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Friday, 26 September 2014

StartUP or Growth Crisis: How to create Competitive Advantage

Startup's struggle and even mature businesses can get to a crisis point at around year 2 or 3 when it cannot seem to grow as hoped. Research suggests it can also happen further down the line after a business feels it has matured, but market changes start causing a decline. 

I know of two companies, both around 10 years old, in this situation. Both are "Services" companies, both have seen their customer base decline due to changes in the market place.

So, whether your starting a new business or looking to grow an exiting one then this post will be of interest. We will be looking at:


  • The Business Model Canvas
  • Partners, Activities and Resources
  • Conclusions
  • What is next?


Business Canvas Model 

In our last post (What a Great Idea) we discussed the need to have a Business Model to ensure we can create a Competitive Advantage and clarifying your brand. The Business Model Canvas is a great practical way to do this. You can download the actual canvas shown below from our Forum here




This 2 minute Introduction video will help   



On the canvas you will find 9 sections:


  1. Key Partners
  2. Key Activities
  3. Key Resources
  4. Value Proposition
  5. Customer Relationships
  6. Channels
  7. Customer Segments
  8. Cost Structure
  9. Revenue Streams
In this post we will look at the first three to get you going on creating your own canvas.

Partners, Activities and Resources

Key Partners
are those people or organisations you need to work with for your business to be a success. If you are a T-Shirt printer one of your key partners is the T-shirt supplier and of course the place you are getting your inks or printing materials from will be included here.

It is important to work closely with them to ensure you get good quality supplies and at the best cost. They may also provide advice and assistance in other ways. With good partnerships you can lower the risk of outsourcing and, if you are a good customer they will want to keep you happy.

Other Key Partnerships will be Strategic Alliances you have with non-competitors and even some you may have with competitors. Perhaps you have a Joint-Venture to help you. This was quite common in the car industry. 

Key Activities
What are the key activities that keep your business going. In the T-Shirt case it will be things like Managing Stock, Sales, Selecting T-shirt collection, Brand Management.

These activities will obviously be different for each type of business. Consultants will be involved in Problem Solving and software companies in Software Development and manufacturers will have Production Management.

Finally, if your business is dependent on an Internet Platform (Ebay, Amazon, ONline Store etc), then this will be a major activity.

Key Resources
Can be physical (CNC machinery), financial (cash in the bank, financial guarantees, lines of credit)  intellectual (patents, copyright etc) or human (skilled staff).

Some organisations are reliant on significant physical resources be they a warehouse, fleet of lorries, or major computer installation. Others have strong brands, knowledge, patents and copyrights. Creative industries are highly reliant on human resources and highly skilled and talented ones. 

One of our earlier Case Studies Excel Metal Spinners is reliant on highly skilled spinners who are few and far between because of the lack of engineering apprenticeships and training.


Although the Directors are skilled men themselves, they need to spend their time running the business and need staff to fulfil the orders.


Conclusions

The three areas covered above may appear to you as being quite obvious and you may be wondering what this is all about and is it worth the effort.

Putting all this down one your canvas, right in front of you in black and white (you can use coloured pens if you want, some even use Post-it notes) will help you see the wood from the trees and get your mind much clearer.

Although these three are obvious to you, what you may not appreciate is there impact on everything else. They all impact on your brand, value proposition, risk, customer relationships etc. It will become more obvious as you go through the model.

What is Next?

In the next post we will look at Value Proposition, Customer Relationships and Channels. IN the meantime start you canvas now. 

See out latest Monthly Newsletter here and subscribe to ensure you do not miss the next post in this series.



Best Wishes


www.sagesaffron.co.uk

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Wednesday, 17 September 2014

Say Yes Scotland just to get away from our politicians!

According to an article in today's "i newspaper" (Andrew Grice, Sept. 17th) our own politicians are blaming each other for the Scottish people being given this opportunity.

In fine amateurish style our politicians point the finger at each other, they not only seem to thrive, but deliberately go out to create a blame culture. Perhaps this is why the Civil Service and Local Government seem to inherit it too.

Labour blame Mrs Thatcher for ruining Scottish Industry. Conservatives blame Mr. Blair for letting Scotland have its own Parliament.

What comes to mind is that powerful metaphor of the pointing hand.

Most fingers point back to the pointer!

Before you blame others, look at your own performance.

If your only comment is to blame others, it won't take long for them to blame you for something. The act of blaming does nothing to solve the problem.

The Scottish Independence vote is for the Scottish people to make.

Friday, 5 September 2014

Why you should kiss Pareto?

A friend, and potential contributor to the Sage Saffron blog, came round for coffee and a chat on how blogging could promote his skills and services. He ended up, not so much teaching but reminding me of three key management skills that I had failed to draw on in setting up my web based business.


Pareto's Law
Vilfredo Pareto (1848-1923)
Courtesy of Wikipedia

  • KISS
  • PARETO
  • WHY
The "Keep It Simple Stupid" rule sounds comical, but in real life we often make things far more difficult than it needs be.

Along similar lines Pareto Law proposed that 80% of effects come from 20% of the causes. 

WHY, in this case is from Simon Sinek's "Golden Circle". 


Now all this applies to the development of my own business but could be a timely reminder for you.

My friend was very impressed with quality of the site and pages but when he went to the home page, he did not really understand what I was trying to do. I had made it too complicated and tried to provide too much information. We looked at each other and there was a stereophonic response as both muttered "keep it simple, stupid".

We then discussed who I was targeting and of course I was trying to be all things to all people and he reminded me of Pareto. Although this is clearly a marketing segmentation issue, I recall one Sales Manager of a Manufacturing company deliberately dropping the 80% of his clients that only produced 20% of his sales and profits. The business grew even faster because he was able to focus more on the 20% that produced the 80% of his income.   

Finally he inquired "Why are you doing this?". You have had a successful career, have no money problems and should be spending more time off sailing in your boat. I am sure part of this was self motivated so he could do more sailing with me! 

After he had gone,  I took another look at Simon Sinek's  5 minute TED video that got me thinking and may get you thinking too.

I also read through his book again recalling two key phrases

"Knowing your WHY is not the only way to be successful, but it is the only way to maintain a lasting success and have a greater blend of innovation and flexibility"

"My [Sinek] WHY is to inspire people to do things that inspire them...."

I realised, my WHY was to help people help themselves. I still had a passion and enjoyed helping them manage themselves better, feeling more comfortable in managing people and confident in managing their or their employees organisation or business.

So, I set about revamping my websites and business strategy and felt a better sense of where I was going and what I needed to do. If you have seen my site before then appreciate your thoughts on the new look. 

So to summarise:


  1. By all means learn new ideas, but don't forget the tried and tested older ones
  2. If in doubt on an issues think "WHY I should Kiss Pareto"
  3. If you have not read Sinek's book get it now, you will see how important "why" is, not just in your management life but for your personal development and that of your organisation. 





We will be covering more on this in future posts so don't miss out, sign up for our monthly newsletter.

Best Wishes
www.sagesaffron.co.uk


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Friday, 11 July 2014

What a great idea because now...

You need to see if it works
.
In the previous post in this How to Startup a Business series, Death by Startup and how to avoid it, we discussed the main causes of business failure and having the right funding can be critical. In the Bank research we mentioned 79% suggested the cause of failure was “starting with too little money.”

However, some businesses do not even get to the end of their first year because the idea is not viable.

Apparently it is a myth that 90% of restaurants fail in the first year ( Business Week )

Nevertheless,  restaurants often fail quickly because they think it is the menu and recipes that are the key to success.

A restaurant concept is not a menu and a set of recipes. Rather, it encompasses a location, a marketing plan, a service scheme, design, atmosphere, price point, a defined position in relationship to the competition, and almost as important as the food itself, a long-term strategy”.

Christine Letchinger, Associate Professor, School of Hospitality, Kendall Collge, USA
Follow link for full 2013 article TheAnatomy of Restaurant Failure: Dead Man Walking 

Letchinger believes there are two basic strategic choices:

1.       Be the first one to come up with an idea
2.      Take an idea and execute it better.

and she makes the point that McDonald’s and Apple were not the first companies in their markets but there is no doubt about their success and they did it by being different and doing it better.

She concludes that “A winning concept should be distilled to its very essence and defined in a simple, clearconcise, and highly communicable sentence”.

So, when you try to tell someone what your business is about, can you tell them in ONE SIMPLE SENTENCE and what expression do they see on their face.



Other research suggests,  to check if your idea can become an “opportunity” by considering the following:
    
The idea needs to be attractive to the customer and this means in terms of convenience, price and visual/comfort attributes.

You may not have considered whether your idea is timely but even really good ideas may not appeal to today’s market.



With the current market the idea of a C5 might be appealing but in the 1980’s it was a complete failure.



Lastly durability is the ideal thing but not perhaps a necessity. Durability is about will it last and some business ideas can be very profitable and successful but not designed to last. As an example, a musical festival, some product for a specific celebration such as World Cup.  Durability may exist in the format or management techniques of the event, which could be applied to another event.

Certainly to be durable your business needs to develop what is known as “Competitive Advantage”. Something that makes you different from your competitors and attracts people to you. Michael Porter, a leading authority on competitive strategy identified three key routes:

  •  Cost Leadership – the emphasis is on your being the cheapest (ASDA)
  •  Differentiation – is where you try to make yourself different through branding, design, service, quality and new product development. This strategy can apply even with low cost companies (IKEA) or where design is the factor (Audi).
  • Focus – Is the more likely option for a new enterprise. It is where you specialize either in terms of some aspect of the market. You could be a specialist in terms of geography (your local bakery) or product/service.

Deakins and Freel (2012) indicate that this is the “the most important section of the business plan” and that by creating a business model “the development of a competitive strategy will be a natural outcome”
So now some practical ways of developing this model and testing your idea.

Alexander Osterwalder did some considerable research on business models and this resulted in the Business Model canvas. This brilliant model lets you lay out on the table all the aspects of your business you need to consider. 


Take a look at this 2 minute video to see how works.  



Now you can go onto our "How to Start a Business Course" Forum by following this link and download a Preview of their book which explains the idea in more detail. You can also buy the full book from our Amazon Store of Knowledge. Also available there is the book mentioned earlier (Deakins and Freel, 2012, Entrepreneurship and small firms)

Try using the model on your business idea and, via the Forum we can respond to any questions you have or provide more help.

Our next post in the series will look at how you start to move this business model forward.

Best Wishes



www.sagesaffron.co.uk
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Saturday, 5 July 2014

Pay is not everything at work

When I was in our local One Stop convenience store  a young man serving was responding to a customer's enquiry on how he was. "Fine, he said, hard work and feeling tired but fine". To which the customer  commented "Hard work and low pay".

The young man, I guess in his 20's, replied "No, its not a lot of money but it pays the bills"

 Now I know that this chap is naturally a happy person and I cannot say for sure how much of his comment was politeness or truth, but if its not true, then its dam good customer service skills.

I like to think he meant it and if so, what a good outlook on work and life. 

Perhaps some people, who find their work hard and boring and so negative that they moan all the time, can appreciate that life does not have to be that way. 

Attitude is a big aspect of how you lead your life, and we need to have greater self-awareness of how it impacts on our life and that of others.

You only live once, so make it matter.                                                
Best Wishes

Trevor



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Wednesday, 2 July 2014

The end of segmentation

The places we buy things have changed dramatically over the past few years, but does that mean our buying models have.

Marks and Spencer have just appointed Laura Wade-Gery as their new CEO,  having been in charge of the companies online service. (The Daily Telegraph,  1st July).

One reason mentioned was to have "one view of the custoner". Is this the end of segmentation, the end of different buying models or just just a desperate move in the light of declining sales.

We would be very interested in your views.

Friday, 30 May 2014

Death by Startup and how to avoid it

Nobody likes failure, but every day businesses close for one reason or another and it is best to understand the causes so you can do your best to address them and avoid your own enterprise dying a prematurely. 

However,there is a difference between business “closure” and “failure”.As Stokes and Wilson (2010) put it “there is an unfortunate tendency to associate business closure with business failure” (p450). Companies may close for very good and valid reasons. They may close because their purpose for setting up is completed (creative industries, social enterprises). Their owners sell the business (about one third of UK closures).

In reality a mere 20% of closures are where companies owe money. This represents 1% of the European business population. Bearing in mind 0.7% of the UK population die each year then it is reasonable to deduce that businesses failing, with creditors, are not as frequent as one would expect. 

It is clear that closure rates are highest for young small businesses and that some sectors (construction) are more vulnerable than others (manufacturing). Whilst we may have come leaps and bounds in reducing infant mortality, there is still a concern that we could do better with company mortality and certainly none of us want to put ourselves up in front of the firing squad of emotional, legal and psychological trauma that comes with any form of death. 

Research by Cressy highlights one problem, entrepreneurs do not secure sufficient capital in the first place. So it’s easy you might think; you can avoid business failure by ensuring you do not run out of cash! 
Cressy 2001 Business Failure Curve


 Easier said than done, and the real question is why did they run out of cash? 

A business can have a lot of money, but it may be tied up in property, stock etc. It is when it runs out of cash in the bank the problems start. It is like the human body, you may have plenty of blood but if it gets blocked and fails to reach the right place……. 

This becomes quite obvious when you look at other research and data starting with a bank’s perception.

US Bank Research on Reasons for Business Failure




> Poor Management &                                               Planning
 
> Not enough Startup capital
 
> Lack of Self Awareness 

> Poor Research 

> Poor Marketing 










Richardson, Nwankwo & Richardson (1994) carried out research which was more focused on the Leadership aspects of business failure and they concluded that there were four types


 • Boiled Frog      • Drowned Frog    • Bullfrog      • Tadpole 

Boiled Frog

If you were to put a frog in pot of hot water it would jump out. In cold water he would sit quite comfortably and even if you turned the heat up, he would not notice it even if the water was boiling. Our entrepreneur may have a viable business but is so busy doing the day to day tasks of running a things, he is oblivious to the changing environment and decline of his own business. Strategic drift or in simple terms the company has lost its purpose. Some large company examples are easy to find (Woolworths, Kodak etc) but there are lots of family businesses, particularly older companies that won’t change. 

Drowned Frog 
 In this case the entrepreneur behaves in a Dell Trotter style. Often a great salesman, bubbling charisma, lots of great ideas but quite forceful and autocratic. Taking advice is not something our Drowned Frog does unless it agrees with his views! The business booms and Trotter wants the world so starts putting his profits into strange areas that he lacks the knowledge and skills in; thinking his success will naturally work here to. Examples, Next’s growth out of Hepworth, Air Europe’s growth out of International Leisure Group, Polly Peck’s growth from its family business heritage). 


Bullfrog 
 In a similar way bullfrog swims around his “pond-lily garnered, for all the world to see, with the trappings of status and power”. The difference here is that the Bullfrog is more selfish than ignorant. He is unable to separate his business and personal life and this can create ethical issues as in the case of Robert Maxwell. 

Tadpole 
 Our tadpole never becomes a frog. The highly promising startup project fails as in the case of Sir Clive Sinclair and his C5 Bike that not only failed but brought down his parent company. Some links here with the Drowned Frog. 

So, pulling all these views together we can see the causes of business failure are. 




 As we progress through the “How to Startup a Business” blog training course we will look at these issues in more depth. 

If you want to explore these more, join us at the Sage Saffron Forum on Entrepreneurship where you can raise questions and find out more and share with others your thoughts and learn from them to. 

If you would like to ensure you do not miss the next post then see how here


References for this post


Stokes & Wilson (2010) Small Business Management and Entrepreneurship (link to Store of Knowledge) 

Available at our Store of Knowledge.  in the Business Development Section

Richardson, Nwankwo & Richardson (1994) Management Decision, Vol. 32 No. 4, 1994, pp. 9-22


Best Wishes
www.sagesaffron.co.uk
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