Category Archives: Entrepreneurship

Competitive Edge

In his book, The Road Ahead, Bill Gates of Microsoft writes of “friction-free capitalism” made possible by developments in communications, chief among them the Internet and its World Wide Web. In this context, “friction” is everything that keeps markets from functioning as the “perfect competition” of economics textbooks. This friction can be a function of distance between buyer and seller, costs of overcoming this distance, and incomplete or incorrect information.

Friction manifests itself by causing barriers to entry for new competitors, limiting the number of outlets from which the consumer has to choose. Large companies, with multiple sales outlets, and economies of scale, have greater power to direct the marketplace.

The degree of friction in the developed world has been decreasing for some years now. Affordable air travel, overnight delivery, improved telephone and fax communications have shortened distances. Credit cards and toll-free numbers have spawned at-home shopping from sources across the country.

The Web has taken the friction in our economy down another notch. In principle, we can sell products and services to a worldwide audience as easily and effectively as our largest multi-national competitor. In principle, we can sell products and services to a worldwide audience as easily and effectively as our largest multi-national competitor. In the friction-less economy, the challenge of differentiating ourselves from the competition becomes even greater.

In the friction-less economy, the challenge of differentiating ourselves from the competition becomes even greater. Successful small businesses tend to be those who can find some competitive edge, even when their product or service is similar to those around them.

Marketing professionals often call a business’ competitive edge their “unique selling proposition”, or USP. Pinpointing and refining one’s USP, however, is not a simple matter. An approach is unique only in the context of our competitors’ marketing messages.

Some marketing messages go beyond product and service characteristics. For example, Charles Revson, founder of Revlon, insisted that he sold hope, not makeup. Similarly, United Airlines sells “friendly skies”, and Wal-Mart sells “always” the low price. Do these slogans convey how each company views their customers? Does their selling proposition appeal to your preferences?

Sharpen your USP:

  • Put yourself in your customer’s shoes; satisfy their needs, not yours.
  • Know what motivates behavior and buying decisions.
  • Find the real reasons people would buy your product instead of a competitor’s. Ask them!
  • “Shop” the competition, be open-minded about your product, and never stop looking for ways to make your product stand out.
  • Try now to recast your business idea in terms of its competitive advantage. Prepare an industry analysis (size, customers, trends, and competitiveness). Identify what you see as your specific market, and estimate the share you think you can capture.

    The Web can be a powerful research assistant. Virtually every major business puts product and service information on the Web, including business directory services and magazines.

    Search engines can help in improving your understanding of your industry, and the key success factors. Test the resources available on the Web. Visit sites of major companies in the industry, where appropriate. Search the archives of business magazines for articles that give background and statistics.

    John B. Vinturella, Ph.D. has over 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site www.jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business,” available on Amazon.

    Motivation and Commitment

    Abstract: What kinds of people start businesses? Their skills are seldom different from those of people who succeed at working for others. The more successful entrepreneurs tend to be proactive, assertive, and highly observant.

    Why do people start small businesses? The most frequently cited motivation for business start-ups is to allow the entrepreneur to achieve independence; money is secondary. Is this surprising? The other reasons named most often are that an opportunity presented itself, a person took over the family business, or the person simply wanted to be an entrepreneur. Identify your motivation.

    For context, what reasons might people offer for joining a large corporation? For choosing a government career? A union job? Certainly, many people desire security, fringe benefits, and a predictable career “trajectory”.

    What kinds of people start businesses? Their skills are seldom different from those of people who succeed at working for others. The more successful entrepreneurs tend to be proactive, assertive, and highly observant. They are efficient, quality-conscious, and good at planning and procedures. As business operators, they are committed to “partnership” with employees, customers, suppliers, and their community. Would these skills or personality traits lead to success at any professional pursuit?

    Most entrepreneurs value control, freedom, flexibility; and self-reliance. They generally desire responsibility and personal fulfillment. Most entrepreneurs are not “gamblers”; they have a preference for moderate risk (What is the largest financial risk that you would consider moderate?). They are always searching for opportunities, and willing to pursue some.

    These are merely general characteristics. How might we apply them to our own fitness for, and commitment to, the entrepreneurial lifestyle? We need to ask ourselves some tough questions:

    Do I really want to start or own a business? What are my real reasons for considering going into business? The motivation must be strong enough to sustain you when the excitement of the startup has passed, and the everyday grind begins.

    Is there a product or service that fits my talents or desires? How should I address the opportunity? About 65% of new businesses are startups, 30% purchases of existing businesses, with the remainder inherited, promoted or otherwise brought into ownership. About 11% of the businesses operate under a franchise name.

    Am I ready yet? Why do you think so many new business founders are in their 30s? Perhaps it is because they have enough experience to be confident, yet are still flexible enough to take some risk. Do you think entrepreneurs are born (demanding parents, ethnic tradition) or made? Is it for you? If so, identify what additional skills or knowledge would increase your readiness.

    For women and minorities, there are additional considerations relevant to their chances of success. Do they have to be “better” to make it, or is entrepreneurship the only true meritocracy? Is any disadvantage only at startup?

    Do I have an adequate support structure? If you have a spouse, or are relying on some other form of family support, make sure that they understand the sacrifices involved and the pressures these will put on relationships.

    Can I place developing this business over other interests and goals for the foreseeable future? Am I willing to take on the personal demands of entrepreneurship? For example, can I work a full day as an employee of another firm, then work at my coffee shop evenings and weekends until it can support me full-time? There is more to life than work, and maintaining a balanced and healthy lifestyle can be a challenge for the self-employed.

    Can I muster the resources to make the venture a success? Do I respond well to continuous pressure? Once I make the venture a full-time pursuit, can I live without a regular paycheck, a predictable work schedule, and for a while without vacations and other benefits? Even after startup, business concerns seldom end when you lock the door at closing time. Am I prepared for the possibility that I might lose my money and property, and damage my health and self-respect?

    There are no right or wrong answers to these questions, only those that best reflect your feelings on these issues. Similarly, if your feelings indicate that you should not take the entrepreneurial path, it is certainly not a sign of weakness or any other sort of deficiency. It is more likely a decision that reflects the best life-work balance for you.

    John B. Vinturella, Ph.D. has almost 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site www.jbv.com and its associated blog. John recently released his latest book “8 Steps to Starting a Business” available on Amazon.

    Innovation

    Abstract: Innovation, in a business context, is generally thought of as the product or application of creativity. Peter F. Drucker suggests that innovation “is the specific instrument of entrepreneurship”.

    Mr. Drucker further suggests that there are seven sources of innovative opportunity. Four of these relate to a specific industry or service sector: the unexpected; the incongruous; process needs; and structural change. The other three relate to the human and economic environment: demographics; changes in perception, mood, and meaning; and new knowledge.

    Let us observe some of these factors at work in a coffee shop venture. The unexpected factor in the recent success of gourmet coffee shops is the willingness of the consumer to spend two or three times the cost of a generic cup of coffee for exotic, flavored or brand-name coffee. An incongruity is the popularity of fat-free desserts (“healthy” indulgence) to go with that coffee. The structural change in the industry is the emergence of franchises.

    Environmental changes have also contributed to this phenomenon. As the “baby-boomer” generation has aged, the preferred place to meet has moved from the bar to the health club to the coffee shop.

    Let us consider information about some current trends to see if we can relate them to potential opportunities in the context of Professor Drucker’s categories. For each, see if you can possibly find a niche on which to build a business:

  • The unexpected The International Association for Financial Planning is observing a rapid (to the point of unexpected) increase in calls requesting referrals for financial planners. A spokesperson for the IAFP says, “People are realizing that financial planning is not just for retirement or saving for a child’s college education; it’s for all stages of a person’s life”.
  • The incongruous Many Americans are feeling pressed for time, incongruously wishing to lead simpler, easier lives without giving up those activities that take the most time and effort. The opportunity lies in offering personal time-saving products and services that relieve these people of tasks that they find less than fulfilling, not worth the time, or unpleasant.
  • Process needs Individuals and businesses are spending unprecedented sums of money to acquire the education, training and skills necessary to remain competitive in a rapidly evolving marketplace, creating opportunities in consulting and training.
  • Structural change The health-care industry will flourish because of an aging population, myriad technological advances and people’s expectations of readily available medical care. One of the industry’s fastest growing segments is home-based health care, which is well-suited for entrepreneurs because of its ease of entry.
  • Demographics The aging population referred to possesses a combination of leisure time and discretionary funds that makes them a great market for new ventures in services relating to their comfort and recreational needs.
  • Changes in perception, mood and meaning The amount of money that citizens and businesses spend on security products and services is growing rapidly; the preferred method for many forms of purchase is increasingly becoming the Internet.
  • New knowledge In 1996, for the first time, computer sales outnumbered television sales in the United States.
  • Do any of these sources of innovative opportunity suggest an entrepreneurial niche to you?

    John B. Vinturella, Ph.D. has almost 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business
    opportunity site www.jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business”, available on
    Amazon
    .

    Think Like an Entrepreneur

    Introduction

    Entrepreneurship is the process of creating or seizing an opportunity, and pursuing it regardless of resources currently controlled. The American Heritage Dictionary defines an entrepreneur to be “a person who organizes, operates, and assumes the risk for business ventures.”

    These are rather abstract concepts for a person just beginning to consider whether they ought to start a business rather than take a job, or leave a secure job for a chance at greater self-fulfillment. Entrepreneurship is more an attitude than a skill or a profession.

    Who is an Entrepreneur?

    Would you consider a person who inherits a business an entrepreneur? It is their own money and financial security at risk. They could as easily liquidate, invest in blue-chips, and live off dividends.

    Would a person who inherited a small or marginal business, then took it to new dimensions be considered an entrepreneur? What if that person paced the business’ decline to just carry them to retirement? Is long-term success, even beyond the founder’s lifetime, an important criterion to being an entrepreneur?

    Are franchise owners entrepreneurs? Franchises are sure things, aren’t they? Is it much different from income from “passive” investments? What is the appeal of franchise ownership?

    Are there entrepreneurs in large companies? How can a company promote “intrapreneurship?” Are different qualities required of a successful division manager than of a president of a successful company of similar size? Is an entrepreneur necessarily a manager?

    Entrepreneurship is generally characterized by some type of innovation, a significant investment, and a strategy that values expansion. The manager is generally charged with using existing resources to make a business run well. Are these incompatible roles? Are most managers entrepreneurial?

    Self-Analysis

    Peter F. Drucker, author of Innovation and Entrepreneurship, said that anybody from any organization can learn how to be an entrepreneur, that it is “systematic work.” But there is a difference between learning how to be, and succeeding as an entrepreneur.

    “When a person earns a degree in physics, he becomes a physicist,” said Morton Kamien, a former professor of entrepreneurship at Northwestern University. “But if you were to earn a degree in entrepreneurship, that wouldn’t make you an entrepreneur.”

    The U.S. Small Business Administration suggests that the prospective entrepreneur begin by examining their motivation. How important to you are the reasons commonly given for people going into business for themselves? Among these reasons are freedom from work routine; being your own boss; doing what you want when you want; boredom with the current job; financial desires, and; a perceived opportunity. Which of these might be sufficient to get you to take the risk?

    Personal characteristics required, according to the SBA (https://www.sba.gov/starting-business/how-start-business/entrepreneurship-you), include leadership, decisiveness, and competitiveness. Can you objectively rate yourself in these dimensions? How much of each of these traits is enough to insure a good chance of success? Important factors in personal style include will-power, and self-discipline, comfort with the planning process, and with working with others. Are these indicators of success even for the non-entrepreneurial?

    The prospective entrepreneur should perform a personal skills inventory that includes supervisory/managerial experience, business education, knowledge about the specific business of interest, and willingness to acquire any necessary skills that may be missing. A commitment to filling any knowledge or experience gap is a very positive indicator of success.

    Former newspaper columnist Niki Scott suggested questions that could help us determine our fitness for the temperamental demands of entrepreneurship:

  • Do you routinely accept responsibility? Are you comfortable with moderate risk?
  • Do you consider yourself pro-active? Focused? A priority-setter?
  • Are you confident about overcoming obstacles? Realistic about your limitations?
  • Are you accurate? Controlled? Self-reliant? Disciplined? A self-starter?
  • Are you comfortable accepting advice? Willing to do whatever it takes?
  • Are you fair and honest? Constructive? A good delegator? A motivator?
  • Are you persevering? Resilient? Do you know when to quit?
  • Does it still sound like fun? How does the sense of intensity and personal responsibility implied by this checklist sit with you? Does this direction still seem a few years away?

    Conclusion

    The process of creating or seizing an opportunity is less the result of a deliberate search than it is a mindset of maintaining a form of vigilance that is sensitized to business opportunity. This frequently relates to the prospective entrepreneur’s current profession or interests, where he or she perceives a process that can be more efficiently performed an attractive new service or improvement of an existing service, or some business or geographic “niche” that is being undeserved.

    Successful entrepreneurs exhibit the ability to recognize an opportunity while it is still taking shape. These are often based on broad trends, which may be: demographic, such as the “graying” of America, creating opportunities in health services; sociological developments, like the “green” movement, with its emphasis on recycling and environmental sensitivity, and; cultural changes caused by changing economic conditions and technological developments.

    Opportunities can also frequently be found in current and developing business trends such as the globalization of business, the need for outsourcing created by downsizing, and the burgeoning service economy. There are often localized opportunities, based on geography, natural resources, human resources in local abundance, and the like. Can you think of any for your area?

    John B. Vinturella, Ph.D. has more than 40 years’ experience as an educator, manager, entrepreneur, and strategist. He founded and ran a highly successful business for 20 years. He is the author of “8 Steps to Starting a Business,” available at Amazon and directly from John at a significant discount. Contact John at: info@jbv.com

    Risks of Entrepreneurship

    The “spark” for many entrepreneurs is seeing an opportunity that doesn’t yet exist. Ted Turner, for example, launched CNN because he perceived that people wanted more television news than they were being offered. It took a lot of patience on Turner’s part to realize the vision, but he had read the market in a way that few “experts” did at the time.

    In realizing the promise of CNN, Turner demonstrated another facet of the entrepreneurial spirit, persistence. There are a lot of bright ideas that never reach fruition; taking a “raw” idea and converting it into a successful business model is very hard work.

    And that work never stops. No matter how innovative your idea, the competition is always just behind you. With anything less than constant creative effort on your part, they may not stay behind you.

    When small businesses fail, the reason is generally one, or a combination, of the following:
    * inadequate financing often due to overly optimistic sales projections;

    * management shortcomings,

    — such as inadequate financial controls, lax customer credit, inexperience, and neglect, and;

    * misreading the market,

    — indicated by failure to reach the “critical mass” required in sales volume and profitability,

    — usually due to competitive disadvantages or market weakness.

    In a recent Wall Street Journal article titled “Why My Business Failed,” Ken Elias cautions that “even if the concept is right, it won’t fly if the strategy is wrong.” Still, on being asked whether he would start another business today, he answers: “Absolutely. The experience is fabulous, exciting and the possibility of success is always there.”

    John B. Vinturella, Ph.D. has more than 40 years’ experience as an educator, manager, entrepreneur, and strategist. He founded and ran a highly successful business for 20 years. He is the author of “8 Steps to Starting a Business,” available at Amazon and directly from John at a significant discount. Contact John at: info@jbv.com

    Mining Market Data

    With a heightened awareness of opportunity, ideas can often be generated by market research. The National Women’s Business Center (NWBC) defines market research as “a systematic, objective collection and analysis of data about your target market, competition, and/or environment with the goal being increased understanding. Through the market research process, you can take data–a variety of related or non-related facts–and create useful information to guide your business decisions.

    For example, in recent years data has indicated the shift of the U.S. to a service economy and away from manufacturing. Service industry growth is good news for prospective entrepreneurs. Service businesses are relatively easy to start, and economies of scale are not generally sufficient to give larger companies a significant competitive edge.

    For an indication of the products and services that people will need in the near future, we can look at projections of those industries which are expected to produce the most new jobs in upcoming years. The U.S. Department of Labor projects that eating and drinking places will create the most new jobs in the early 21st century, followed by health care, construction, and personnel and supply services.

    More specific ideas are often suggested in the business and entrepreneurship literature. Food and recreation opportunities could include family entertainment centers, tea salons, and brewpubs. Services you might offer could include children’s learning centers, unique travel experiences and specialized staffing agencies.

    Other useful sources of ideas include the business section of the local newspaper and the local business weekly. Broad trends can be tracked merely by being a reasonably well-informed observer of the popular culture.

    Are opportunity listings useful? Some believe that it is already too late to enter a business by the time it is publicly acknowledged to be an opportunity. Many suggest that it is better to wait for the “first movers” to clarify exactly what services consumers want, and then to enter with a more focused product.

    We also have the choice of moving into “hot” new businesses, or developing better approaches to well-established industries. While leading edge ventures are generally more exciting, more fortunes have probably been made with well run versions of fairly common businesses.

    Scan the current literature for opportunities that fit your strengths and interests. Describe a specific business that would take advantage of one of these opportunities. Identify how your strengths and expertise would contribute to the success of such a business. Visualize yourself as the owner/manager, and project how you would get the venture off the ground.

    For example, a coffee shop fits within the fastest growing industry, eating and drinking places, though in competition with national franchises. Is it in competition only with other coffeehouses, or with other casual dining or snack-food places?

    Many services are highly localized. Is national data useful to consideration of a neighborhood coffee shop? Can we acquire meaningful data on just our market area, the northeast corner of a metropolitan area, serving 18% of its population? This would almost certainly require gathering primary data, that is data that we gather or commission specifically for this purpose, rather than secondary or published data.

    The NWBC stresses that information gained through marketing research isn’t just “nice to know.” It is solid information that can guide your most important strategic business decisions.

    We Are All Self Employed

    Q: I am not yet ready to be self-employed, but wish to be in the near future. What can I do in my current job to prepare?

    We are all self-employed; even as employees of a firm, we are still primarily personal career managers. Still, some of us are, or will become, entrepreneurs.

    The U.S. Small Business Administration has developed a Checklist for Going into Business (http://www.sba.gov/content/use-our-starting-assessment-tool) that leads the prospective entrepreneur through a skills inventory that includes supervisory and/or managerial experience, business education, knowledge about the specific business of interest, and willingness to acquire the missing necessary skills. A commitment to filling any knowledge or experience gap is a very positive indicator of success.

    Personal characteristics required, according to the SBA, include leadership, decisiveness, and competitiveness. Important factors in personal style include will power, and self-discipline, comfort with the planning process, and with working with others. Can you objectively rate yourself in these dimensions?

    Peter F. Drucker, author of Innovation and Entrepreneurship, says that anybody from any organization can learn how to be an entrepreneur, that it is “systematic work.” But there is a difference between learning how to be, and succeeding as an entrepreneur. “When a person earns a degree in physics, he becomes a physicist,” says Morton Kamien, a professor of entrepreneurship at Northwestern University. “But if you were to earn a degree in entrepreneurship, that wouldn’t make you an entrepreneur.”

    Why we are all self-employed

    The reasons commonly given for people going into business for themselves are: freedom from a work routine; being your own boss; doing what you want when you want; boredom with the current job; financial desires, and; a perceived opportunity. Which of these might be sufficient to get you to take the risk?

    How are you doing as a personal career manager? Trends toward downsizing and outsourcing will almost certainly lead to smaller companies utilizing networks of specialists. Fortune magazine suggests that “Almost everyone, up through the highest ranks of professionals, will feel increased pressure to specialize, or at least to package himself or herself as a marketable portfolio of skills.”

    Xerox has published an article titled “12 Tips for Personal Career Growth.” The subtitle is illustrative of the challenges faced. “Personal growth is a journey that’s never complete. It’s easily sidelined by the day’s urgent tasks, yet it’s essential for long-term job satisfaction and advancement. Our tips include techniques and tactics that encourage personal growth and help keep it a priority.”

    How marketable is your portfolio of skills? Many think they have several years’ experience, when what they really have is one year’s experience several times. Are you continuing to learn, and keeping up with developments in your field? The best approach to preparing for an entrepreneurial career is often to find some aspect of your field in which you can become expert. jbv.com is Dr. Vinturella’s management consulting site with tutorials on a wide range of topics in entrepreneurship, internet marketing and personal finance. jbv.com/library is an extensive set of links to anything an entrepreneur and market researcher might need. jbv.com/8steps discusses John’s latest book on business startup.