Monday, July 30, 2012

3 Questions For Entrepreneurs

The Entrepreneurs Mindset

Entrepreneurs make the world go around.  They have a special talent.  They interact in the world differently than most people.

At heart, entrepreneurs are innovators.  An HBR article in December of 2009 gave some insight into the mind of people who are capable of generating business innovations.  What HBR found was that innovators have five abilities they practice better than people who were considered “non-innovators.”  The five abilities are:
  • Associating:  Connecting data points that are seemingly unrelated.
  • Questioning:  Not having strong orthodoxies – being free to ask why.
  • Observing:  Seeing things that are concealed to others.
  • Experimenting:  Not being scared of big ideas – breaking ideas down into chewable chunks.
  • Networking:  Connecting with lots of people – in diverse areas.

We try to believe that anyone can learn these five abilities.  I'm sure they can be taught; however, my experience is that some people are more natural at it than others.  We all know people we go to when we’re looking for fresh thinking.

Once entrepreneurs have ideas they also allow their ideas to interact with other ideas to become even bigger.  Then voila, a product or service emerges that can be commercialized.  Often the idea person such as: Bill Gates, Michael Dell, or Jeff Bezos, launch a business around the idea.  

Obviously these people created huge businesses, but this is not always the case.  Most entrepreneurs only take their idea to a certain business level before it plateaus.   At that point they hit the entrepreneur’s dilemma – how to take the business “to the next level.”  The failure rate is high.

When entrepreneurs hit this wall I ask them the following questions.

       1. Is your business scalable?
Often the entrepreneur’s business hits a niche market.  It provides a special, almost personalized solution to a uniquely defined problem.

Consultancies are prone to a lack of scalability.  Founders can grow their business to about 50 people.  At that point the “cult leader” runs out of reach.  They can no longer grow sales and they can no longer maintain thought leadership as new people, and new ideas enter the business.

The call goes out to sell the business to gain access to larger sales channels.  But there’s a cost.  Along with the sale comes a demand to scale up the business for a mass market.  Quickly the core idea is lost, the business gets absorbed and disappears.

2. If you scale-up, will the big boys let you play?
Entrepreneurial businesses are safe when they are under the radar.  They can grow profitably when no one is looking.    But once they burst into the sunshine the game changes.  The big boys get them in their sights.  With the flick of a pen the big boys can unleash resources and steal markets.

I'm advising the CEO of a small software development company; less than 50 people and less than $5 million in annual revenue.  He’s brilliant and he has a talented team.  Every time they put out a new product one of the big software houses comes over top of him with an inferior product that they practically give away to millions of customers.

My client is in a spin cycle with no release point.

3. Do you have the mindset of a businessperson?
Entrepreneurs can be plagued by a love of ideas rather than a love of business. Entrepreneurs love to do what they do because – well, they love to do what they love to do.  This passion is compelling.  It attracts others to “the cause.”  It binds people together at an emotional level.  They become a family.

Employee (family) engagement is often the key to success within entrepreneurial businesses.  If the business is scalable and the big boys let it play, the question is whether the “family” can change?  

I’ve been working with a good sized family owned manufacturing business – more than 1000 employees and close to $100 million in annual revenue.  It’s time to go “to the next level.”  I was talking with the owner about how to create a “performance culture.”  I used one of the founding employees as an example of a low performer who should be released.  The owner refused to accept that type of action.  I asked why.  She said, “Because it’s wrong!”

These are three core questions.  If the answer to any of them is “no” then the entrepreneur has some serious thinking to do.  What do they really want from their business?
  • A life style?
  • An exit strategy?
  • An enterprise?
Entrepreneurs need to know what they have and what they’re willing to do.  Change always brings opportunity, but never without risk.

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