What is your Core Business?
“Do you want to sell sugar water for the rest of your life, or do you want to change the world?”— Steve Jobs, CEO Apple
I am a big fan of knowing what your company’s role in the marketplace is. You can call this your Mission, Vision, USP (Unique Selling Point), Evangelist Role, Cult Mantra, or even your Entrepreneurial root story. They are all variations on the same idea: your company exists to do something other than the dreary “increase shareholder value through retained profits” thing. Now, hopefully you do increase shareholder value, but that is the byproduct of doing something else that is more fun and more meaningful.
Is Marketing the Next Finance?
Rory Sutherland at Ted Talks helps me understand the value and cost of customer loyalty
I recently discovered Rory Sutherland from one of my favorite podcasts: Ted Talks. After rapidly devouring all the You
Tube videos and blogs on this Olgilvy “Ad Man”, I found myself stuck on one of his minor theses: “Is marketing the new finance?” (quoted from Guy Phillipson). He argues that every new corporate initiative in the last ten years has created the all-important spreadsheet analysis that carefully laid out shareholder value, including an analysis of the perception of the company by the financial community. How about using the same care in analyzing how the customers feel about the company and its products? From Rory’s perspective, business is simple: Find something that customers want to buy and then remove the barriers that keep them from buying it. I think he is on to something. He proposed that this current financial emphasis should be replaced by a real solid marketing emphasis. Read more…
Importance of Coffee
Strategic Coffee
I truly enjoy taking my Slovene colleagues on business trips to the US and UK. Inevitably, a local business partner will invite us for a coffee and then proceed to lead us as we walk, talk, and drink our coffee. Walking and drinking coffee is a most ordinary activity in the US, but in much of Continental Europe, this borders on being an acrobatic exercise. The resulting business consequences are quite revealing. For many years I worked in a Slovenian office with two cafes in the building. We would refer to the lower cafe as the “Decision Center” as a partial joke when we walked new clients around the building on a tour. American customers would envy this “luxury” and soon we also began to see this as a luxury. As we expanded, our new buildings were made more efficient by replacing the cafes with machine equipped coffee areas. The theory was that employees should not have to waste company time getting coffee. Now, based on my observations on coffee in the corporate culture, I am prepared to make some bold conclusions on “optimal coffee behavior” in the workplace. Read more…
The Falacy of the Total Addressable Markets
The Chinese Market fallacy in business planning….
Most every guide to a business planning process includes a section that describes the need for identifying the potential market size, sometimes called the total addressable market. The exercise usually starts with some governmental or Gartner-like information source to identify a global or regional segment. The planner is then instructed to make some assumptions that better restricts the addressable market, but typically the remaining market is still huge. Based on this information, inexperienced (or deceiving) business champions will compare their first few years cost against some percentage of this huge market as justification for proceeding with the business plan which I believe results in the common market penetration mistake I call “Chinese Marketing”. This is a term that I intend to push into the business vocabulary: “Chinese Marketing” is the fallacy that you can create a successful business based on getting a very small percentage of a huge market. Read more…
Practical Sales Outsourcing
When you have a great idea, but the world will not come to you…
I was recently invited as a guest speaker and panelists for an entrepreneur development group. My fellow panelist, Charles Leadbeater (a recognized proponent of innovation and Web2.0 thinking) started with a call for more collaboration and cited amazing successes and fantastic creativity. While I agreed with his thesis, I could not help but recount the many initial business (tech initiatives) failures caused by an improper reliance on collaborators for their sales channel. Charles was right to highlight a new paradigm of collaboration as a significant opportunity for small entrepreneurs, but for the sake of the technical entrepreneurs in the audience, I found myself taking a contrary position and highlighting the limitations of collaboration.
- Author Charles Leadbeater
Engineers have a serious defect– they cannot resist solving a problem. The reason I call this a defect is that it keeps getting in the way of sensible business. For the most naive, they normally worry about things like manufacturing, on-line order taking systems, and future developments, but dismiss the challenges of path to market by either assuming customers will come on their own (once they recognize the brilliance) or they assume that they will outsource sales through resellers. The truth is that many people have very successful businesses using resellers and OEM relationships, but this will not be possible at the same time as you are just entering the market. (See earlier, related blog post “Production vs Prototype Sales“). I wish it were possible to simply outsource initial sales the same way you can outsource initial manufacturing– in truth, I am a “recovering engineer” (an addictive and life long disease) and would likely have stayed a happy engineer if it were not for this unfortunate truth.
Selling Risk Management
Definition of Experience: A rich history of the many horrible mistakes one never wants to repeat
I touched on this subject in “Lawyer Rant No. 1” — Get paid for the risks you know you are better able to manage or at least are perceived to be better able to manage. Let’s break this down a bit more and see what insights it brings.
In a market-based economy we sell products and services to willing buyers. These could be as simple as an apple by a street vendor or as complex as an enterprise-wide information system. But in its elemental form, I suggest that you can only sell a combination of five basic things:
- Raw materials such as iron and oil mineral rights
- Labor
- Expertise as in intellectual property and knowledge transfer
- Economies of scale
- Management of risk.
The first three are obvious and the fourth, as it applies to the first three, is also obvious. Let’s consider the last two in their pure forms. Read more…
Drilling for Oil
Services vs Product Business Models
It always struck me that there are very few companies that are equally as strong in products as they are in services. This is in sharp contrast to the number of companies that have moved from their core to embrace the other side. Companies like Cap Gemini quickly abandoned the idea of becoming a product company and we see HP struggle with services by now trying to jump start it through the acquisition of EDS. IBM might be held as a contra-example with both products and services, but I would submit that they have switched from being a product company to the current service company that they are today (e.g., selling the laptop division to Lenovo and printer division to Lexmark)
Before the Business Plan Gets Written
A few steps before you write your next business plan
The other day a friend asked me if I had any business plan templates. Of course I have many plans that could be used as a template and there some good websites with information on how to build a business plan. Instead, however, I invited him for a coffee to learn more about why he wanted to make a plan. It turns out that my friend was entertaining the idea of starting a business. Like many good entrepreneurs, he had several good ideas, he was not sure how they fit together, he was excited, and he was scared. He had a potential partner, also good, and most of his business ideas could be done without external investment– perfect.
I then outlined a template to help form his ideas that looked like this for each idea:
- What is the business need in the market that needs solving?
- How are you (and your company) uniquely qualified to solve this?
- How will you identify such customers and how will you make contact with them? Read more…
Smart and Dumb Data
It is a tragedy when smart people create nothing more than smart data.
Years ago I worked for Honeywell making sensors used in steel production. Our premium systems were the market leader in high speed, precise measurements. My role at the time was manager of the “cost effective” product line. One day, while visiting a customer using our equipment, I made a discovery: Our worst sensor was already five times faster than they needed! Their control systems connected to the sensors were so slow that any increase in data acquisition was just a waste. Yes, at the same time, our ‘most educated’ customers were pushing us to build faster sensors, our competitors were trying to build sensors as fast as ours, and we were proudly announcing our latest speed triumphs each year. How could this be? Read more…
Moral Skill in Sales
Barry Schwarz at TED talks
“Not just is it profitable, but is it right?” -Obama
I just listened to Psychologist Barry Schwartz give a lecture on “virtue” at TED Talks. If you have not heard of TEDTalks, they are Technology, Education, and Design talks, a free-form gathering and speaking by some truly intelligent people. I highly recommend it. In this season’s speakers, Barry was a standout. I also found his talk on moral intelligence and virtue particularly relevant to sales.
First off, we need to eliminate the “pusher” and “manipulator” salesmen as not “real” salesmen because the value of a true salesmen is that they connect need with ability to supply. A true salesman knows that discovery is key: “You probably did know we exist (or could do this) but….” While this is a necessary part of selling, it is only the first, smallest, step. The real bulk of the work begins when the salesman has identified a customer with a need his company can fulfill. After discovery, the salesman identifies an entire list of reasons why the customer will not make the obvious business engagement; They can’t decide; the order process is too complex; already committed to another (likely less good) supplier: we don’t trust your company; we are scared and can’t decide… There are also supplier side barriers that come into play: We don’t know that they will pay; they want special treatment; we sold to them before and had a bad experience…. Read more…