Date archives "August 2009"

The Past and the Future

If not handled carefully, the past has the ability to hinder future progress. It is most important to realize and understand that the past does not have to be your future. If we sit back and do nothing to change what is happening today, inevitably occurrences of your past will creep into your future. Everyone goes through phases of difficult times in their lives. All of us also have an option on how we want to let these incidents affect our ability to move forward. If we fail to take responsibility for ourselves and play the blame game, unfortunately things will not change for the better. We have to make a personal decision to consciously want to make a better and brighter future for ourselves and those who depend on us.

It all comes down to the ability to set goals, and then identify where you want to go. That has to be the starting point of any future transformation we want to see in life. Simply saying, I hope the next five years of my life will be better than the last, and doing nothing to make them better, will not yield any positive results. Yet, how many of us actually take time out to sit and chart a plan about where we want to go in life and what we want to achieve.

Setting goals and sticking to them is a great challenge. It requires patience, persistence, commitment and faith in our ability to achieve what we have set out to get. In order to get on the right track, we have to shake ourselves free from the clutches of our past, take responsibility for our actions and chart a path for the future. The sooner you do that, the faster you will start to achieve the things you aspire to and get on track to living a fuller and happier life.

Wanting to Change the World?

I read an interesting post on Techcrunch about the overall feedback on companies which presented at Techcrunch50 this year. One paragraph which really stood out was:

“Start-ups by definition don’t have the experience, market position, funding or resources to tackle obvious market opportunities. If what they’re trying to do makes clear business sense, a bigger, better-positioned company would do it. A start-up’s only edge is that it’s not built into legacy businesses and preconceived notions and can do something, well, crazy.”

I agree with the statement to a certain extent. Startups and entrepreneurs are often the ones at the helm of innovation. It is all about breaking the mold and going down the path less traveled. At the same time, there are a lot of opportunities available where bigger well positioned companies are just not bothered or pushed to enter. Take for example the very recent news of Mint being acquired by Intuit. Mint entered the personal finance space where Intuit had clearly made inroads, but had left a lot to be desired. In comes Mint who adapts to the current market situation and requirements, and soon they have over a million users registered on their site. Intuit could have entered this space and been aggressive, but it didn’t. This lack of initiative and complacency by larger companies is taken advantage of, time and time again by start-ups. Even though they do not end up changing the world, they do leave the world a better place to be in.

In conclusion, I don’t think that a start-up’s only edge is a lack of bureaucratic layers and controls. It is on the other hand, their flexibility and nimbleness which provides them with the ability to continuously weave and dodge the punches from larger organizations. When vulnerabilities are exposed by larger entities, that is when they take advantage of the situation. This does not mean that we abandon all crazy and adventurous ideas and notions and stick only with the tried and tested paths and markets. It is actually the merging of these two different approaches which provides start-ups with the ability to truly make a difference.

Knocking your Competition’s Pricing

A mistake many first time entrepreneurs often make at the negotiating table, is knocking down their competition’s pricing. Regardless of whether you are charging a premium over current market rates or are positioned as a cheaper alternative, the focus of your negotiations should not place heavy emphasis on your competitor’s products/services and pricing model as compared to yours. Pricing is definitely a tricky component for any business regardless of size. When a business picks a model they want to use to set their prices, they should stick with it unless the market provides them feedback on which components need changes.

On the negotiating table, emphasis needs to be placed on:

1. The requirements of the prospect

2. If they are an existing customer, feedback on their products & services is essential.

3. Whether they have any questions regarding any specific components of the proposal.

The majority of your time needs to be spent on sizing up the prospect’s current situation and what barriers you will need to cross to get them to close the deal. Pricing will eventually be discussed. When it is, focus needs to be placed on the value that your product/service is providing the customer rather than defending and comparing prices. When the prospect does compare your pricing to your competition’s, it is important not to bash their products or find holes in them, rather, spend time focusing on your product/service and the value you bring to the table.

Negative Emotions

Everyone faces highs and lows in their lifetime. There will be incidents that really pull you down, to the extent that you feel like giving up and blaming everyone and everything around you. We do our level best to justify how we were wronged in a particular situation. This only feeds an ever growing well of negative emotions within us. This victim mentality has the ability to grow onto you very quickly and sabotages your relationships, work and overall quality of life. The only way to stop them from taking over is to be able to take responsibility for your actions and where you currently are in life.

Our current position in life is because of a series of actions and decisions we have taken in the past. If someone is not happy with where they are, they have to look back and evaluate major decisions they took in the past which have got them where they are. Are you making the same mistake repeatedly? Have you stopped learning or growing? Are you doing what you are truly passionate about? Have you sat down and written down what you really want to achieve?

The only way to get to a state of contentment and happiness is to start taking responsibility for your own actions and decisions. The greater responsibility you take, the more you will be in control of where your live is headed. This in turn will result in a greater level of contentment and happiness, knowing that you are making progress. The entire world may be falling apart around you but only you are responsible for how you will deal with it. The sooner you learn to take responsibility for your own actions, the faster you can begin moving towards achieving goals you want to attain.

Does Your Business Own a Word?

In the book “22 Immutable Laws of Marketing” by Al Ries & Jack Trout, they mention that “owning a word in the prospect’s mind” is “the most powerful concept in marketing”. When you think of words in the online space, words such as “bookstore” or “search”, the direct connection to “Amazon” and “Google” by many participants is overwhelming. The word “online” helps to focus our attention to a certain category, the single word then helps to forge a connection with a brand which is strong in that space. Similarly with cars, the words, “safety” & “driving” are often unconsciously associated with “Volvo” and “BMW”.

In a world that is becoming increasingly more competitive and being continuously filled with new brands , single word associations are more powerful today than ever before. So how does a startup business go about owning a word? For starters, take the strongest core benefits of your product/service and link them with certain key words. For example, a brand like Rolex wants the word ‘perfection’ to be one of their key association words. To do this, they need to link the word to certain attributes such as the painstaking detail their watchmakers take, or the quality assurance processes that each watch must pass through. By linking the word to a tangible process or attribute the customer is able to connect the word to the brand with greater ease. In essence, it provides a framework for association.

Newer businesses and startups should strive to set strong and reliable foundations to build their brand names on. This process takes time and should never be rushed into. Words need to be picked with great care and thought, since they will shape and establish how you want your customers and prospects to think about what you do as a business. Once this is established, it is hard to dislodge the association, so avoid confusion about your brand by stringent initial brand strategies.

Trying to Make a Quick Buck?

The lure of making a quick buck attracts many people to adopt short term strategies, where they may not always take the most ethical path. I have experienced many hit and run vendors who have taken advantage of situations for the short term, by charging too much or delivering poor work as compared to what they had committed . This always results in the severing of ties, and finding alternative vendors to carry out the same task in the future. This short sightedness invariably leads to the eventual downfall of the service being provided because the key element of customer satisfaction and value is missing from the equation.

There are dire repercussions to adopting such tactics. Firstly, word of mouth spreads faster than you can imagine. Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000: Running a Business in Today’s Consumer-Driven World. I recommend reading this book to get a better understanding of the word of mouth impact on either the credibility of a person or business.

If you are starting a new venture, it is critical that you surpass your first customer’s expectation. These will become ambassadors for your product or service. This does not mean that your product has to be perfect from the onset. If there are glitches or mistakes made during delivery, it is important that the customer is given a full explanation and even compensated in return.

In the end, it is the customer experience which will be remembered.

We Can’t Work Together

I had an interesting discussion yesterday regarding friction within a team, and how it sometimes reaches a level where it becomes difficult to work with each other. This happens in many group settings. There will always be a greater level of friction among certain individuals in a group, which will in turn impact the rest adversely. It is simple to identify this level of friction, dealing with it appropriately and diplomatically is where the real challenge lies.

If you have not read my 5 Steps to Manage Conflict article series, I do recommend it. This provides a good foundation on how to approach such matters and helps develop a good framework to deal with them. Conflict is an area which involves great deal of emotions, these often lead us to saying and doing things in the heat of the moment, which we may not mean or do ordinarily. This is fairly common and natural behavior, and all we need to do is focus on clearing our minds about the options we have, and decide how we would ideally like to resolve the conflict.

If we do not think in terms of options about closure, we are treading a dangerous path, which will only make matters worse, as well as negatively impact the morale of the entire team. Once a decision is made regarding how to proceed, it is important to stick to it, and aim to reach a conclusion as soon as possible. This could entail having to let a team member go, or leaving yourself, either way it is an emotionally draining experience. Given that a lot of work is put into building and bringing a venture upto a certain stage, having to give it up is tough.

However bigger and better things may await you, and the lessons learned from this experience will inevitably enable you to make better decisions in the future.

I Don’t Want to Change!

Change is hard. Change is uncomfortable. Change requires inner strength and willingness to break the status quo! Starting a new business is very challenging. It requires a level of personal commitment and courage often lacking in many people. Most importantly, it requires a deep belief in one’s own skills set and ability to deliver. This inner belief is challenged on a daily basis when you start a new business. Chances are that you will not end up doing what you initially started out to do. This route will often require having to make many painful decisions, which will result in changing focus and, at times starting anew from scratch.

The ability to change has to be an integral component of your journey to achieve excellence. Those of us who become stubborn in our ways and accept mediocrity, get stuck in a rut which becomes increasingly more difficult to get out of. We need to ride through “The Dip” as Seth Godin says if we want to achieve anything worthwhile in our lives. We not only need to ride the dips but also know when to quit those dips if we believe we do not have the skills or resources to overcome them. In the end, we need to stick to a niche or market segment and find an area to excel in and, become an authority on.

When you start your journey as an entrepreneur, you need to be mentally prepared for this. Chances are you will change many paths until you find the one you believe you have the best chance of winning at, and becoming an authority in. This does not mean that we change paths every other day, only when we sincerely believe we do not have what it takes to be #1 in what we started out to acheive.

Cost Plus Pricing Strategies

Pricing is always a tricky issue. Determining a correct price that a customer will pay for your product or service, is always a point of debate among team members, since the price appears to be either too high, or too low. I find the cost plus pricing mode usually adopted by many business owners as being the simplest, and most straight forward way to determine pricing.

Price = (Cost of Production + Misc Costs) + Profit Margin

This is a good workable model and I have used it extensively while pricing products & services. When advising startups, I find the two most common mistakes usually made when adopting this approach are :

1. Under estimating cost elements: In the first part of the equation, calculating the cost of production is in most cases, a relatively simple exercise irrespective of whether one is producing a product or providing a service. Mistakes are usually made in appropriating miscellaneous costs to the overall cost of production. Components such as marketing, administration and fixed costs have to be inbuilt into the pricing, to ensure that the the cost of production is fully representative of all the resources going into production and delivery. Hoping to recover these expenses by increasing profit margin components is not the best of strategies.

2. Profit Margin Calculations: The last component of the equation is where debate occurs in the team, to gauge whether to adopt a lower % buffer or a higher one. I believe this is dependent on current market place, pricing adopted by competitors and most importantly, your own expectations. Businesses are inherently set up to make profit. Hence, if you start off with low costing structures, it is much harder to scale upwards, whereas it is easier to come down. A lot of thought must therefore be put into setting the profit margin component.

Is cost plus pricing the best pricing strategy that a company could use? I do believe it is dependent on a case to case basis. I am more inclined towards premium pricing models which instead of using base cost as an indicator, use the value that you bring to the customer. I will discuss this strategy in greater detail in another blog post.

Designations & Startups

This conversation comes into play as soon as a start-up is writing up their business plan or printing name cards. It is an exciting and confusing time, specially for first time entrepreneurs who are keen to get their ‘designations’ just right. I remember my first designation, it was, “Strategic Marketing Director”. A mouthful for sure, and one which raised a lot of eyebrows and questions about my actual role. The truth of the matter is, at a start-up, everyone needs to be be doing pretty much… everything! Externally however, I do feel your role must communicate something substantial about your responsibility at the startup. Choosing roles such as CEO, Strategic Marketing Director or Managing Director may sound good, but do not really communicate what you have taken responsibility for. If your startup comprises of 3 people, CEO is really overkill.

I much rather prefer designated roles such as Lead Platform Developer, Customer Liaison, Product Marketing Head, Research & Development Director etc. These help your customers understand whom to call when they have a certain problem or question. If a person on the team has technical expertise regarding the hardware component of your product, their role should reflect that. If another person handles finances, then that is who investors need to call when they want information about cash flow situations etc.

My mantra for start-up designation is simple. Choose an area where you see yourself taking responsibility for a particular function. This communicates both internally and externally what role you would like to play in the company, as well as helping you to steadily enhance your expertise in that particular area. This is not a conversation where founders should dispute who should be CEO and who should not. It is, on the other hand, a first step in the direction you want to grow with the company.