George Eastman, founder of Kodak :
Gave some classic advice about Company, Brand and Name. "A trademark should be short, vigorous, incapable of being misspelled," said Eastman. "It must mean nothing. If the name has no dictionary definition, it must be associated only with your product." Although good advice, this works only if you are able to put some resources behind establishing and supporting a name over time. Most consultants don't consider a rebranding effort worth the cost.
Friday, May 30, 2008
Wednesday, May 14, 2008
NRN's - Infosys Business View
How Infosys began
It was a wintry morning in January 1981 when seven of us sat in my apartment, and created Infosys. We had lots of hope, confidence, commitment, energy, enthusiasm, hard work, passion and a sense of sacrifice.
We were short of one thing, money. We managed to put together just $250 in seed capital.
We never dreamt about size, revenues and profits. Our dream, right from day one, was to build a corporation that was, above all things, respected.
From the beginning, our team was unique in our commitment to a strong value system. We believed in putting the interest of the company ahead of our own interest. We believed in legal and ethical business.
We believed in respect and long-term gratification. And each of us brought complementary strengths to the company.
'Entrepreneurship is a marathon'
To me, entrepreneurship is a marathon. I believe that the key to a successful corporation is longevity – my heroes are companies like IBM, Levers, and GE. These firms have shown growth in earnings quarter after quarter, for a long time.
Infosys itself has seen consistent growth in revenue and profitability for over 49 quarters, since it got listed in India. We have institutionalized performance and accountability in our systems and processes, and through the empowerment of our employees. Let me talk about some of the generic lessons we have learnt.
The name of the game is: predictability of revenues; sustainability of the prediction; profitability; and a good de-risking model. Measurement is key to improvement.
Value system
A sound value system is what differentiates long-term players from others. Putting the corporation's interest ahead of personal interest will advance personal goals in the long term.
No single person is indispensable. It is important that you give challenging engagements to deserving people, whether they are young or new in the organization. Youth and empowerment are the keys to scalability and longevity.
Every situation is what you make it to be. Confidence is half the battle, and leadership is making the impossible look possible. Speed, imagination and excellence in execution are the only three context-invariant and time-invariant attributes for success.
Trust of employees, investors
The trust of employees is the most important ingredient for successful leadership. To gain the trust of people, there is no more powerful leadership style than leadership by example. The world respects performance and action, not rhetoric.
It is better to obsolete our own innovations, rather than allowing our competitors to do it. A healthy sense of paranoia and respect for competition is an absolute must for success. It prevents complacency, and ensures that the organization is learning continuously. The ultimate test for customer satisfaction is making our customer look good in front of his / her customer.
I have realized that if you want to look smarter, you must surround yourself with people smarter than you. Everybody needs incentives to perform. Money is not the only motivator; respect, dignity, fairness and inclusiveness are essential to get the best out of employees. Every employee must feel an inch taller when talking about the company.
Being transaction-oriented in every decision avoids groupism. An emphasis on meritocracy and data-orientation enhances the confidence of employees in the fairness of the corporation. We believe in the adage, In God we trust, everybody else brings data to the table.
To retain the trust of your investors, it is better to under promise and over-deliver. Investors understand that every business will have ups and downs, and want us to level with them at all times. They want us give them bad news pro-actively and as early as possible. Therefore, When in doubt, disclose.
We have realized that we should never take any decision with the stock price in mind. The day we do this, we will ruin the company. Finally, we have realized that we can shortchange investors if we want to make Rs 1 crore (Rs 10 million), but if we want to make Rs 1,000 crore (Rs 10 billion), we have to play the game straight and honest.
We have realized that longevity requires that we follow every law of the land, even if we do not agree with it. We should work hard to change laws that hurt the progress of the corporation.
Unless we make a difference to the society and earn their trust, we cannot be long-term players. Therefore, in everything we do, we must ask ourselves whether we are adding value to the society around us, regardless of where we are -- US or India.
'What I want Infosys to achieve in 25 years'
What do I want to see this company achieve in the next 25 years? I want this to be a place where people of different races, nationalities and religious beliefs work together, in an environment of intense competition but utmost courtesy and dignity, to add greater and greater value to our customers, day after day. Just like we have received respect in India, I want Infosys to be the most respected company in every country that it operates.
But, to achieve these dreams, we have to be in existence over the next 250 years. I know we can do this for the following reasons:
* We have an extraordinary leader in Nandan (Nandan Nilekani, Infosys CEO), a man of great vision, values and dynamism. He is ably supported by the best management team and professionals in the industry.
* We have a depth of leaders within the organisation, with over 500 leaders being part of our leadership training and mentoring programme.
* The de-risking strategy at Infosys ensures that there is a backup for every position, and that decision-making is participatory across the company. In other words, it is not one person, but a team that looks at every decision. Thus, at Infosys, it is the leadership of ideas and meritocracy that drives every decision.
* Every decision is supported by a strong portfolio of systems, processes and technology.
* The value system of the company is time and context invariant.
* We will continue to have the mindset of a small company even as we grow and scale.
* Finally, and most importantly, I see youth, the feel-good factor and confidence around me.
This is why I am confident Infosys will continue to serve the society as a long-term player.
Thank you.
By - N R Narayana Murthy
It was a wintry morning in January 1981 when seven of us sat in my apartment, and created Infosys. We had lots of hope, confidence, commitment, energy, enthusiasm, hard work, passion and a sense of sacrifice.
We were short of one thing, money. We managed to put together just $250 in seed capital.
We never dreamt about size, revenues and profits. Our dream, right from day one, was to build a corporation that was, above all things, respected.
From the beginning, our team was unique in our commitment to a strong value system. We believed in putting the interest of the company ahead of our own interest. We believed in legal and ethical business.
We believed in respect and long-term gratification. And each of us brought complementary strengths to the company.
'Entrepreneurship is a marathon'
To me, entrepreneurship is a marathon. I believe that the key to a successful corporation is longevity – my heroes are companies like IBM, Levers, and GE. These firms have shown growth in earnings quarter after quarter, for a long time.
Infosys itself has seen consistent growth in revenue and profitability for over 49 quarters, since it got listed in India. We have institutionalized performance and accountability in our systems and processes, and through the empowerment of our employees. Let me talk about some of the generic lessons we have learnt.
The name of the game is: predictability of revenues; sustainability of the prediction; profitability; and a good de-risking model. Measurement is key to improvement.
Value system
A sound value system is what differentiates long-term players from others. Putting the corporation's interest ahead of personal interest will advance personal goals in the long term.
No single person is indispensable. It is important that you give challenging engagements to deserving people, whether they are young or new in the organization. Youth and empowerment are the keys to scalability and longevity.
Every situation is what you make it to be. Confidence is half the battle, and leadership is making the impossible look possible. Speed, imagination and excellence in execution are the only three context-invariant and time-invariant attributes for success.
Trust of employees, investors
The trust of employees is the most important ingredient for successful leadership. To gain the trust of people, there is no more powerful leadership style than leadership by example. The world respects performance and action, not rhetoric.
It is better to obsolete our own innovations, rather than allowing our competitors to do it. A healthy sense of paranoia and respect for competition is an absolute must for success. It prevents complacency, and ensures that the organization is learning continuously. The ultimate test for customer satisfaction is making our customer look good in front of his / her customer.
I have realized that if you want to look smarter, you must surround yourself with people smarter than you. Everybody needs incentives to perform. Money is not the only motivator; respect, dignity, fairness and inclusiveness are essential to get the best out of employees. Every employee must feel an inch taller when talking about the company.
Being transaction-oriented in every decision avoids groupism. An emphasis on meritocracy and data-orientation enhances the confidence of employees in the fairness of the corporation. We believe in the adage, In God we trust, everybody else brings data to the table.
To retain the trust of your investors, it is better to under promise and over-deliver. Investors understand that every business will have ups and downs, and want us to level with them at all times. They want us give them bad news pro-actively and as early as possible. Therefore, When in doubt, disclose.
We have realized that we should never take any decision with the stock price in mind. The day we do this, we will ruin the company. Finally, we have realized that we can shortchange investors if we want to make Rs 1 crore (Rs 10 million), but if we want to make Rs 1,000 crore (Rs 10 billion), we have to play the game straight and honest.
We have realized that longevity requires that we follow every law of the land, even if we do not agree with it. We should work hard to change laws that hurt the progress of the corporation.
Unless we make a difference to the society and earn their trust, we cannot be long-term players. Therefore, in everything we do, we must ask ourselves whether we are adding value to the society around us, regardless of where we are -- US or India.
'What I want Infosys to achieve in 25 years'
What do I want to see this company achieve in the next 25 years? I want this to be a place where people of different races, nationalities and religious beliefs work together, in an environment of intense competition but utmost courtesy and dignity, to add greater and greater value to our customers, day after day. Just like we have received respect in India, I want Infosys to be the most respected company in every country that it operates.
But, to achieve these dreams, we have to be in existence over the next 250 years. I know we can do this for the following reasons:
* We have an extraordinary leader in Nandan (Nandan Nilekani, Infosys CEO), a man of great vision, values and dynamism. He is ably supported by the best management team and professionals in the industry.
* We have a depth of leaders within the organisation, with over 500 leaders being part of our leadership training and mentoring programme.
* The de-risking strategy at Infosys ensures that there is a backup for every position, and that decision-making is participatory across the company. In other words, it is not one person, but a team that looks at every decision. Thus, at Infosys, it is the leadership of ideas and meritocracy that drives every decision.
* Every decision is supported by a strong portfolio of systems, processes and technology.
* The value system of the company is time and context invariant.
* We will continue to have the mindset of a small company even as we grow and scale.
* Finally, and most importantly, I see youth, the feel-good factor and confidence around me.
This is why I am confident Infosys will continue to serve the society as a long-term player.
Thank you.
By - N R Narayana Murthy
Thursday, May 8, 2008
Financial Analysis
Investors are always looking for a better way to pick securities. Two types of data analysis have emerged to assist investors in making better investment decisions. In this section, we will introduce you to fundamental and technical analysis.
Fundamental analysis is a method used to evaluate the worth of a security by studying the financial data of the issuer. It scrutinizes the issuer's income and expenses, assets and liabilities, management, and position in its industry. In other words, it focuses on the "basics" of the business.
If you want to use fundamentals to help you make an investment decision, you would rely heavily on an offering prospectus, annual and quarterly reports as well as any current news items relating to the issuer whose securities you are considering.
Technical analysis is a method used to evaluate the worth of a security by studying market statistics. Unlike fundamental analysis, technical analysis disregards an issuer's financial statements. Instead, it relies upon market trends to ascertain investor sentiment to predict how a security will perform.
If you want to use technical analysis to help you make an investment decision, you will refer to financial charts, tables and ratios found in the financial press. You will look for market trends and averages to help you decide whether the "time is right" to make an investment
Which Type of Analysis Is Better for You?
Fundamentalists and technicians have been at odds with one another since the advent of investing. There is no clear answer as to which is right. Sometimes it appears that the technicians make better picks. Other times it seems the fundamentalists are making the right call. One thing is certain, when one group of analysts is wrong the other will surely emerge saying, "We told you so." So, which is right for you? There are many potential answers to that question. Three variants of popular answers are:
If you are a "long-term" investor looking for companies with solid foundation, growth and income potential, the fundamentals may sway you.
If you are a "short-term" investor (trader) looking for companies who are "on the verge" of being discovered, fundamentals will be useful to you.
If you are a "long-term" investor who is not as concerned about one company's basics because you will diversify to minimize risk, or you are a "short-term" investor waiting for investor sentiment to change, then technical analysis will be helpful to you.
Today, many investors find both fundamental and technical analysis helpful in painting a more complete and colorful picture on the investment canvas. Whether you use an asset allocation, buy and hold, or market timing strategy, you will find useful information from both the fundamentalists and technicians. The technicians can tell you about the broad market and its trends. The fundamentalists tell you whether an issue has the "basics" necessary to meet your investment objectives.
Courtesy - AmeriTrade
Fundamental analysis is a method used to evaluate the worth of a security by studying the financial data of the issuer. It scrutinizes the issuer's income and expenses, assets and liabilities, management, and position in its industry. In other words, it focuses on the "basics" of the business.
If you want to use fundamentals to help you make an investment decision, you would rely heavily on an offering prospectus, annual and quarterly reports as well as any current news items relating to the issuer whose securities you are considering.
Technical analysis is a method used to evaluate the worth of a security by studying market statistics. Unlike fundamental analysis, technical analysis disregards an issuer's financial statements. Instead, it relies upon market trends to ascertain investor sentiment to predict how a security will perform.
If you want to use technical analysis to help you make an investment decision, you will refer to financial charts, tables and ratios found in the financial press. You will look for market trends and averages to help you decide whether the "time is right" to make an investment
Which Type of Analysis Is Better for You?
Fundamentalists and technicians have been at odds with one another since the advent of investing. There is no clear answer as to which is right. Sometimes it appears that the technicians make better picks. Other times it seems the fundamentalists are making the right call. One thing is certain, when one group of analysts is wrong the other will surely emerge saying, "We told you so." So, which is right for you? There are many potential answers to that question. Three variants of popular answers are:
If you are a "long-term" investor looking for companies with solid foundation, growth and income potential, the fundamentals may sway you.
If you are a "short-term" investor (trader) looking for companies who are "on the verge" of being discovered, fundamentals will be useful to you.
If you are a "long-term" investor who is not as concerned about one company's basics because you will diversify to minimize risk, or you are a "short-term" investor waiting for investor sentiment to change, then technical analysis will be helpful to you.
Today, many investors find both fundamental and technical analysis helpful in painting a more complete and colorful picture on the investment canvas. Whether you use an asset allocation, buy and hold, or market timing strategy, you will find useful information from both the fundamentalists and technicians. The technicians can tell you about the broad market and its trends. The fundamentalists tell you whether an issue has the "basics" necessary to meet your investment objectives.
Courtesy - AmeriTrade
BPM, BPR, BPO
Business Process Management : A Management discipline that provides governance in a business process environment, with the goal of improving agility and operational performance. Business Process Management is a structured approach employing methods, policies, metrics, management practices and software tools to manage and continuously optimize an Organization's activities and processes.
Business Process Redesign: A systematic, disciplined business process improvement approach that critically examines, rethinks, redesigns and implements the redesigned processes of an organization. BPR's goal is to acheive dramatic improvements in performance in areas important to customers and other stakeholders.
Business Process Optimization: The continuous management of performance and incremental business process improvement efforts by measuring Key Performance Indicators and redesigning the suboptimal processes for better performance.
Business Process Redesign: A systematic, disciplined business process improvement approach that critically examines, rethinks, redesigns and implements the redesigned processes of an organization. BPR's goal is to acheive dramatic improvements in performance in areas important to customers and other stakeholders.
Business Process Optimization: The continuous management of performance and incremental business process improvement efforts by measuring Key Performance Indicators and redesigning the suboptimal processes for better performance.
Tuesday, April 29, 2008
Pitching for a Start-Up
Fixing a Pitch - written by Bill Reichert, From Garage Technology Ventures.
Endless articles, books, and blogs have been written on the topic of business plan presentations and pitching to investors. In spite of this wealth of advice, almost every entrepreneur gets it wrong. Why? Because most guides to pitching your company miss the central point: The purpose of your pitch is to sell, not to teach. Your job is to excite, not to educate.
Pitching is about understanding what your customer (the investor) is most interested in, and developing a dialog that enables you to connect with the head, the heart, and the gut of the investor. If you want advice about pitching, you can ask a venture capitalist, but you probably won’t get a very good answer. Most VCs are analytic types, and so they will give you a laundry list of topics you should cover. They won’t tell you what really “floats their boat,” mainly because they can’t articulate it in useful terms. “I know it when I see it,” is about the best answer you’ll get.
What is the investor most interested in? Contrary to popular belief, the venture capitalist sitting at the other end of the table glaring inscrutably at the presenting entrepreneur is not thinking, “Is this company going to make a lot of money?” That is the simple question that most entrepreneurs think they are answering, but they are missing the crux of the venture capital process. What the investor is really thinking is, “Is this company the best next investment for me and my fund?” That is a much more complex issue, but that is what the entrepreneur has to pitch.
So, the pitch has to accomplish three things:
* Provide a good, clear, easy-to-repeat story—the story of an exciting new startup.
* Fit with other investments the individual venture capitalist has made and the investments the firm is chartered to make.
* Beat out the other investments the firm is currently considering.
These latter two issues are beyond the scope of this modest guide. So for now, let’s just concentrate on telling a good story.
Tell a Good Story
Most of the articles on pitching are generally right about the topics, even if they miss the nuance (sell, don’t explain). But don’t take any template as graven in stone. Your story may require a moderate, or even a dramatic, variation on the list of presentation slides (listed below). You may need to explain the solution before you can explain the market; or if you are in a crowded space, you may need to explain why you are different than everyone else early on in the conversation; or you may want to drop some very impressive brand-name customers before you explain your product or your market. The one thing you may not do is expand the number of slides to twenty (or thirty or fifty)! Other than that, let the specifics of your situation dictate the flow of your slides.
Nevertheless, it is useful to have a guide. With the caveats above in mind, here is a basic outline for your pitch:
* Cover Slide: Company name, location, tagline, presenter’s name and title. If there are multiple team members participating in the pitch, put names on the next slide instead. Key objective: Everyone in the room should know the basic value proposition of the company, including the target market, before the next slide is shown. All the words should not be on this slide, but reinforce and extend the tagline orally so that that everyone has a foundation for what is to come.
* Intro Slide: Team. The three or four key players in the company. For some reason, everyone puts the team slide at the end, but investors want to know this at the beginning, and it is common courtesy to make sure everyone is introduced. But make this short, crisp and relevant. This is not the time to share everyone’s life story, or detail the resumes of all six members of the advisory board. Focus on a significant, relevant accomplishment for each person that identifies that person as a winner. In ten to fifteen seconds, you should be able to say three or four sentences about your CTO that says everything the investors want to know about him or her at that moment. Key objective: Investors should be confident that there is a good credible core group of talent that believe in the company and can execute the next set of milestones. One of those milestones may be filling out the team, and so it is important to convey that the initial team knows how to attract great talent, as well as having great domain skills. If there is a gap in the team, address it explicitly, before investors have to ask about it.
* Slide 1: Company Overview. The best way to give an overview of your company is to state concisely your core value proposition: What unique benefit will you provide to what set of customers to address what particular need? Then you can add three or four additional dot points to clarify your target markets, your unique technology/solution, and your status (launch date, current customers, revenue rate, pipeline, funding needed). Key objective: Flesh out the foundation you established at the beginning. At this point, no one should have any question about what it is that your company does, or plans to do. The only questions that should remain are the details of how you are going to do it. Another key objective you should have achieved by this point in your presentation is to make sure that if there are some compelling brand names associated with your company (customers, partners, investors, advisors), your audience knows about them. Feel free to drop names early and often—starting with your first email introduction to the investor. Brand name relationships build your credibility, but do not overstate them if they are tenuous.
* Slide 2: Problem/Opportunity. You need to make it clear that there is a big, important problem (current or emerging) that you are going to solve, or opportunity you are going to exploit, and that you understand the market dynamics surrounding the opportunity—why does this situation exist and persist, and why is it only now that it can be addressed? Show that you really understand the very particular market segment you are targeting, and frame your market analysis according to the specific problem and solution you are laying out. In some cases, however, the problem you are attacking is so obvious and clear that you can drop this slide altogether. You do not have to tell investors that there are a lot of cell phones out there or that teenagers like to socialize. Save yourself, and them, the pain of the obvious.
* Slide 2.1: Problem/Opportunity Size. Even if your market opportunity is not obvious, you can assert the size of your opportunity on slide 2. Sometimes you may need a slide to clarify the factors that define the size and scope of the opportunity, particularly if you are going after multiple market segments. There may be a unique market dynamic or emerging trend that requires explanation. Do not use this slide to quote the Gartner Group or Frost & Sullivan; show that you really understand where your prospective customers are from the ground up.
* Slide 3. Solution. What specifically are you offering to whom? Software, hardware, services, a combination? Use common terms to state concretely what you have, or what you do, that solves the problem you’ve identified. Avoid acronyms and don’t try to use these precious few words to create and trademark a bunch of terms that won’t mean anything to most people, and don’t use this as an opportunity to showcase your insider status and facility with the idiomatic lingo of the industry. If you can demonstrate your solution (briefly) in a meeting, this is the place to do it.
* Slide 3.1. Delivering the Solution. You might need an extra slide to show how your solution fits in the value chain or ecosystem of your target market. Do you complement commonly used technologies, or do you displace them? Do you change the way certain business processes get executed, or do you just do them the same way, but faster, better and cheaper? Do you disrupt the current value chain, or do you fit into established channels? Who exactly is the buyer, and is that person different than the user?
* Slide 4. Benefits/Value. State clearly and quantify to the extent possible the three or four key benefits you provide, and who specifically realizes these benefits. Do some constituents benefit more than others, or earlier than others? These dynamics should inform your go-to-market strategy, and your product/service roadmap, which you will discuss later.
* Slide 5. Secret Sauce/Intellectual Property. Depending on your solution, you might need a separate slide to convince investors that no one else can easily duplicate or surpass your solution (assuming that’s actually true.) If you are in a business sector in which intellectual property is important, this is where you drill down into your secret sauce and proprietary technology. Again, boil this down to simple elements and terms, devoid of jargon. Do not walk the audience through a guided tour of your detailed product architecture. Instead, highlight the elements of your technology that give you unique potential for leverage and scale as you grow. If you do slides 4 and 5 well, it will be easy to make the case for your...
* Slide 6. Competitive Advantage. Okay, so how are you better than everyone else, including the status quo? Most entrepreneurs misunderstand the critical objective of this slide, which is not to enumerate all the deficiencies of the competition (as much fun as that may be.) Just because you have really cool technology, secret sauce, and intellectual property does not mean you will win. Other factors like domain expertise, high-level connections, and special relationships with customers, vendors, and other companies also play a part. Your key objective is to convince the investor that lots of folks will buy your product or service, even though they have several alternatives (one of which may be to do nothing), for very good reasons.
The best way to convince an investor is to have referenceable customers or prospects who will articulate in their own words why they bought or will buy your offering over the alternatives. Use this slide to summarize the three or four key reasons why customers prefer your solution to other solutions and to the status quo. Many entrepreneurs have been coached to use a four-square matrix that shows that they are in the upper right-hand quadrant, but this has become a joke in the venture community. Check-boxes are better, if they are not abused. Make sure your check-box criteria reflect the market’s requirements, not just your product’s features.
* Slide 6.1. Competitive Advantage Matrix. Depending on how important the analysis of competitive players is in your market segment, you may need a matrix to provide a detailed list of competitors by category. Preferably, you develop this as a “pocket slide” to be used for Q & A, if necessary. It is important, however, that you do your homework on the competition, and that you don’t misrepresent their strengths or their weaknesses.
* Slide 7. Go to Market Strategy. The single most compelling slide in any pitch is a pipeline of customers and strategic partners that have already expressed some interest in your solution—if they haven’t already joined your beta program. Too often this slide is, instead, a bland laundry list of standard sales and marketing tactics. You should focus on articulating the non-obvious, potentially disruptive elements of your strategy, or you can frame your comments in terms of the critical hurdles you need to get over, and how you are going to jump them. If you don’t have a pipeline, and there is nothing unique or innovative about your strategy, then drop this slide and make the elements of your sales model clear in the discussion of your business model (next slide).
* Slide 8: Business Model. How do you make money? Usually by selling something for a certain price to certain customers. But there are lots of variations on the standard theme. Explain your pricing, your costs, and why you are going to be especially profitable. Make sure you understand the key assumptions underlying your planned success and be prepared to defend them. What if you can’t sustain the price? What if it takes twice as long to make each sale? What if your costs don’t decline over time? Some investors will want to test the depth of your understanding of your business model. Be ready to articulate the sensitivity of your business to variations in your assumptions.
* Slide 9. Financial Projections. The two previous slides above should come together neatly in your five-year financial projections. [Bill and I disagree here. I think a five-year projection is impossible.] You should show the two or three key metrics that drive revenues, expenses and growth (such as customers, unit sales, new products, expansion sales, new markets), as well as the revenue, expense, profit, cash balance, and headcount lines. The most important thing to convey on this slide is that you really understand the economics and evolution of a growing, dynamic company, and that your vision is grounded in an understanding of practical reality. Your financials should tell your story in numbers as clearly as you are telling your story in words. Investors are not focused on the precision of your numbers; they’re focused on the coherence and integrity of your business plan.
* Slide 10. Financing Requirements/Milestones. It should be clear from your financials what your capital requirements will be. On this slide you should outline how you plan to take in funding—how big each round will be, and the timing of each—and map the funding against your key near-term and medium-term milestones. You should also include your key achievements to date. These milestones should tie to the key metrics in your financial projections, and they should provide a clear, crisp picture of your product introduction and market expansion roadmap. In essence, this is your operating plan for the funds you are raising. Do not spend time presenting a “use of funds” table. Investors want to see measures of accomplishment, not measures of activity. And they want to know that you are asking for the right amount of money to get the company to a meaningful milestone.
* Summary Slide. This slide is almost always wasted. Most entrepreneurs just put up three or four dot points about how wonderful their investment opportunity is. Generally the words are the same words that investors hear from scores of other entrepreneurs, such as, “We have a huge opportunity, and we will be the winners!” Your key objective on this slide is to solidify the core value proposition of your company in words that are memorable and unique to your company. If the venture investor in the room has to give a short description of your company to his partners, these are the words you want used. This is a good place to reinforce your tagline, or mantra—the short phrase that captures the essence of your message to investors. The best solution to creating your summary slide is to imagine that this is the only slide you will ever be able to present. If you had to do your whole pitch in one slide (with 30 point font), this is that slide.
So here we have a good general outline for pitching your company. But remember, it’s about selling your investment proposition, not about covering points. Don’t get fixated on using this or any other template. You should know the issues about your company that investors are most concerned about. Those are the issues you need to concentrate on. Make sure you address all the predictable “burning questions” as early as you can in your presentation, even if it means violating the sequence above.
Tips On Effective Pitching
How do you turn a pitch from a monolog to a sale? Make sure every point you make connects with your audience. Keep your text very, very short. Really. Please. Use charts and pictures if you can. And engage your prospect. Ask questions. “Do you think this market opportunity is interesting?” “Have you seen anyone else addressing this problem?” “Do you think CIOs would be interested in a solution like this?” You may get some tough responses, but you will know a lot more about what is going on in the investor’s mind, and you will be engaging them in your story—instead of letting them play with their Blackberries under the table.
Some additional tips to improve the effectiveness of your pitch:
* Make sure that everyone in the room is introduced. Rarely do entrepreneurs ask the investors in the room to introduce themselves. While it is appropriate to be familiar with each investor’s bio (assuming it is on the web), it’s fair to ask something like, “What investments have you been looking at recently?” And if there are some other faces in the room, you should absolutely have them introduce themselves and provide a little background.
* Don’t use a feel-good, visionary “mission statement” on your overview slide. Mission statements have also become a joke in the venture industry. It’s like saying, “Our projections are conservative.” Focus on making sure your statement of your company’s value proposition is crisp, clear, and unique.
* Prepare good use cases. Sometimes, no matter how simple and clear the description of a product, what the investor really needs is a concrete example of how people will actually use it. In some cases there will be multiple different use cases. You may need to outline these to get your point across.
* Drop names, early and often. If you really have some brand names involved in your company—as customers, as partners, as members of the team—don’t keep them a secret for the first nine slides; make sure the investor knows about them early in the presentation. Be prepared for the investor to contact every single name you drop—whether it’s a person or a company. If you are going to drop names, they had better be real.
* Make sure you can tell the entire story in ten to fifteen minutes. Even if you have time, your total presentation should be no longer than twenty minutes. You want to have time to engage the investors and discuss their questions or concerns. If you think you have additional critical points that have to be made, prepare “pocket slides” that you can put up if the topic arises.
* Do the math. Average entrepreneur pitch: thirty-eight slides. Average VC attention span/cranial capacity: ten slides.
* Learn how to control the flow of the meeting, without seeming inflexible or anxious. Watch and listen. Body language and questions will tell you if you are okay deferring a point or if you need to address it immediately. If you let your audience take over the flow, you will probably wind up creating a confusing, incomplete impression of your company. But if you don’t address the “burning questions” early and effectively, the investors won’t hear anything else you say.
* Don’t lie. You would think this goes without saying, but in their enthusiasm for their creations, entrepreneurs tend to slip across the line all too often. Please do not interpret our exhortation to “sell” as an endorsement of hype, exaggeration, misrepresentation, spin, or lying. The best salespeople are credible and trustworthy. It is more important that investors trust you than that they understand every nuance your business.
* You don’t have to be “conservative,” but you do have to be realistic. Most entrepreneurs fail to be realistic about how long things take in the real world (versus the spreadsheet world). Whether it’s the time to complete product development, or the time to close the next ten sales, entrepreneurs are pathologically optimistic. As with your financials, find examples of comparable challenges addressed by other companies, and use that data in your model.
* Don’t put so much text on a page that the investor has to read it. Everything should be short, content-rich bullets in a font large enough to read without squinting. The words are simply reinforcement of the points you are making. Pictures, graphs, and charts should be uncluttered and make clear, compelling points. If they have to be deconstructed and explained piece by piece, you will lose focus and momentum.
* Don’t use your presentation stack as a standalone document. It is perfectly okay if it is not readable when you are not around. That’s the job of your executive summary or your business plan. If you are looking for a guide to writing an executive summary, you can find our version online: “The Art of the Executive Summary.”
A good pitch is rare because it is so hard to execute on everything else that has to be done to build a successful company. But the ability to pitch is a key indicator for investors—if the entrepreneur doesn’t know how to sell, how can he or she build a great company?
Endless articles, books, and blogs have been written on the topic of business plan presentations and pitching to investors. In spite of this wealth of advice, almost every entrepreneur gets it wrong. Why? Because most guides to pitching your company miss the central point: The purpose of your pitch is to sell, not to teach. Your job is to excite, not to educate.
Pitching is about understanding what your customer (the investor) is most interested in, and developing a dialog that enables you to connect with the head, the heart, and the gut of the investor. If you want advice about pitching, you can ask a venture capitalist, but you probably won’t get a very good answer. Most VCs are analytic types, and so they will give you a laundry list of topics you should cover. They won’t tell you what really “floats their boat,” mainly because they can’t articulate it in useful terms. “I know it when I see it,” is about the best answer you’ll get.
What is the investor most interested in? Contrary to popular belief, the venture capitalist sitting at the other end of the table glaring inscrutably at the presenting entrepreneur is not thinking, “Is this company going to make a lot of money?” That is the simple question that most entrepreneurs think they are answering, but they are missing the crux of the venture capital process. What the investor is really thinking is, “Is this company the best next investment for me and my fund?” That is a much more complex issue, but that is what the entrepreneur has to pitch.
So, the pitch has to accomplish three things:
* Provide a good, clear, easy-to-repeat story—the story of an exciting new startup.
* Fit with other investments the individual venture capitalist has made and the investments the firm is chartered to make.
* Beat out the other investments the firm is currently considering.
These latter two issues are beyond the scope of this modest guide. So for now, let’s just concentrate on telling a good story.
Tell a Good Story
Most of the articles on pitching are generally right about the topics, even if they miss the nuance (sell, don’t explain). But don’t take any template as graven in stone. Your story may require a moderate, or even a dramatic, variation on the list of presentation slides (listed below). You may need to explain the solution before you can explain the market; or if you are in a crowded space, you may need to explain why you are different than everyone else early on in the conversation; or you may want to drop some very impressive brand-name customers before you explain your product or your market. The one thing you may not do is expand the number of slides to twenty (or thirty or fifty)! Other than that, let the specifics of your situation dictate the flow of your slides.
Nevertheless, it is useful to have a guide. With the caveats above in mind, here is a basic outline for your pitch:
* Cover Slide: Company name, location, tagline, presenter’s name and title. If there are multiple team members participating in the pitch, put names on the next slide instead. Key objective: Everyone in the room should know the basic value proposition of the company, including the target market, before the next slide is shown. All the words should not be on this slide, but reinforce and extend the tagline orally so that that everyone has a foundation for what is to come.
* Intro Slide: Team. The three or four key players in the company. For some reason, everyone puts the team slide at the end, but investors want to know this at the beginning, and it is common courtesy to make sure everyone is introduced. But make this short, crisp and relevant. This is not the time to share everyone’s life story, or detail the resumes of all six members of the advisory board. Focus on a significant, relevant accomplishment for each person that identifies that person as a winner. In ten to fifteen seconds, you should be able to say three or four sentences about your CTO that says everything the investors want to know about him or her at that moment. Key objective: Investors should be confident that there is a good credible core group of talent that believe in the company and can execute the next set of milestones. One of those milestones may be filling out the team, and so it is important to convey that the initial team knows how to attract great talent, as well as having great domain skills. If there is a gap in the team, address it explicitly, before investors have to ask about it.
* Slide 1: Company Overview. The best way to give an overview of your company is to state concisely your core value proposition: What unique benefit will you provide to what set of customers to address what particular need? Then you can add three or four additional dot points to clarify your target markets, your unique technology/solution, and your status (launch date, current customers, revenue rate, pipeline, funding needed). Key objective: Flesh out the foundation you established at the beginning. At this point, no one should have any question about what it is that your company does, or plans to do. The only questions that should remain are the details of how you are going to do it. Another key objective you should have achieved by this point in your presentation is to make sure that if there are some compelling brand names associated with your company (customers, partners, investors, advisors), your audience knows about them. Feel free to drop names early and often—starting with your first email introduction to the investor. Brand name relationships build your credibility, but do not overstate them if they are tenuous.
* Slide 2: Problem/Opportunity. You need to make it clear that there is a big, important problem (current or emerging) that you are going to solve, or opportunity you are going to exploit, and that you understand the market dynamics surrounding the opportunity—why does this situation exist and persist, and why is it only now that it can be addressed? Show that you really understand the very particular market segment you are targeting, and frame your market analysis according to the specific problem and solution you are laying out. In some cases, however, the problem you are attacking is so obvious and clear that you can drop this slide altogether. You do not have to tell investors that there are a lot of cell phones out there or that teenagers like to socialize. Save yourself, and them, the pain of the obvious.
* Slide 2.1: Problem/Opportunity Size. Even if your market opportunity is not obvious, you can assert the size of your opportunity on slide 2. Sometimes you may need a slide to clarify the factors that define the size and scope of the opportunity, particularly if you are going after multiple market segments. There may be a unique market dynamic or emerging trend that requires explanation. Do not use this slide to quote the Gartner Group or Frost & Sullivan; show that you really understand where your prospective customers are from the ground up.
* Slide 3. Solution. What specifically are you offering to whom? Software, hardware, services, a combination? Use common terms to state concretely what you have, or what you do, that solves the problem you’ve identified. Avoid acronyms and don’t try to use these precious few words to create and trademark a bunch of terms that won’t mean anything to most people, and don’t use this as an opportunity to showcase your insider status and facility with the idiomatic lingo of the industry. If you can demonstrate your solution (briefly) in a meeting, this is the place to do it.
* Slide 3.1. Delivering the Solution. You might need an extra slide to show how your solution fits in the value chain or ecosystem of your target market. Do you complement commonly used technologies, or do you displace them? Do you change the way certain business processes get executed, or do you just do them the same way, but faster, better and cheaper? Do you disrupt the current value chain, or do you fit into established channels? Who exactly is the buyer, and is that person different than the user?
* Slide 4. Benefits/Value. State clearly and quantify to the extent possible the three or four key benefits you provide, and who specifically realizes these benefits. Do some constituents benefit more than others, or earlier than others? These dynamics should inform your go-to-market strategy, and your product/service roadmap, which you will discuss later.
* Slide 5. Secret Sauce/Intellectual Property. Depending on your solution, you might need a separate slide to convince investors that no one else can easily duplicate or surpass your solution (assuming that’s actually true.) If you are in a business sector in which intellectual property is important, this is where you drill down into your secret sauce and proprietary technology. Again, boil this down to simple elements and terms, devoid of jargon. Do not walk the audience through a guided tour of your detailed product architecture. Instead, highlight the elements of your technology that give you unique potential for leverage and scale as you grow. If you do slides 4 and 5 well, it will be easy to make the case for your...
* Slide 6. Competitive Advantage. Okay, so how are you better than everyone else, including the status quo? Most entrepreneurs misunderstand the critical objective of this slide, which is not to enumerate all the deficiencies of the competition (as much fun as that may be.) Just because you have really cool technology, secret sauce, and intellectual property does not mean you will win. Other factors like domain expertise, high-level connections, and special relationships with customers, vendors, and other companies also play a part. Your key objective is to convince the investor that lots of folks will buy your product or service, even though they have several alternatives (one of which may be to do nothing), for very good reasons.
The best way to convince an investor is to have referenceable customers or prospects who will articulate in their own words why they bought or will buy your offering over the alternatives. Use this slide to summarize the three or four key reasons why customers prefer your solution to other solutions and to the status quo. Many entrepreneurs have been coached to use a four-square matrix that shows that they are in the upper right-hand quadrant, but this has become a joke in the venture community. Check-boxes are better, if they are not abused. Make sure your check-box criteria reflect the market’s requirements, not just your product’s features.
* Slide 6.1. Competitive Advantage Matrix. Depending on how important the analysis of competitive players is in your market segment, you may need a matrix to provide a detailed list of competitors by category. Preferably, you develop this as a “pocket slide” to be used for Q & A, if necessary. It is important, however, that you do your homework on the competition, and that you don’t misrepresent their strengths or their weaknesses.
* Slide 7. Go to Market Strategy. The single most compelling slide in any pitch is a pipeline of customers and strategic partners that have already expressed some interest in your solution—if they haven’t already joined your beta program. Too often this slide is, instead, a bland laundry list of standard sales and marketing tactics. You should focus on articulating the non-obvious, potentially disruptive elements of your strategy, or you can frame your comments in terms of the critical hurdles you need to get over, and how you are going to jump them. If you don’t have a pipeline, and there is nothing unique or innovative about your strategy, then drop this slide and make the elements of your sales model clear in the discussion of your business model (next slide).
* Slide 8: Business Model. How do you make money? Usually by selling something for a certain price to certain customers. But there are lots of variations on the standard theme. Explain your pricing, your costs, and why you are going to be especially profitable. Make sure you understand the key assumptions underlying your planned success and be prepared to defend them. What if you can’t sustain the price? What if it takes twice as long to make each sale? What if your costs don’t decline over time? Some investors will want to test the depth of your understanding of your business model. Be ready to articulate the sensitivity of your business to variations in your assumptions.
* Slide 9. Financial Projections. The two previous slides above should come together neatly in your five-year financial projections. [Bill and I disagree here. I think a five-year projection is impossible.] You should show the two or three key metrics that drive revenues, expenses and growth (such as customers, unit sales, new products, expansion sales, new markets), as well as the revenue, expense, profit, cash balance, and headcount lines. The most important thing to convey on this slide is that you really understand the economics and evolution of a growing, dynamic company, and that your vision is grounded in an understanding of practical reality. Your financials should tell your story in numbers as clearly as you are telling your story in words. Investors are not focused on the precision of your numbers; they’re focused on the coherence and integrity of your business plan.
* Slide 10. Financing Requirements/Milestones. It should be clear from your financials what your capital requirements will be. On this slide you should outline how you plan to take in funding—how big each round will be, and the timing of each—and map the funding against your key near-term and medium-term milestones. You should also include your key achievements to date. These milestones should tie to the key metrics in your financial projections, and they should provide a clear, crisp picture of your product introduction and market expansion roadmap. In essence, this is your operating plan for the funds you are raising. Do not spend time presenting a “use of funds” table. Investors want to see measures of accomplishment, not measures of activity. And they want to know that you are asking for the right amount of money to get the company to a meaningful milestone.
* Summary Slide. This slide is almost always wasted. Most entrepreneurs just put up three or four dot points about how wonderful their investment opportunity is. Generally the words are the same words that investors hear from scores of other entrepreneurs, such as, “We have a huge opportunity, and we will be the winners!” Your key objective on this slide is to solidify the core value proposition of your company in words that are memorable and unique to your company. If the venture investor in the room has to give a short description of your company to his partners, these are the words you want used. This is a good place to reinforce your tagline, or mantra—the short phrase that captures the essence of your message to investors. The best solution to creating your summary slide is to imagine that this is the only slide you will ever be able to present. If you had to do your whole pitch in one slide (with 30 point font), this is that slide.
So here we have a good general outline for pitching your company. But remember, it’s about selling your investment proposition, not about covering points. Don’t get fixated on using this or any other template. You should know the issues about your company that investors are most concerned about. Those are the issues you need to concentrate on. Make sure you address all the predictable “burning questions” as early as you can in your presentation, even if it means violating the sequence above.
Tips On Effective Pitching
How do you turn a pitch from a monolog to a sale? Make sure every point you make connects with your audience. Keep your text very, very short. Really. Please. Use charts and pictures if you can. And engage your prospect. Ask questions. “Do you think this market opportunity is interesting?” “Have you seen anyone else addressing this problem?” “Do you think CIOs would be interested in a solution like this?” You may get some tough responses, but you will know a lot more about what is going on in the investor’s mind, and you will be engaging them in your story—instead of letting them play with their Blackberries under the table.
Some additional tips to improve the effectiveness of your pitch:
* Make sure that everyone in the room is introduced. Rarely do entrepreneurs ask the investors in the room to introduce themselves. While it is appropriate to be familiar with each investor’s bio (assuming it is on the web), it’s fair to ask something like, “What investments have you been looking at recently?” And if there are some other faces in the room, you should absolutely have them introduce themselves and provide a little background.
* Don’t use a feel-good, visionary “mission statement” on your overview slide. Mission statements have also become a joke in the venture industry. It’s like saying, “Our projections are conservative.” Focus on making sure your statement of your company’s value proposition is crisp, clear, and unique.
* Prepare good use cases. Sometimes, no matter how simple and clear the description of a product, what the investor really needs is a concrete example of how people will actually use it. In some cases there will be multiple different use cases. You may need to outline these to get your point across.
* Drop names, early and often. If you really have some brand names involved in your company—as customers, as partners, as members of the team—don’t keep them a secret for the first nine slides; make sure the investor knows about them early in the presentation. Be prepared for the investor to contact every single name you drop—whether it’s a person or a company. If you are going to drop names, they had better be real.
* Make sure you can tell the entire story in ten to fifteen minutes. Even if you have time, your total presentation should be no longer than twenty minutes. You want to have time to engage the investors and discuss their questions or concerns. If you think you have additional critical points that have to be made, prepare “pocket slides” that you can put up if the topic arises.
* Do the math. Average entrepreneur pitch: thirty-eight slides. Average VC attention span/cranial capacity: ten slides.
* Learn how to control the flow of the meeting, without seeming inflexible or anxious. Watch and listen. Body language and questions will tell you if you are okay deferring a point or if you need to address it immediately. If you let your audience take over the flow, you will probably wind up creating a confusing, incomplete impression of your company. But if you don’t address the “burning questions” early and effectively, the investors won’t hear anything else you say.
* Don’t lie. You would think this goes without saying, but in their enthusiasm for their creations, entrepreneurs tend to slip across the line all too often. Please do not interpret our exhortation to “sell” as an endorsement of hype, exaggeration, misrepresentation, spin, or lying. The best salespeople are credible and trustworthy. It is more important that investors trust you than that they understand every nuance your business.
* You don’t have to be “conservative,” but you do have to be realistic. Most entrepreneurs fail to be realistic about how long things take in the real world (versus the spreadsheet world). Whether it’s the time to complete product development, or the time to close the next ten sales, entrepreneurs are pathologically optimistic. As with your financials, find examples of comparable challenges addressed by other companies, and use that data in your model.
* Don’t put so much text on a page that the investor has to read it. Everything should be short, content-rich bullets in a font large enough to read without squinting. The words are simply reinforcement of the points you are making. Pictures, graphs, and charts should be uncluttered and make clear, compelling points. If they have to be deconstructed and explained piece by piece, you will lose focus and momentum.
* Don’t use your presentation stack as a standalone document. It is perfectly okay if it is not readable when you are not around. That’s the job of your executive summary or your business plan. If you are looking for a guide to writing an executive summary, you can find our version online: “The Art of the Executive Summary.”
A good pitch is rare because it is so hard to execute on everything else that has to be done to build a successful company. But the ability to pitch is a key indicator for investors—if the entrepreneur doesn’t know how to sell, how can he or she build a great company?
Tuesday, April 22, 2008
8 Mistakes Start-ups Make
8 Mistakes Start-ups Make
By David R. Butcher
As the global economy expands, there is reason to believe that small businesses may have some competitive advantage. That is, if entrepreneurs don't fall prey to these common start-up pitfalls.
Start Underfunded
Cash flow is critical to a startup business. It is also the most common reason new businesses don't last.
Think about how you're going to finance your startup business initially: bank loans, venture capitalists, angel investors, SBA government grants, your own savings — all are options, so figure out which is best for your situation. About 53 percent of new small businesses begin in the home with less than $10,000, according to the National Federation of Independent Business. Many start with leased or used capital and equipment. About 3 percent are franchises.
Also consider easing into the business by doing it part-time until you know it will make enough money to support you.
For tips and lots of other information related to cash flow, check out the Startup Financing and Guides to Raising Money sections of Entrepreneur.com.
(See today's How to Find Good Money.)
Do It Alone
Small-business employees can make or break the business. Unfortunately, a common problem new business owners have is managing their employees effectively; not only do they make hiring mistakes, but they also struggle to retain good employees.
No one has the skills (never mind the time) to do everything themselves. "You need to understand what it is that you bring to the table and what you need to surround yourself with," Evan Carmichael writes at YoungEntrepreneur.com.
From day one, think hard about the candidates who can be brought on board to help you meet your vision. "By getting people around you who complement your skills, you will be able to achieve your goals and have a lot more fun along the way," Carmichael writes.
And if you want to keep good employees, be sure you have a system in place that rewards their efforts.
(See today's Making the Right Hire.)
Don't Plan/Research Properly
Have a plan of attack, with clear, concise and written goals. If you don't have an idea of the overall picture of the end result, the fruits of your labor shrink significantly.
But don't just understand your own goals — understand your market and competitors. Market research can prove invaluable in both determining your business' potential and improving on your competition's offering. You can gather information from industry associations, Web searches, periodicals, federal and state agencies, and so forth.
Moreover, don't fail to recognize increased competition, especially during a downturn. In a recession, competition increases because more businesses are chasing less total demand. How much are other companies providing the same or similar products/services for? Can you add something to it to make yours different and hence a better price?
The aim here is basically two parts: to gain a general sense of the type of customer your product or service will serve; and to understand what your competition is doing so you can do it better.
That said, be willing to make adjustments. One of the frequent downfalls of startups is that founders are overly focused on their original game plan or otherwise inflexible. "Learn to listen to stuff you don't want to hear," advises one expert (via Information Week).
Undervalue the Customer
"Talk to potential customers, see what they are interested in, identify who has money and what their pains are and then create your product/service around them," Carmichael writes.
Once the product or service is made available — based on customer input — small businesses often fail to take into account the importance of outstanding customer service. Many factors are responsible for success, but perhaps the easiest way to expand your business is to provide customers with customer service that surpasses industry standards.
Failing to work hard at retaining key customers is hazardous to any business, especially to those just starting out.
A Weak Call to Action
A business' first-year goal should be client acquisition, says Inc.com.
Yet while specific marketing problems are unique to each business, common problems facing small businesses are typically a shortage of funds for adequate advertising and promotion, plus a lack of time for developing creative marketing strategies. Today, entrepreneurs simply cannot expect to compete as a small business without choosing from a growing arsenal of online marketing tools, the least of which is creating a simple, effective Web site.
Also, keep in mind that marketing for small businesses is not a one-time event; it is an on-going process. For more on this, check out Microsoft's Small Business Center.
Lose Momentum
About two-thirds of new employer establishments survive the first two years, according to a 2005 study (via the U.S. Small Business Administration's Office of Advocacy).
Building a successful business takes time. Many entrepreneurs struggle to make it to the end of the first year — money is running out, the business is taking up a lot more time than expected, the minimal sales are dispiriting, etc.
For entrepreneurs just starting out with their business, the beginning stages may require doing some work that isn't exactly what they want to do. But it helps pay the bills. Work your way through the negativity, the downturns, the doubt — and keep at it, striving for progress everyday.
Don't Get Involved
Build a relationship — not only with customers but also with mentors and peers in your community. Network like crazy.
Two notable ways to get involved are: 1) finding a mentor, someone who has achieved success in your industry and who is willing to take time to help you out; and 2) getting involved in the small business community. Connecting with other like-minded entrepreneurs and finding out what they're up to opens up new business opportunities, partners, investment, ideas, advice and other resources. There are many events where would-be entrepreneurs can get beyond these basics. For example, Information Week suggests Startup Camp in San Francisco.
Do It Only for the Money
Sure, most companies are for-profit enterprises, but making money may not happen immediately. According to a Kauffman Foundation study last month, more than a third of businesses (37 percent) had no revenue in their first year of operation.
When first starting out, many business owners and self-employed individuals think the more sales they have, the bigger and better their business will be. Running a successful business requires focus on the whole business, not just parts of it.
Earlier: Biz Startup Basics
By David R. Butcher
As the global economy expands, there is reason to believe that small businesses may have some competitive advantage. That is, if entrepreneurs don't fall prey to these common start-up pitfalls.
Start Underfunded
Cash flow is critical to a startup business. It is also the most common reason new businesses don't last.
Think about how you're going to finance your startup business initially: bank loans, venture capitalists, angel investors, SBA government grants, your own savings — all are options, so figure out which is best for your situation. About 53 percent of new small businesses begin in the home with less than $10,000, according to the National Federation of Independent Business. Many start with leased or used capital and equipment. About 3 percent are franchises.
Also consider easing into the business by doing it part-time until you know it will make enough money to support you.
For tips and lots of other information related to cash flow, check out the Startup Financing and Guides to Raising Money sections of Entrepreneur.com.
(See today's How to Find Good Money.)
Do It Alone
Small-business employees can make or break the business. Unfortunately, a common problem new business owners have is managing their employees effectively; not only do they make hiring mistakes, but they also struggle to retain good employees.
No one has the skills (never mind the time) to do everything themselves. "You need to understand what it is that you bring to the table and what you need to surround yourself with," Evan Carmichael writes at YoungEntrepreneur.com.
From day one, think hard about the candidates who can be brought on board to help you meet your vision. "By getting people around you who complement your skills, you will be able to achieve your goals and have a lot more fun along the way," Carmichael writes.
And if you want to keep good employees, be sure you have a system in place that rewards their efforts.
(See today's Making the Right Hire.)
Don't Plan/Research Properly
Have a plan of attack, with clear, concise and written goals. If you don't have an idea of the overall picture of the end result, the fruits of your labor shrink significantly.
But don't just understand your own goals — understand your market and competitors. Market research can prove invaluable in both determining your business' potential and improving on your competition's offering. You can gather information from industry associations, Web searches, periodicals, federal and state agencies, and so forth.
Moreover, don't fail to recognize increased competition, especially during a downturn. In a recession, competition increases because more businesses are chasing less total demand. How much are other companies providing the same or similar products/services for? Can you add something to it to make yours different and hence a better price?
The aim here is basically two parts: to gain a general sense of the type of customer your product or service will serve; and to understand what your competition is doing so you can do it better.
That said, be willing to make adjustments. One of the frequent downfalls of startups is that founders are overly focused on their original game plan or otherwise inflexible. "Learn to listen to stuff you don't want to hear," advises one expert (via Information Week).
Undervalue the Customer
"Talk to potential customers, see what they are interested in, identify who has money and what their pains are and then create your product/service around them," Carmichael writes.
Once the product or service is made available — based on customer input — small businesses often fail to take into account the importance of outstanding customer service. Many factors are responsible for success, but perhaps the easiest way to expand your business is to provide customers with customer service that surpasses industry standards.
Failing to work hard at retaining key customers is hazardous to any business, especially to those just starting out.
A Weak Call to Action
A business' first-year goal should be client acquisition, says Inc.com.
Yet while specific marketing problems are unique to each business, common problems facing small businesses are typically a shortage of funds for adequate advertising and promotion, plus a lack of time for developing creative marketing strategies. Today, entrepreneurs simply cannot expect to compete as a small business without choosing from a growing arsenal of online marketing tools, the least of which is creating a simple, effective Web site.
Also, keep in mind that marketing for small businesses is not a one-time event; it is an on-going process. For more on this, check out Microsoft's Small Business Center.
Lose Momentum
About two-thirds of new employer establishments survive the first two years, according to a 2005 study (via the U.S. Small Business Administration's Office of Advocacy).
Building a successful business takes time. Many entrepreneurs struggle to make it to the end of the first year — money is running out, the business is taking up a lot more time than expected, the minimal sales are dispiriting, etc.
For entrepreneurs just starting out with their business, the beginning stages may require doing some work that isn't exactly what they want to do. But it helps pay the bills. Work your way through the negativity, the downturns, the doubt — and keep at it, striving for progress everyday.
Don't Get Involved
Build a relationship — not only with customers but also with mentors and peers in your community. Network like crazy.
Two notable ways to get involved are: 1) finding a mentor, someone who has achieved success in your industry and who is willing to take time to help you out; and 2) getting involved in the small business community. Connecting with other like-minded entrepreneurs and finding out what they're up to opens up new business opportunities, partners, investment, ideas, advice and other resources. There are many events where would-be entrepreneurs can get beyond these basics. For example, Information Week suggests Startup Camp in San Francisco.
Do It Only for the Money
Sure, most companies are for-profit enterprises, but making money may not happen immediately. According to a Kauffman Foundation study last month, more than a third of businesses (37 percent) had no revenue in their first year of operation.
When first starting out, many business owners and self-employed individuals think the more sales they have, the bigger and better their business will be. Running a successful business requires focus on the whole business, not just parts of it.
Earlier: Biz Startup Basics
Needed small business skills
“Running a small business requires many skills. However, to do this successfully you need to organize yourself first. Avoid procrastination - read the following and take action.
1. Successful Small Business Owners Look After Themselves First
Exercise regularly, eat healthily and be around positive people. Feed your mind by attending personal development courses. Read self-help and motivational books, listen to tapes. Stress management levels will be much more effective when you look after yourself.
Do the right thing by yourself and you’ll have heaps of energy, be motivated, have more balance in your life which in turn will help you be more productive and successful.
2. Successful Small Business Owners Clean out the Clutter Regularly
You will save yourself heaps of time, energy and money if you clear out your work and home environment…paperwork, books, old equipment etc. You’ll be able to find things, save money because you won’t have to buy what you already have hidden somewhere, plus you’ll be less stressed. Organize your office and your small business premises regularly…keep the clutter out. Eliminating clutter will help you to avoid procrastination. It’s too easy to avoid getting things done if you are overwhelmed with clutter.
3. Successful Small Business Owners Use the Right Tools
It’s no good having the latest whiz-bang computer when the desk that you sit at is too small to accommodate it, or the chair has poor back support, or the lighting is dull causing you eyestrain and fatigue. All these factors heavily influence how you work. Invest in a decent desk, purchase a desk lamp or change the light globes.
Don’t avoid the warning signs your body gives you. Take action now before you have eye, back or neck problems.
4. Successful Small Business Owners Use a Diary or Digital Organizer
With so much to organize in your small business, you need to record your appointments and things to do and goals somewhere. Preferably in a paper diary or digital organiser that you can take everywhere. This is the most effective way to get things done, plan your work and your life. Balance is extremely important. Top achievers are great at time management (even if they have to pay someone else to organize them).
5. Successful Small Business Owners Learn to say “No”
To dramatically improve your productivity and do more of the things you want, you have to be firm with others and let them know if you cannot, will not or are unavailable to fulfil their requests. If you constantly say “yes” to everyone else’s requests you will never have the time to do what you really want to.
Book yourself into a self-assertiveness course to learn these skills if you feel you need to.
6. Successful Small Business Owners Do What They Do Best and Delegate the Rest
See what tasks you can delegate tasks which would suit someone else’s talents. Many small business owners are spending heaps of time on mundane secretarial tasks which would take a person who is trained in that area a quarter of the time to undertake. Stress management is an important part of running your small business. Reduce the stress by delegating or outsourcing wherever you can.
Use a bookkeeper, personal assistant or virtual assistant. Always ask yourself, who else can I get to do this? Use your time management to focus on what you do best.
7. Successful Small Business Owners Only Have Meetings if Necessary
Make sure the meetings you organize in your small business are relevant and run effectively. Avoid procrastination - always make sure there is an outcome and all actions are followed through.
The Final Word By following these simple yet very effective time management tips for small business owners you will have more control over your work and your life. You’ll have more balance, experience less stress and be more proactive.
Avoid procrastination…take action today!”
Evan Carmichael
YoungEntrepreneur.com Blog Manager
1. Successful Small Business Owners Look After Themselves First
Exercise regularly, eat healthily and be around positive people. Feed your mind by attending personal development courses. Read self-help and motivational books, listen to tapes. Stress management levels will be much more effective when you look after yourself.
Do the right thing by yourself and you’ll have heaps of energy, be motivated, have more balance in your life which in turn will help you be more productive and successful.
2. Successful Small Business Owners Clean out the Clutter Regularly
You will save yourself heaps of time, energy and money if you clear out your work and home environment…paperwork, books, old equipment etc. You’ll be able to find things, save money because you won’t have to buy what you already have hidden somewhere, plus you’ll be less stressed. Organize your office and your small business premises regularly…keep the clutter out. Eliminating clutter will help you to avoid procrastination. It’s too easy to avoid getting things done if you are overwhelmed with clutter.
3. Successful Small Business Owners Use the Right Tools
It’s no good having the latest whiz-bang computer when the desk that you sit at is too small to accommodate it, or the chair has poor back support, or the lighting is dull causing you eyestrain and fatigue. All these factors heavily influence how you work. Invest in a decent desk, purchase a desk lamp or change the light globes.
Don’t avoid the warning signs your body gives you. Take action now before you have eye, back or neck problems.
4. Successful Small Business Owners Use a Diary or Digital Organizer
With so much to organize in your small business, you need to record your appointments and things to do and goals somewhere. Preferably in a paper diary or digital organiser that you can take everywhere. This is the most effective way to get things done, plan your work and your life. Balance is extremely important. Top achievers are great at time management (even if they have to pay someone else to organize them).
5. Successful Small Business Owners Learn to say “No”
To dramatically improve your productivity and do more of the things you want, you have to be firm with others and let them know if you cannot, will not or are unavailable to fulfil their requests. If you constantly say “yes” to everyone else’s requests you will never have the time to do what you really want to.
Book yourself into a self-assertiveness course to learn these skills if you feel you need to.
6. Successful Small Business Owners Do What They Do Best and Delegate the Rest
See what tasks you can delegate tasks which would suit someone else’s talents. Many small business owners are spending heaps of time on mundane secretarial tasks which would take a person who is trained in that area a quarter of the time to undertake. Stress management is an important part of running your small business. Reduce the stress by delegating or outsourcing wherever you can.
Use a bookkeeper, personal assistant or virtual assistant. Always ask yourself, who else can I get to do this? Use your time management to focus on what you do best.
7. Successful Small Business Owners Only Have Meetings if Necessary
Make sure the meetings you organize in your small business are relevant and run effectively. Avoid procrastination - always make sure there is an outcome and all actions are followed through.
The Final Word By following these simple yet very effective time management tips for small business owners you will have more control over your work and your life. You’ll have more balance, experience less stress and be more proactive.
Avoid procrastination…take action today!”
Evan Carmichael
YoungEntrepreneur.com Blog Manager
Tuesday, March 18, 2008
Open Source Analytics ....
piwik is an open source (GPL license) web analytics software. It gives interesting reports on your website visitors, your popular pages, the search engines keywords they used, the language they speak… and so much more.
piwik aims to be an open source alternative to Google Analytics.
Behavioral Based Target Ads over NeT
Behavioral Targeting and Contextual Advertising
Is online advertising undergoing a “rebirth”? Some might argue it is, first spurred on by paid search advertising then by contextual and adware placements. Now there is another “new” game in town, if the buzz-o-meter is any indication. While not altogether new, behavioral advertising is getting more play than ever, perhaps because it’s now being married with every marketer’s favorite word: targeting.
Is behavioral targeting really all that? Let’s take a closer look.
The Process
One basic premise in marketing is that to more effectively sell your product or service, you should understand how your customers’ minds work. What do they like to see? What do they want to hear? What do they like to do? And can you determine these things with as little time and money as possible? Now there technologies that *can* easily establish these answers quickly and effectively to give you an at-a-glance picture of behavioral targeting to these consumers.
Behavioral targeting technologies work by anonymously monitoring and tracking the content read and sites visted by a designated unique user or IP as that user surfs the Internet. This is done by serving tracking codes, which are implemented as cookies, on a user’s computer as s/he is served ads from various online advertising networks. Sites visited, content viewed, and length of visit are then all databased and analyzed to predict an online behavioral pattern for such a user, thereby classifying that user by his/her online demographic. Behavioral ad networks then serve targeted advertising related to that user’s behavioral classification, regardless of where s/he then visit.
For example, if a computer user frequents sites such as SlashDot, Maxim Online, Wired, and Men’s Health, behavioral targeting would classify such a user as a male, with interest in technology. When behavioral targeting advertising companies such as Tacoda or 24/7 serves ads on such sites, their ads place behavior targeting cookies on the user’s computer. Then, if that same user later visits a site with ads served by these networks, an advertisement might be served for shaving cream or even a tech job site (especially if the user is reading the news online during regular work hours). If that user becomes target to a behavioral advertising, he may be served a series of the same ad campaign across various sites, all without his awareness of the targeting going on around him.
Monday, March 17, 2008
Basic Essence of Leadership
You don't have to be in a position of authority to be a leader. Conversely, just because you have authority doesn't mean that people will follow you. You must be a leader to get others to follow you.
There are many books on leadership. They can have lots of great examples and in-depth explanations, but sometimes you just need something simple to help you focus on the essentials. This article intends to do just that. These are the habits that will help you and your team achieve great things if you focus on them.
1. Goals. Make it simple and easy for your team to understand the mission and to understand their part in achieving it.
- Concise Goals. Keep them simple and easy to understand.
- Focus your team on as few goals as possible.
- Communicate the team's goals Often and through Various Means (team meetings, individual meetings, emails, posters, slogans). And then do it some more.
- Track progress on goals.
- Involve team players in tracking the goals so that they own the results.
2. Motivating People. What you reward gets done. It's that simple.
- Instruct team players to do the tasks that are most critical for reaching the team's goals. Make sure the rewards are meaningful to people. Understand each player and what they want from their job and in life. That's how you'll know how to reward them.
- Praise, Thank, and Recognize big and small contributions by individuals. Do this often and then do it some more.
- Set High Expectations. People will live UP to or DOWN to the expectations you set. Set them high and you're saying, "I believe in your ability to do great things!"
- Empower people by delegating responsibility.
- Celebrate team accomplishments often.
- Encourage Fun. Make the work place a fun place to be. Yes, work needs to get done but short fun breaks can make all the difference in the culture of your team.
- Pride. Foster a sense of pride in your team. As a team you could establish a mascot, create a team chant, and have a meeting that is focused solely on each individual's strengths and the team's overall strengths.
3. Walk Your Talk. You need to practice what you preach. This is how you establish trust and credibility.
- Model the Way by participating in the team's tasks as much as your position allows.
- Be Honest. Deliver on your promises. Actions speak louder than words.
- Challenge Yourself. Do your best (and then some) just like you ask your team to do their best.
- Speak Up. Just like your team members sometimes need to let you know what they've done in order for you to be able to recognize and praise them. They, in turn, need to know what you've been working on and what you've accomplished. So find ways to communicate this, modeling this key behavior.
- Stay Sharp. You need to be competent for others to follow you. If you're not improving, you're falling behind. Always be learning and keep on top of the latest skills, technology, and knowledge in your field.
4. Inspire through a combination of
- Unwavering Positive Future Vision
- Commitment to Improve things along the way that will make that positive vision a reality.
- Ability to Bootstrap as necessary when resources are tight.
5. Process Power. Good process is like having a high performance machine. Sloppy process makes things fall apart. So be sure to establish these key habits with your team.
- Establish Routines. Do this for the team and also work with each individual to come up with their own high productivity routines. These are routines that dictate what work is done when.
- Establish Processes for all the tasks that are done repeatedly. It takes time to set up at first, but after that it will pay off in saved time and less errors. Processes describe how work is done and might involve systems for doing the work.
- Task Assignment. As much as possible, assign tasks according to the strengths of each teammate.
6. Change. Embrace change by seeking it out. This will tread a path for your teammates to follow.
- Change Routines Quarterly. Look for better ways to achieve the team's goals.
- Take Risks. Don't be afraid of failure. No one ever reaches great heights without a few failures.
- Learn. Learn as a team from failures. "How can we improve it the next time?"
- Encourage team members to take smart risks too by making it safe to fail. Focus on learning from past experiences and building upon them to find better solutions.
7. Advocacy. Support your team and they'll support you.
- Promote your team members. Make sure others outside your team know about the individual team members' successes. You want your team members to excel and even graduate away from your team possibly. Don't worry. If your team is great there will be plenty of others who will want to join! This natural turnover of team members is like the renewal of cells in your body. It is necessary and healthy.
- Promote your team. It's your job to market the great accomplishments of your team in order to get the rewards, recognition, and resources that your team deserves.
- Fight for the most important resources and changes that will benefit your team and the organization overall. Remember to pick your battles wisely.
Strategy - About ......
Abstract
The concept of strategy has been borrowed from the military and adapted for use in business. A review of what noted writers about business strategy have to say suggests that adopting the concept was easy because the adaptation required has been modest. In business, as in the military, strategy bridges the gap between policy and tactics. Together, strategy and tactics bridge the gap between ends and means. This paper reviews various definitions of strategy for the purpose of clarifying the concept and placing it in context. The author's aim is to make the concepts of policy, strategy, tactics, ends, and means more useful to those who concern themselves with these matters..
Some Language Basics
Strategy is a term that comes from the Greek strategia, meaning "generalship." In the military, strategy often refers to maneuvering troops into position before the enemy is actually engaged. In this sense, strategy refers to the deployment of troops. Once the enemy has been engaged, attention shifts to tactics. Here, the employment of troops is central. Substitute "resources" for troops and the transfer of the concept to the business world begins to take form.
Strategy also refers to the means by which policy is effected, accounting for Clauswitz’ famous statement that war is the continuation of political relations via other means. Given the centuries-old military origins of strategy, it seems sensible to begin our examination of strategy with the military view. For that, there is no better source than B. H. Liddell Hart.
Strategy According to B. H. Liddell Hart
In his book, Strategy [1], Liddell Hart examines wars and battles from the time of the ancient Greeks through World War II. He concludes that Clausewitz’ definition of strategy as "the art of the employment of battles as a means to gain the object of war" is seriously flawed in that this view of strategy intrudes upon policy and makes battle the only means of achieving strategic ends. Liddell Hart observes that Clausewitz later acknowledged these flaws and then points to what he views as a wiser definition of strategy set forth by Moltke: "the practical adaptation of the means placed at a general’s disposal to the attainment of the object in view." In Moltke's formulation, military strategy is clearly a means to political ends.
Concluding his review of wars, policy, strategy and tactics, Liddell Hart arrives at this short definition of strategy: "the art of distributing and applying military means to fulfil the ends of policy." Deleting the word "military" from Liddell Hart’s definition makes it easy to export the concept of strategy to the business world. That brings us to one of the people considered by many to be the father of strategic planning in the business world: George Steiner.
Strategy According to George Steiner
George Steiner, a professor of management and one of the founders of The California Management Review, is generally considered a key figure in the origins and development of strategic planning. His book, Strategic Planning [2], is close to being a bible on the subject. Yet, Steiner does not bother to define strategy except in the notes at the end of his book. There, he notes that strategy entered the management literature as a way of referring to what one did to counter a competitor’s actual or predicted moves. Steiner also points out in his notes that there is very little agreement as to the meaning of strategy in the business world. Some of the definitions in use to which Steiner pointed include the following:
- Strategy is that which top management does that is of great importance to the organization.
- Strategy refers to basic directional decisions, that is, to purposes and missions.
- Strategy consists of the important actions necessary to realize these directions.
- Strategy answers the question: What should the organization be doing?
- Strategy answers the question: What are the ends we seek and how should we achieve them?
Steiner was writing in 1979, at roughly the mid-point of the rise of strategic planning. Perhaps the confusion surrounding strategy contributed to the demise of strategic planning in the late 1980s. The rise and subsequent fall of strategic planning brings us to Henry Mintzberg.
Strategy According to Henry Mintzberg
Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning [3], points out that people use "strategy" in several different ways, the most common being these four:
- Strategy is a plan, a "how," a means of getting from here to there.
- Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy.
- Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets.
- Strategy is perspective, that is, vision and direction.
Mintzberg argues that strategy emerges over time as intentions collide with and accommodate a changing reality. Thus, one might start with a perspective and conclude that it calls for a certain position, which is to be achieved by way of a carefully crafted plan, with the eventual outcome and strategy reflected in a pattern evident in decisions and actions over time. This pattern in decisions and actions defines what Mintzberg called "realized" or emergent strategy.
Mintzberg’s typology has support in the earlier writings of others concerned with strategy in the business world, most notably, Kenneth Andrews, a Harvard Business School professor and for many years editor of the Harvard Business Review.
Strategy According to Kenneth Andrews
Kenneth Andrews presents this lengthy definition of strategy in his book, The Concept of Corporate Strategy [4]:
"Corporate strategy is the pattern [italics added] of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities. (pp.18-19)."
Andrew’s definition obviously anticipates Mintzberg’s attention to pattern, plan, and perspective. Andrews also draws a distinction between "corporate strategy," which determines the businesses in which a company will compete, and "business strategy," which defines the basis of competition for a given business. Thus, he also anticipated "position" as a form of strategy. Strategy as the basis for competition brings us to another Harvard Business School professor, Michael Porter, the undisputed guru of competitive strategy.
Strategy According to Michael Porter
In a 1996 Harvard Business Review article [5] and in an earlier book [6], Porter argues that competitive strategy is "about being different." He adds, "It means deliberately choosing a different set of activities to deliver a unique mix of value." In short, Porter argues that strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors. In his earlier book, Porter defines competitive strategy as "a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there." Thus, Porter seems to embrace strategy as both plan and position. (It should be noted that Porter writes about competitive strategy, not about strategy in general.)
Strategy According to Kepner-Tregoe
In Top Management Strategy [7], Benjamin Tregoe and John Zimmerman, of Kepner-Tregoe, Inc., define strategy as "the framework which guides those choices that determine the nature and direction of an organization." Ultimately, this boils down to selecting products (or services) to offer and the markets in which to offer them. Tregoe and Zimmerman urge executives to base these decisions on a single "driving force" of the business. Although there are nine possible driving forces, only one can serve as the basis for strategy for a given business. The nine possibilities are listed below:
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It seems Tregoe and Zimmerman take the position that strategy is essentially a matter of perspective.
Strategy According to Michel Robert
Michel Robert takes a similar view of strategy in, Strategy Pure & Simple [8], where he argues that the real issues are "strategic management" and "thinking strategically." For Robert, this boils down to decisions pertaining to four factors:
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Like Tregoe and Zimmerman, Robert claims that decisions about which products and services to offer, the customers to be served, the market segments in which to operate, and the geographic areas of operations should be made on the basis of a single "driving force." Again, like Tregoe and Zimmerman, Robert claims that several possible driving forces exist but only one can be the basis for strategy. The 10 driving forces cited by Robert are:
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Strategy According to Treacy and Wiersema
The notion of restricting the basis on which strategy might be formulated has been carried one step farther by Michael Treacy and Fred Wiersema, authors of The Discipline of Market Leaders [9]. In the Harvard Business Review article that presaged their book [10], Treacy and Wiersema assert that companies achieve leadership positions by narrowing, not broadening their business focus. Treacy and Wiersema identify three "value-disciplines" that can serve as the basis for strategy: operational excellence, customer intimacy, and product leadership. As with driving forces, only one of these value disciplines can serve as the basis for strategy. Treacy and Wiersema’s three value disciplines are briefly defined below:
| Strategy is predicated on the production and delivery of products and services. The objective is to lead the industry in terms of price and convenience. |
| Strategy is predicated on tailoring and shaping products and services to fit an increasingly fine definition of the customer. The objective is long-term customer loyalty and long-term customer profitability. |
| Strategy is predicated on producing a continuous stream of state-of-the-art products and services. The objective is the quick commercialization of new ideas. |
Each of the three value disciplines suggests different requirements. Operational Excellence implies world-class marketing, manufacturing, and distribution processes. Customer Intimacy suggests staying close to the customer and entails long-term relationships. Product Leadership clearly hinges on market-focused R&D as well as organizational nimbleness and agility.
What Is Strategy?
What, then, is strategy? Is it a plan? Does it refer to how we will obtain the ends we seek? Is it a position taken? Just as military forces might take the high ground prior to engaging the enemy, might a business take the position of low-cost provider? Or does strategy refer to perspective, to the view one takes of matters, and to the purposes, directions, decisions and actions stemming from this view? Lastly, does strategy refer to a pattern in our decisions and actions? For example, does repeatedly copying a competitor’s new product offerings signal a "me too" strategy? Just what is strategy?
Strategy is all these—it is perspective, position, plan, and pattern. Strategy is the bridge between policy or high-order goals on the one hand and tactics or concrete actions on the other. Strategy and tactics together straddle the gap between ends and means. In short, strategy is a term that refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise, memories, perceptions, and expectations that provides general guidance for specific actions in pursuit of particular ends. Strategy is at once the course we chart, the journey we imagine and, at the same time, it is the course we steer, the trip we actually make. Even when we are embarking on a voyage of discovery, with no particular destination in mind, the voyage has a purpose, an outcome, an end to be kept in view.
Strategy, then, has no existence apart from the ends sought. It is a general framework that provides guidance for actions to be taken and, at the same time, is shaped by the actions taken. This means that the necessary precondition for formulating strategy is a clear and widespread understanding of the ends to be obtained. Without these ends in view, action is purely tactical and can quickly degenerate into nothing more than a flailing about.
When there are no "ends in view" for the organization writ large, strategies still exist and they are still operational, even highly effective, but for an individual or unit, not for the organization as a whole. The risks of not having a set of company-wide ends clearly in view include missed opportunities, fragmented and wasted effort, working at cross purposes, and internecine warfare. A comment from Lionel Urwick's classic Harvard Business Review article regarding the span of control is applicable here [11]:
"There is nothing which rots morale more quickly and more completely than . . . the feeling that those in authority do not know their own minds."
For the leadership of an organization to remain unclear or to vacillate regarding ends, strategy, tactics and means is to not know their own minds. The accompanying loss of morale is enormous.
One possible outcome of such a state of affairs is the emergence of a new dominant coalition within the existing authority structure of the enterprise, one that will augment established authority in articulating the ends toward which the company will strive. Also possible is the weakening of authority and the eventual collapse of the formal organization. No amount of strategizing or strategic planning will compensate for the absence of a clear and widespread understanding of the ends sought.
The Practical Question: How?
How does one determine, articulate and communicate company-wide ends? How does one ensure understanding and obtain commitment to these ends? The quick answers are as follows:
The ends to be obtained are determined through discussions and debates regarding the company's future in light of its current situation. Even a SWOT analysis (an assessment of Strengths, Weaknesses, Opportunities and Threats) is conducted based on current perceptions.
The ends settled on are articulated in plain language, free from flowery words and political "spin." The risk of misdirection is too great to tolerate unfettered wordsmithing. Moreover, the ends are communicated regularly, repeatedly, through a variety of channels and avenues. There is no end to their communication.
Understanding is ensured via discussion, dialog and even debate, in a word, through conversations. These conversations are liberally sprinkled with examples, for instances, and what ifs. Initially, the CEO bears the burden of these conversations with staff. As more people come to understand and commit to the ends being sought, this communications burden can be shared with others. However, the CEO can never completely relinquish it. The CEO is the keeper of the vision and, periodically, must be seen reaffirming it.
Ultimately, the ends sought can be expressed via a scorecard or some other device for measuring and publicly reporting on company performance. Individual effort can then be assessed in light of these same ends. Suppose, for instance, that a company has these ends in mind: improved customer service and satisfaction, reduced costs, increased productivity, and increasing revenues from new products and services. It is a simple and undeniably relevant matter for managers to periodically ask the following questions of the employees reporting to them:
- What have you done to improve customer service?
- What have you done to improve customer satisfaction?
- What have you done to reduce costs?
- What have you done to increase productivity?
- What have you done to increase revenues from new products and services?
The Decisions Are the Same
No matter which definition of strategy one uses, the decisions called for are the same. These decisions pertain to choices between and among products and services, customers and markets, distribution channels, technologies, pricing, and geographic operations, to name a few. What is required is a structured, disciplined, systematic way of making these decisions. Using the "driving forces" approach is one option. Choosing on the basis of "value disciplines" is another. Committing on the basis of "value-chain analysis" is yet a third. Using all three as a system of cross-checks is also a possibility.
Some Fundamental Questions
Regardless of the definition of strategy, or the many factors affecting the choice of corporate or competitive strategy, there are some fundamental questions to be asked and answered. These include the following:
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Some Concluding Remarks
- Strategy has been borrowed from the military and adapted for business use. In truth, very little adaptation is required.
- Strategy is about means. It is about the attainment of ends, not their specification. The specification of ends is a matter of stating those future conditions and circumstances toward which effort is to be devoted until such time as those ends are obtained.
- Strategy is concerned with how you will achieve your aims, not with what those aims are or ought to be, or how they are established. If strategy has any meaning at all, it is only in relation to some aim or end in view.
- Strategy is one element in a four-part structure. First are the ends to be obtained. Second are the strategies for obtaining them, the ways in which resources will be deployed. Third are tactics, the ways in which resources that have been deployed are actually used or employed. Fourth and last are the resources themselves, the means at our disposal. Thus it is that strategy and tactics bridge the gap between ends and means.
- Establishing the aims or ends of an enterprise is a matter of policy and the root words there are both Greek: politeia and polites—the state and the people. Determining the ends of an enterprise is mainly a matter of governance not management and, conversely, achieving them is mostly a matter of management not governance.
- Those who govern are responsible for seeing to it that the ends of the enterprise are clear to the people who people that enterprise and that these ends are legitimate, ethical and that they benefit the enterprise and its members.
- Strategy is the joint province of those who govern and those who manage. Tactics belong to those who manage. Means or resources are jointly controlled. Those who govern and manage are jointly responsible for the deployment of resources. Those who manage are responsible for the employment of those resources—but always in the context of the ends sought and the strategy for their achievement.
- Over time, the employment of resources yields actual results and these, in light of intended results, shape the future deployment of resources. Thus it is that "realized" strategy emerges from the pattern of actions and decisions. And thus it is that strategy is an adaptive, evolving view of what is required to obtain the ends in view.
This paper has taken a broad, multi-faceted look at the subject of strategy. Some readers might go away disappointed that no final, unambiguous definition of strategy has been provided. The quick response is that there is none, that strategy is a broad, ambiguous topic. We must all come to our own understanding, definition, and meaning. Helping the reader do so is the chief aim of this paper.
References
- Strategy (1967). B. H. Liddell Hart. Basic Books.
- Strategic Planning (1979). George Steiner. Free Press.
- The Rise and Fall of Strategic Planning (1994). Henry Mintzberg. Basic Books.
- The Concept of Corporate Strategy, 2nd Edition (1980). Kenneth Andrews. Dow-Jones Irwin.
- "What is Strategy?" Michael Porter. Harvard Business Review (Nov-Dec 1996).
- Competitive Strategy (1986). Michael Porter. Harvard Business School Press.
- Top Management Strategy (1980). Benjamin Tregoe and John Zimmerman. Simon and Schuster.
- Strategy: Pure and Simple (1993). Michel Robert. McGraw-Hill.
- The Discipline of Market Leaders (1994). Michael Treacy and Fred Wiersema. Addison-Wesley.
- "Customer Intimacy and Other Value Disciplines." Michael Treacy and Fred Wiersema. Harvard Business Review (Jan-Feb 1993).
- "The Span of Control." Lionel Urwick. Harvard Business Review (May-Jun 1956)
Wednesday, March 12, 2008
Realising the NEED for Change
Recognise that Change is a constant. As Darwin Said, it's not the Strongest Organisms that win, it's the most adaptable. And that's precisely what STANDARDS enable.
Foward excerpt from Jonathan Schwartz, CEO, Sun Microsystems Inc. from Principles of Enterprise IT Architecture, an excellent book by Infoscions.
Foward excerpt from Jonathan Schwartz, CEO, Sun Microsystems Inc. from Principles of Enterprise IT Architecture, an excellent book by Infoscions.
Tuesday, March 4, 2008
Seven Saving Graces for Managers
The Seven Saving Graces for Managers
by George Hallenbeck provided by 
In managerial and executive success, it is what comes after the "but" that is important. Executives are generally hard-charging drivers with rough edges. They are often not out to please people but are focused on getting things done. What does the research say about the characteristics that keep an executive in favor, even if he or she possesses some flaws or shortcomings?
"He can be awfully shrewd and is always looking for an angle, but you eventually realize that he has got the company's best interests at heart and is not looking out just for himself." And, "She can be very forward and biting with her ideas and opinions, but she is also willing to take the time to listen carefully to your point of view." Or, "He can be pretty rough on people, but underneath he is compassionate and considerate."
What comes after the "but" are called saving graces -- qualities or redeeming features that make up for other generally negative characteristics.Saving graces serve as balancers so that the driver strengths that got you where you are do not go into overdrive and damage your efforts. They also offer benefits of their own. Because many saving graces contribute to perceptions of you as someone who is trustworthy, considerate, and insightful, they can help you more easily acquire information from key people, gain access to limited resources, and navigate the bureaucracy.
The saving graces are listed in order of importance:
1. Listening: Taking the time to listen can get you out of more jams than the rest of the saving graces combined. It is the ultimate way of demonstrating that it is not all about you and your agenda, and it is an excellent tool for breaking down barriers and getting more out of what you do with others. Few executives are good listeners.
2. Approachability: The best executives need to be early knowers, especially when it comes to negative information. The best executives are easy to talk to, even when conveying or having potentially bad information conveyed to them. To be effective, approachability has to be combined with listening. Executives tend to play 20 Questions: "Where did you get the information? Who else knows? Why didn't I hear about that before?" This is not a best practice for effective executives.
3. Boss Relationships: Those who tend to venture into deep and dangerous waters find that it can be very difficult to swim alone. If you tend to stir up controversy and are quick to engage in conflict, it is helpful to have the advice and counsel of a seasoned boss who can coach you through such situations and provide some support when you falter. Making your boss successful is Job One, whether you like him or her or not.
4. Integrity and Trust: This one speaks for itself. The people you lead will often forgive a lot if they can clearly perceive that you speak the truth and are a person of your word.
5. Humor: The use of humor to make others comfortable is a useful skill. Using self-deprecating humor is one of the better techniques. It puts others at ease and makes your thoughts appear to come from someplace a little more accessible. Humor allows you to become approachable by putting others at ease when in your presence.
6. Interpersonal Savvy: Being able to relate 360 degrees is important. Finding a way to make a connection with individuals up and down the chain and inside and outside the organization gives you something to rely on when things are not going so well. Diplomacy, tact, and knowing what to say and when to say it can take the tension out of situations and make unpopular decisions and unfortunate mistakes easier to deal with.
7. Understanding Others: The focus here is on groups rather than individuals. Understanding others is about knowing what makes one group different from another and why that matters. This is more difficult to master than listening, but learning to identify what is important to a group and why is often the key for gaining buy-in and knowing how to lead through difficult situations.
Saving graces are not the fire extinguisher you pull out in the case of emergency, but are more the trusty life preserver you should wear at all times, in calm waters and rough seas. Saving graces lead to longer tenure and staying power when coupled with the power skills like drive, strategy, results, and power. They can compensate for mistakes that would get those people who don't possess them into trouble. They smooth out the rough edges and can help smooth over rough situations.
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