Posts tagged "effective"

Strategy

What is your business model?

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“Great companies first build a culture of discipline…and create a business model that fits squarely in the intersection of three circles: what they can be best in the world at, a deep understanding of their economic engine, and the core values they hold with deep passion.” Jim Collins

In essence what this question is asking is, how does your business make money? To answer this question you must explain comprehensively how the different functions of your business fit together to make a profit. A good business model must satisfy two very simple core criterions, it must be based on it’s target market demand and must make financial sense. As simple as these two criterions may seem, many businesses, specifically in the “internet” era fail to pay attention to them.

One example is that of Webvan. They wanted to take grocery shopping, online. Great idea, huge demand from customers, however, it failed the financial test. The numbers did not add up and after spending hundreds of millions of dollars, the company was forced to close down. Another example of where the story did not make sense, is a company called Flooz. It wanted to convert real money to virtual currency to be used for spending online. After $35m, they found out that customers did not really feel comfortable with the idea.

The litmus test to put to business models, must cover:

1. Does it meet customer needs?: Is there a large enough target market segment willing to buy or use the product/service that the business is wanting to sell? It is essential that business models make sense and that there is a large potential target market.

2. Do the numbers add up?: Firstly, are the forecasts and projection based on solid foundations? Many a time when assessing businesses, I come across assumptions that seem to have been pulled out of a hat and  projections that are quite unrealistic. Secondly, have they taken the costs of doing business into account realistically? In the end, if the numbers do not add up and the business does not have a good plan, the chances of success and making money are very slim.

3. Is the business model scalable?: Investors and potential partners are always more interested in a business which has the ability to scale. Look into the future to see how the business model can be expanded and what it will cost the organization. If IPO and becoming an attractive takeover target is your goal, the business model has got to be scalable.

4. Can the business model be easily replicated?: Almost all models can be replicated. However, how much does it cost, and how long before your competition catches up? Look at DELL, it developed a business model which was very difficult for its competition to replicate because of its existing distribution channel agreements. Hence, even though the model could be replicated, they chose not too because they could not match it.

Listed above are a few things to keep in mind when developing an answer to the above question. It is important to clearly communicate how the business will make money, what assumptions the forecasts are based on, and whether it has the ability to scale. Investors are looking for something unique yet simple. It is challenging to find this balance, however if you do, success is right around the corner.

Strategy

What is your competitive edge?

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“The essential element of successful strategy is that it derives its success from the differences between competitors with a consequent difference in their behavior.” Bruce Henderson

The next logical question after hearing an initial elevator pitch is about the competitive advantage. What can you do that your competitors will have a hard time duplicating or catching up to? This is not the easiest question to answer, as most products and services can be replicated quite easily.

To provide a concise and clear answer to the question above, keep three segments in mind:

1. Customer Needs: Having a deep understanding of what the customer requires and wants from the product/service you are providing is critical. For such an understanding, the target segment of your business must be clearly demarcated, their expectations known, and their core needs clearly documented through research, feedback and surveys. It is only after such a thorough analysis can you develop a strong competitive advantage.

2. Competitor Capabilities: Never say your business does not have any competition! There will always be competitors, directly or indirectly. It is important that you understand how they are serving your target market. Gauge the benefits the target segment gets from their product/service. Research the areas they are unable to serve. What entry barriers have they created to the market? Where are they most vulnerable? What complaints do existing customers have with their service?  You need answers to all these questions to formulate a good answer.

3. Our Capabilities: After identifying the customer and the competition, a clearer understanding emerges for focusing and building competitive strengths . Efforts have to be made to operate in areas where your competition has difficulty in reaching the target customers. To help carve out such a segment you require a  strong team, patentable technology, strong alliances or any other factor to differentiate you from the rest.

Focus on these three factors will enable you to come up with the ‘where’ and ‘how’ to provide to your target segment. When you look at companies such as Amazon with their one click ordering system, Google with their patentable technology and algorithms or Toyota with its production system, notice how these great companies have been able to develop great competitive advantages in the face of excessive competition.

The answer to this question will hold the key to whether your business is going to be a long term success or not. Without an initial competitive edge, a company has slimmer chances of making it very far. They will have difficulty in getting investors to infuse money and a harder time getting customers to develop a level of trust in what they have to offer. What is your competitive edge?

Strategy

Why does your organization exist?

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“Whenever you see a successful business, someone once made a courageous decision.” Peter F. Drucker

The answer to the question above involves two fundamental factors, clarity of purpose, and passion. Without these two factors, one usually ends up listening to convoluted stories without the vital x-factor. The answer to this question is sometimes also called an elevator pitch. This is a concise snippet about one’s business and should be enough to intrigue a potential investor. Other than for investors, it can be used for customer presentations, networking events, or any other platform to introduce your organization. Failure to get the answer to this question right, usually means you will not get the opportunity to be asked other follow up questions. It is therefore vital that the answer to this question is carefully drafted and rehearsed to perfection.

A couple of key factors need to be addressed in your answer :

1. The Problem: Correctly identify the problem area  your business is attempting to target and alleviate. Having numbers and research indicating size of the problem is an added bonus and adds weight to your argument.

2. Customer Value Proposition: The next part of the pitch must cover how your product/service is going to address the problem, and what your competitive advantages are in relation to your competitors. Many CVPs are not formulated correctly, are often vague and abstract and leave potential investors or customers at a loss to understand it comprehensively. To read more about how to develop a good CVP please click here.

3. Team: If you have any outstanding team or board members who are well known and respected in your particular industry, mention them during the pitch. In the end it all comes down to execution, and having industry veterans backing you is a huge bonus.

The answer to this question should be given in less than 2 minutes, ideally. It is therefore essential to spend time perfecting the pitch and making sure that it is concise, clear and full of energy. One of the most important parts of the pitch is the opening sentence. This is usually called the “hook”, it must be cleverly drafted and be able to grab the audience’s attention instantly. Practice the delivery of this answer as much as you can, the feedback you get along the way should be incorporated into the pitch. In the end a well executed elevator pitch could help secure that venture funding you require.

Strategy

Assessing a Business

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“These two questions are the fundamental questions in strategy. How can you understand your industry and your competitive environment, and how can you understand how to position your company within that environment?” Michael Porter

Being able to assess your own company as well as those of the competition correctly is a skill every entrepreneur must develop. This skill helps look at the state of a current business objectively and ensure it is in line with what it started out to do. If it has changed along the way, you need to be able to identify the reasons for the change correctly, and  justifiably, for whether it has served the company well. Very often, well thought out organizations, have simple targeted reasons for existing and cater solely to those needs in an effective and efficient manner. When a company attempts to manage too many fronts without adequate resources, unnecessary complications arise in their business model.

Like any other skill this one will take time, commitment, and experience to master. I am involved in the assessment of some start-up ventures due to my linkage with several entrepreneurial clubs and societies. Over the years I have come to rely on a couple of basic and fundamental questions when assessing a business. These are simple questions which are aimed at the core of the business, where it wants to be, and how it plans on getting there. As a business owner myself, I continue to ask myself these same questions about the businesses I manage, to ensure that we are on track for where we want to be and have adjusted our strategy correctly, in light of any changes which may have occurred along the way.

Over the course of this week I will go through five basic questions which can be used to assess a company at a very basic level. I hope they will help those who use these questions and will enable them to channel their thought process in a more structured manner when assessing a business. In the near future, case studies will be added to this blog, these will be ideal to test one’s understanding of this week’s blog series. If anyone would like to have their company or business model assessed please send me an email at blog(at)usmansheikh(dot)(net). I will be more than happy to take a look at them and send you some feedback.

Time Management

Productivity Boosters

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“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” Bill Gates

The first Personal Digital Assistant (PDA) I got myself was in college. I still remember how frustrated I was when nothing changed after I got it. When I came across this quote by Bill Gates it all made sense, applying technology boosters to our own life will not yield the results we want if our life does not have structure. Today I rely on many productivity tools which help me organize my day in a much more efficient manner.

Contactizer Pro: This is a key program I use to keep track of my day, week, month and year.

Yep: Manages all my documents, receipts, invoices and bills

Yojimbo: Manages important information when I am surfing the internet

Marsedit: Manages all my blogging related activities

iPhone: Can’t imagine life without it

All of these tools have made a difference to the way that I manage information. These tools will only work when you have the discipline to work towards certain goals with perseverance and diligence. Those three characteristics will have a direct impact on how much these tools aid you in organizing your day.

Time Management

Time Management System

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“Many people seem to think that success in one area can compensate for failure in other areas. But can it really?…True effectiveness requires balance.” Stephen Covey

When scheduling my week, month and year I use the following time management system. The system basically asks you to break up your week into three different types of days. The break up is:

  1. Preparation
  2. Best
  3. Rest

This system truly is very simple, yet, it is often overlooked by many of us. Examples of when this system is not used are days when you feel you are not giving your best to what you are doing, looking to find more time in the day to complete a critical task, thinking your life is purely about work and nothing else.These are thoughts which come to mind even though we have a goals list which is prioritized. By implementing this system I have been able to bring balance into my life and to make sure that I am in sync with all aspects of it.

To use the system effectively you need a prioritized goals list as well as clearly outlining  the functions or tasks you excel at and bring the greatest amount of value to. Once you have marked these, you need to categorize your week into preparation, best and rest days. For example, due to an excess work load I am experiencing this month, I have allocated 2 preparation days, 4 best days and 1 rest day.

Preparation Days: These are the days when I plan the critical tasks which need to be completed during the course of the week or month. These include research for proposals which need to completed, tabulating psychometric tests scores which have been conducted, set and plan agendas for meetings scheduled during the week and coordination which needs to be done for events taking place during the week. Everyone’s preparation days will be unique to the core tasks at which they excel.

Best Days: These days include a number of tasks which create the greatest value. These would include finalizing and sending out proposals, giving presentations and meeting prospective clients, consultations and feedback sessions with clients who have taken our psychometric tests and internal strategic planning meetings. These are tasks which are made easier when prepared for in detail and make my best days a lot more productive. Choose tasks which you have skills and passion for to ensure that you make the most of these days.

Rest Days: These days include tasks which are not related to business . With the advent of Blackberry’s and iPhones, these rest days are slowly becoming extinct. You should do your best to allocate activities or events where you can relax and unwind during these days. I usually spend time with friends and family during this day, reading the ever increasing backlog of unread books and catching up on some sitcoms and shows which I enjoy. These days are essential for a balanced lifestyle.

By targeting a number of prep, best and rest days in a month I have been able to allocate  time more efficiently and have become more effective at the tasks which I excel at. I hope this system can help you as much as it has helped me.

Time Management

Where did the day go?

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“Lost wealth may be replaced by industry, lost knowledge by study, lost health by temperance or medicine, but lost time is gone forever.” Samuel Smiles

As an entrepreneur the biggest hurdle that I face is that I wish the day had more hours in it. This is a problem which I have attempted to overcome and have had some success in achieving. It all comes down to the fact that my brain is in a continuous processing mode. Somewhat like a computer which has not been reset for a long time thus slowing everything down. This is how I feel on the days when I know I am not doing my best. I have hence decided to use this week to remind myself on the importance of time management and in the process give some tips to others on what has helped me.

Time management is a vast topic and has been written about and discussed widely. Yet most of it becomes difficult to digest and implement. The reason for this is that most individuals already have too much going on in their lives and miss out on the bigger picture. Three years ago, I remember being in college, running a large students organization, operating my first startup company and occasionally hanging out with friends. Looking back, that period of my life was well time managed due to correct prioritizing . The first step for organizing time has to revolve around priorities . As an entrepreneur I ask myself questions such as; what is important to myself, what do I aim to achieve and how do I plan to achieve these goals? You have to bring focus to the key priorities in life otherwise they will get left behind. For example if you believe helping out the less fortunate is an important aspect of your life and you plan to support it through a particular NGO, how are you incorporating this into your schedule? Has life taken over whilst you have been talking about it? If it has you shouldn’t be too worried, this does happen to everyone at some point of their lives. Prioritizing and using time more effectively with greater focus will help you achieve your commitment.

You will need to allocate certain days and time to your goals to make them possible. Through this methodology we will be able to strike a balance and make sure we utilize this most precious commodity as carefully as possible. I would like to know from the readers where they would utilize an extra hour if they could gain it from effectively managing time. Comments will be much appreciated.