a self-inventory
3. Choose your path
4. Plan for success
5. Assess your progress

The series of articles has some nice links to other resources to help you through this process, such as a self-inventory test, a Career Interests Game, articles on goal setting, and a substantial list of links to companies offering work at home options.

 

What I Think

I think the articles posted on this date provide a nice variety of advice from reshaping your day job, so you can work from home, to surviving the battlefield of competition in the open market. Annemarie’s article on steps to dispel the “apparitions” of personal doubt is followed by more concrete steps and resources in the BabyCenter series on how to get from point A to point B in the process of getting yourself into the marketplace on your terms.

The article by Freek Vermeulen (love the name) points out that you might want to be careful what you ask for. His analogy that running a business in an economic downturn “is like winter in Alaska,” is a fair spin on Darwin’s theory of survival of the fittest. I have certainly witnessed many businesses exhibiting “threat-rigidity effects,” when faced with the challenges of today’s economic downturn. I have not witnessed that leading to success for any of them.

On the other hand, I have found success stories among those companies, which have used this economic crisis to become leaner and more efficient, and to seek out innovative ways to decrease costs, shorten turn around time for deals, and sought out new revenue streams based upon feedback from customers and employees. Difficult times require difficult and sometimes extreme measures for survival. A well-worn saying attributed to Albert Einstein puts a point on this: the definition of insanity is “doing the same thing over and over again and expecting different results.”

If a business is to survive in these difficult economic times, it would certainly seem appropriate for it to be diligent in using self-examination tools, market research and competitive intelligence techniques, and the many other diagnostic tools available even to the smallest businesses. Years ago, I placed a fortune cookie saying under the glass atop the desk in my office. The saying is “Some people spend their lives trying to climb the ladder of success, only to find it is leaning against the wrong tree.”

The common thread among the articles posted on this date seems to be to avoid the path of the dodo bird (i.e. extinction). There certainly are adequate tools available to set a reasonable path for a new business, to test customer reaction to new products and services, and to measure the sustainability of existing ones. Established businesses, likewise, have tools and techniques to gain valuable feedback from customers and employees, to find ways to do more with less, and to increase the number of revenues streams. A business owner or board of directors not in tune with these opportunities would seem far down the path of the dodo.

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 5/20/09 – Which way do I go?

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Growing Too Fast? Watch the Danger Signs by Shel Horowitz

A closely held business should prepare for the day when it might be for sale, and the business will fetch its best price only if everything is in order.

For bankers, the biggest caution flag is a cash flow problem and the most important criterion: a business should be able to repay debts out of income generated through normal operations.

There is a long list of red flags focused on lack of proper corporate documentation, which covers a number of areas:

• Documentation that is inconsistent with current practice
• Poorly negotiated vendor and franchise agreements
• Failure to document loans from shareholders or problem employees
• Improper protection of trade secrets and intellectual property
• Noncompliance with ERISA disclosure rules
• Lack of buy/sell and succession agreements
• Inability to move forward because 50/50 ownership creates a voting deadlock
• Inadequate cash reserves to pay taxes (especially for S corporations
• A history of contract disputes
• Unwillingness to grant sufficient independence to advisors or lack of follow-through on their recommendations

 

*Competitive Intelligence on a Shoestring by Shel Horowitz

“There are a lot of things you can do on the cheap that help you understand your market better.” It can help you:

• Be prepared when your competitor launches a new product or enters a new territory
• Understand the opportunities and threats posed by your competitor’s strengths and weaknesses
• Know when organizational shifts create power vacuums or new directions and centers of influence
• Watch technology trends that could create an upheaval in your industry
• Know how to protect your company’s uniqueness: the “special sauce” or “crown jewels:” that differentiate you from everyone else in the market

Among many other techniques you can use with essentially no cost to you:

• Examine the company’s own website
• Collect information from trade shows, industry journals, etc.
• Ask questions of former employees – that don’t violate their NDAs (for instance, “Who are the rising stars, what makes them tick? You’re not asking them to show you the blueprints, but the contextual info can help you understand what they’re going to do next”.)
• Visit job websites such as Monster.com and see what kinds of positions they’re listing
• Put their company names into news alert services and receive a notice when they get press
• Ask journalists who’ve interviewed your competitors about the back story that didn’t make it into print
• Look on business portal and information websites such as hoovers.com and ceoexpress.com
• Ask their customers, suppliers, and other stakeholders

This article was worth reading simply because of the amazing list of hyperlinks to CI resources, divided into ten categories. You have to bookmark this article.

 

*Grow Your Business with Strategic Questions by Shel Horowitz

By focusing on the positive, on the encompassing, broad-based “how” rather than on the narrower, more defensive “why,” strategic questions uncover new opportunities that might otherwise have stayed hidden.

Typical strategic questions might be:

• How might we..?
• What would it take..?
• What might shift our situation for the better?
• What in the past leads you to think as you do?
• How has change happened here in the past?
• How did the issue of… first get on your radar screen

Strategic questions can help your business last through the ages. Lipke cited a Royal Dutch Shell study of 40 companies that were hundreds of years old (the oldest was a 700 year old Scottish firm). The researchers identified four common characteristics:

• fiscal conservatism, including large cash reserves;
• a strong sense of organization, community, and each individual’s role;
• seeking outside influences ” for example- ongoing conversations with the most radical thinkers they could find”; and
• active encouragement of unconventional experimentation

 

*Branding: Three Experts, Three Approaches by Shel Horowitz

Branding is about creating loyalty: generating repeat customers and positive word-of-mouth that leads to referral business. The final result comes out of an exhaustive six-stage process:

• research
• strategy
• creation
• tools
• launch
• maintenance.

Each of these has many subelements. For instance, within the category of brand creation, selecting a name is one of the steps. Selecting the right name involves seeking something short…easy to spell…easy to say…distinctive…memorable…long-lasting…and without any really brainless cultural baggage in the words, the shapes, the colors (like trying to market the Chevy Nova in Spanish-speaking countries where the name translates as “doesn’t go”). Oh yes, and it should be available as an Internet URL.

 

*What Kind of Business will You have in 30 Years -And Who will Be Running It? by Shel Horowitz

“A successful succession strategy recognizes the need to combine younger visionary dreamers—sometimes called the “lunatic fringe”—and Boomer-generation practical managers who can turn those sweeping visions into systematized, replicable products and processes.”

Getting the radically different perspectives—the visionary and the manager—to harmonize requires an adjustment.

Collaborative leadership is key to fusing those two very different personalities.

You need a task team” to integrate marketing, sales, and manufacturing. “You will need collaborative leadership for boundary-less management.”

“In a traditional organization, knowledge transfer does not take place; people are protecting their turf. In collaborative leadership, we all work together. Everyone may not benefit equally, but together we’ll change the size of the pie.”

 

*Where to Locate Your Business by John Tozzi

Each year, entrepreneurs start or expand some 650,000 small companies, according to data from the Small Business Administration. Choosing the right place can mean the difference between profitability and failure.

Large corporations typically pay professionals high fees to find the best location for new plants, offices, or stores. But the cost can be prohibitive for small companies, ranging from $50,000 to $125,000 or more.

Many factors affect whether a place is a good location for a particular business, including the labor force, tax rates, distance from suppliers and distributors, access to transportation, and the local market for the company’s products or services.

GIS Planning launched a site three months ago called ZoomProspector.com, designed to help entrepreneurs find and evaluate potential sites based on what attributes of a place matter most to their business. Other Web sites like City-data.com provide local information, but Ubalde says ZoomProspector’s proprietary data, much of it collected from the company’s economic development clients, offers small business owners access to the same information large companies use when they decide where to site new locations. ZoomProspector is free for users and makes money by selling geographically targeted advertising,

Aside from the labor pool, tax rates differ significantly from state to state, and they may be more important for small businesses with few employees.

Those small businesses in a position to create jobs can appeal to local economic development groups for help, and use other tools such as the Site Selection Network.

 

*Think Twice About Being First to Market by John Tozzi

New research offers fresh insight on when to launch a product or service, and shows that being first to market isn’t always a competitive advantage.

“Conventional wisdom says being first to market creates a competitive advantage. Reality is more complicated. Market opportunities are constantly opening and closing, and a hit idea at one point could be a dud a year earlier or a yawning “me too” business a year later.”

“New entrepreneurs can improve their odds if they weigh how much they stand to gain or lose by waiting.”

“In a hostile learning environment, entrepreneurs gain relatively little benefit by watching others. For example, if the relevant knowledge is protected intellectual property, studying the market before entering wouldn’t yield much advantage. In these situations, the trade-off favors entering early. But in less hostile learning environments, where entrepreneurs gain valuable information likely to increase their success just by watching other companies, companies benefit from waiting and learning lessons from earlier players.”

 

*Desperate for Entrepreneurs by Amy S. Choi

With a 22% unemployment rate and the second-highest foreclosure rate in the country, Merced County is pinning its hopes on small business.

Entrepreneurs and small business owners in Merced County are facing dire times, and seeking financial assistance to help them stay afloat or, in Lucy’s case, get up off the ground. The cities want to help them. Local authorities, in fact, are pinning their hopes on entrepreneurs to help create jobs and restore economic health in the region.

Small businesses are the backbone of our economy. Entrepreneurs will pull the economy out of the recession. But without some assistance, whether that comes in the form of financing, refinancing, or debt relief, it seems all but impossible that entrepreneurs such as Lucy Whittle will be able to thrive, much less carry the rest of the economy on their shoulders.

 

What I Think

I think many of my business clients can use a road map. Fortunately, there are lots of such guides out there. This series of articles, once again, was chosen randomly. Look at the common thread, however. Every one of these articles can help an entrepreneur at some stage of the process of starting, running, or getting out of a business.

The Desperate for Entrepreneurs article by Amy Choi and the Where to Locate Your Business article by John Tozzi point out the significance of site location. There are tremendous differences in the availability of resources and the cost of locating in different parts of the county, and even within different cities in a single state. The “Big Guys” certainly put a lot of research into the decision on where to locate a new operation, as well as whether they can squeeze a little more out of a location by staying, or ultimately do better by relocating to another place. Why shouldn’t small to mid-sized businesses do the same?

Obviously, the “Big Guys” have resources with which to conduct such analysis, which it would seem smaller companies don’t have. On the other hand, these articles point out that even smaller companies can do extensive site location research at nearly no cost with resources pointed out in these articles. It would seem extravagantly foolish not to take advantage of such tools, which can provide a long term advantage or disadvantage to your business.

Another roadmap to success can be found in the Competitive Intelligence on a Shoestring article by Shel Horowitz. This article is packed with links to find out almost anything you want to know about your competition, your market, funding, the future of your industry, and all for free. Once again, before charging in or continuing on, shouldn’t you check the map to make sure you’re on course to your chosen destination?

Once you are up and running, the Think Twice About Being First to Market article by John Tozzi is a good one, which can help you save your limited resources to apply them most effectively. “Common wisdom” is to be first to market because once you become the leader, you have beaten the competition. As with the article I posted recently by Wil Schroter, Draft Your Competition, there are actually two ways of looking at this. In some cases, just as in the Indy 500, you are more likely to win the race if you sometimes draft behind your closest competition, watching for their mistakes and missed opportunities, as they expend more of their resources than you, all to stay ahead.

The road from start-up to a successful final destination is typically long and difficult. Sometimes it simply makes sense to be conservative at the beginning, to keep checking your map to make sure you are on course, and to conserve as much of your finite resources as possible for the final push. The articles by Shel Horowitz, which I posted on this date, should all be helpful in making the best use of those resources. All of them should help you keep your focus on your goal and help you reach it a little faster and in a little better shape than if you didn’t check those directions.

They have lots of road maps in service stations along the interstates for a reason. Are you one of those guys they talk about because you refused to stop to ask for directions?

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.