Posts Tagged ‘Entrepreneurship’

When I’m working to help my clients identify and develop their mission as part of their strategy formulation, I often ask them to imagine what the world would be like if they didn’t exist as a company. It can be an unsettling question, not unlike what the main character goes through in the classic movie, A Wonderful Life. Call it the Wonderful Life question.

I have found that there are basically two possible answers to that question. Either the group answers that there wouldn’t be much different, or they answer that they have something unique to offer their clients. How they answer then frames the discussion of their mission. If they can’t really say much would be different, then they are interchangeable when any number of other companies. They probably offer commoditized and undifferentiated products and services. If they answer that they think they have something truly unique, then they are clearly differentiated from their competitors, or at least aspire to be so.

There is no correct or better answer to this question. Many companies have been widely successful by offering commoditized products. These success stories, such as Walmart, are focused relentlessly on offering uniform quality products and services at ever lower prices. They have to be masters at generating value from the “back end” of the business, that is, by ruthlessly rooting out waste and inefficiency so they can keep lowering their costs, and therefore their prices. Conversely, companies that truly believe they can make a difference in their customers’ lives tend to offer highly differentiated products and services. They can also be ruthless with costs, but this isn’t as critical, as they can demand higher prices in return for that differentiation and uniqueness. German auto makers such as Mercedes, BMW, and Audi are clearly differentiated producers. Apple also offers highly differentiated consumer electronics products, and prices them accordingly. This makes them wildly profitable and allows them to continually reinvest in new designs and category-busting products.

It’s interesting how asking that one simple existential question can generate a whole new way of viewing one’s business, mission, and strategy to achieve it.

© 2011 Richard Martin. Reproduction and quotes permitted with full and proper attribution.

I was called by a survey company agent yesterday on behalf of my business bank, Bank of Montreal. They did the same thing about two years, and nothing changed in my responses in those two years. Essentially, while I’m happy with the service I get when I ask for it, the bank doesn’t know I exist otherwise.

One of the questions I was asked: “Why do you say you’re not fully satisfied with Bank of Montreal’s service?” (or words to that effect) Well, for starters, no one ever contacts me, other than this campy survey every two years. If they had investigated my previous responses, they would have contacted me and asked for more details.

I have no concerns for myself, because I have a good team of advisors and I’ve educated myself to find the best financial products and services. But, for the bank, you have to ask how many opportunities they’re letting flit by. What if someone were to call me on a quarterly basis to know how things were going, to ask me if all my needs were being met? Perhaps I need business or personal insurance? Perhaps I need a different type of business credit card, or travel coverage, or a line of credit instead of a higher limit on my card? How would they know if they don’t call me up, or ask me to come and visit them so we can talk about my wants and–more importantly–my needs?

If they’re basically ignoring me, then that means they are ignoring thousands of other small business owners, consultants, professional service firms, and self-employed workers. How many opportunities are they leaving to competitors? It’s not my concern, but the fact that no bank seems to be truly interested in accompanying small business owners is indicative of what one author in the 80s called the syndrome of “towers of gold, feet of clay.” Banks are like deer in the headlamps. They are risk averse, they are slow to react, and when they do, it usually means an overreaction, such as freezing credit, even though most businesses are still good risks.

Personally, I don’t care if the Bank of Montreal gets my business or someone else’s. I chose them as a business bank when I was starting out over 5 years ago simply because they answered the phone and seemed to be genuinely interested in my business (as compared to the ridiculous hoops CIBC wanted me to jump through, for instance). They have done nothing since then to build my loyalty or to generate additional revenue by offering additional services or products. I keep my accounts there because of habit, and because they haven’t compelled me to vote with my feet.

But if someone else came a-courting, I may be tempted.

Richard Martin brings to bear his military and business leadership experience to help executives and organizations exploit change, maximize opportunities, and minimize risks.

© 2011 Richard Martin. Reproduction and quotes permitted with full and proper

One of the basic tactics you learn as a young military officer is to “picket and bypass.” This refers to the fact that as you advance against the enemy, you can encounter small pockets of resistance and obstacles that are meant to slow your advance or distract you from your main purpose. The order to picket and bypass means that you leave a small element to keep a watch on the enemy (picket) and then bypass them to continue with the main mission. This, of course, assumes that you have the room to manoeuvre around the enemy.

Whenever I’m working on a project, whether one of my own or for a client, I find that obstacles and resistance tend to crop up. It is easy to become distracted by these hindrances to progress. At a minimum they can be minor irritants, but they can also be a major distraction to your progress, and even occasionally to the success of your project.

For instance, I was working on strategy project with a client. As we started to work on implementing his strategic plan, several obstacles started to surface. These were mainly ownership issues with partners and questions of apportionment of costs for initiatives involving the main company and some of its subsidiaries. Most of these issues were not showstoppers, but merely minor irritants. It was easy to stay focused on the overall objective while setting them aside. On the other hand, other issues appeared to be more important, and even critical to the successful implementation of the strategy. What allowed us to distinguish between the minor irritants and the critical obstacles? In a nutshell, it was whether or not the particular issue could derail successful implementation or progress of the strategy.

Asking whether the issue can derail the project or not is the main method to determine its criticality. However, sometimes you can’t really estimate the relative importance of the resistance or obstacle until you’ve actually tried to resolve it or eliminate it. This is why it is critical that you and your team periodically review your focus of effort so you’re not going down rabbit holes when you should instead be staying on the main game trails.

Here are some questions you can ask that will assist in determining whether an obstacle is substantial or just a potential distraction:

•What could happen if we don’t address this issue? What could happen if we do address it?
•Are the potential effects major or minor? Could the effects stop us from reaching our objectives now or in the future? How probable are these effects?
•Can resolution of this issue be delayed or do we need to address it immediately? Could they circle around and take us unawares?
•Are these issues about the nature of the objectives or merely about the means to achieve them, especially about resources?
•What is the effect of focusing on these issues? Is this preventing us from addressing something more important or putting effort into higher payoff activities? In other words, is this the best use of limited leadership and managerial resources, given everything that needs to be done?

Once you’ve determined whether an obstacle or hindrance is only minor or can be delayed, you can’t just ignore it. You may have to take preventive action or develop contingency plans to address it should it become more critical over time or if the situation changes. This is why you don’t just bypass the obstacle or issue, but also picket it. This means you keep an eye on it, ready to act on a change of situation or to mitigate its effects until such time as you can put more focus and effort into resolving it.

Sometimes, obstacles and issues can disappear as the project advances. The person you thought would be against the project eventually comes around, or you realize that that wasn’t the problem you thought it would be after all. We all have a limited amount of energy and attention we can use to focus on achieving a successful project or implementing a new strategy, process, or approach. We need to keep our resources for the truly important so that we aren’t caught off guard when problems and obstacles arise, or that we don’t go chasing rabbits when we should be stalking the real big game instead. That’s why “picket and bypass” must be part of the repertoire of every leader and manager.

© Alcera Consulting Inc. 2011. We encourage the sharing of this information and forwarding of this email with attribution. All other rights reserved.

A few years back I met with prospective client to discuss his objectives for his business. He was in his late sixties, and wanted to retire. Unfortunately, he was the only one who could close business. He had also associated himself with another shareholder who was supposedly brilliant (i.e. the inventive one) but also increasingly erratic in his behaviour with others in the company and with clients. To put a cherry on this particular sundae, the business was also owed a significant amount of money by a major client, with severely hampered cash flow. My prospect told me point blank, “I want to retire, but I’m a prisoner of my own company. I can’t sell it, because it’s worth nothing without me; I have no one to take over from me; and I’m owed a significant amount of money to get at least something out of it if I were to liquidate it.” He figured his best option was to bring in one of his technicians to run the company, someone with little actual business experience, and who was also very young (about 25 years old). I tendered a proposal to help him get out of that mess, but he claimed he didn’t have the money to pay me.

All in all, not a pretty situation. Though it’s admittedly extreme, in my work with small business owners and entrepreneurs, I repeatedly encounter owners who, though not necessarily a prisoner of their business, could be reckoned fairly close to being so. In my mind, there are two basic prosperity models for small business owners. One is to build a machine, a business that can be passed on to one’s children or associates, or otherwise sold at a reasonable profit. The other model is to operate a business for a number of years, drawing a salary and dividends commensurate with one’s overall revenues and personal objectives.

In the first, you realize that you have to create systems and processes and to surround yourself with people who can eventually run the business without you. You can then choose to scale back your activities in the company, or to sell or transfer it. The bottom line though is that you are no longer required to be there on a day-to-day basis to make it work. The most important area of course is in sales. Finding sales talent is not easy, and it’s a challenge to compensate good salespeople in a small business. The most common way to do so is to ensure they have a stake in the business, either through bonuses or an ownership position, although that can sometimes create a whole other raft of issues.

Not all businesses can be successfully turned into a machine, so it’s important to know if your business falls into that category. In many, perhaps most, cases, it doesn’t. That’s why it’s important to be realistic about your prospects for selling or transferring a business that would have to be a going concern without you. Also, many small business owners make the mistake of overestimating the value of their business for selling. Many entrepreneurs think it will be worth two or three times annual revenue, when in actuality they would be lucky to get one year’s revenue for it. In many cases, it’s more like 25% to 50%, and there is often a need for the seller to remain with the business for a number of years in order to maintain client relationships or transfer them to the buyer.

It’s important to be realistic about these matters. In many cases, you’re better off to take a salary and dividends, and build a retirement nestegg outside the business. That way, even if you can’t sell the business for a lot of money, or if you can’t sell it at all, then at least you have built up your retirement fund.

There are numerous advantages to owning a business and being an entrepreneur, but it’s not when you’re 65 and wanting to retire that it is time to start planning for your retirement or extrication from your business.

© 2011 Richard Martin. Reproduction and quotes permitted for non-commercial purposes with full and proper attribution.