Category: Business

Learning for business start-ups

I don’t often work with start-ups but I had two interesting and contrasting bquest coaching sessions last week with people who had left their jobs to start out on their own with new businesses. Both had big gaps in their knowledge about what to do. This got me asking, “What do you need to learn to give your new business a reasonable chance of success?”

I have never been a fan of the typical business planning processes advocated by the banks and other usual suspects. They tend to focus on the financial projections and they discourage adaptability and experiential learning. I have enjoyed however a fairly new book “The plan-as-you-go business plan” by Tim Berry which proposes doing exactly what the title suggests, plan as you go.

From my coachings sessions, I found four common gaps in knowledge:

Marketing – What exactly are you offering? What value will it bring to your customers? Just who are your customers? How will you access them?

Pricing – How much will your target customers pay, happily? How can you add extra value to them, at little or no cost to yourself, so they pay more, happily? If you have to price at a loss initially to get into the market, how will you make sure it is an investment that pays back in the not too distant future?

Balancing a here-and-now mindset with a strategic one – Your first priority is get customers and to get them to pay you; without a positive cashflow your business will die. But, at the same time, you have to spend time building the essential management systems that you will need to continue in business, for example financial management tools, customer database, marketing and promotion actions, recruitment and employment systems, etc. How much time should you spend on each?  Ignore the here-and-now, and you will die now. Ignore the core management systems and the future, and you will die in a few months.

Balancing a goal-oriented mindset with an opportunistic, entrepreneurial one - Having a goal and really going for it is usually seen as important to success. But having a goal means putting on the blinkers so you don’t get distracted. On the other hand, many successful businesses I deal with are open to ideas and opportunities that come from their customers, “Thankyou for this product ABC; do you do XYZ as well? Well, I hadn’t thought of that but, if I can do it and you want to pay for it, why not?” Isn’t it wonderful when customers pull you rather than you having to go out and push what you do to them!

Learning about marketing and pricing is straightforward. I ask you challenging questions. I may give you some short readings or models. You think about the questions and work out the best answers for yourself.

Learning to have the two balanced mindsets is less straightforward. You may not have the appropriate personality traits. The first way I have found is to agree some simple systems that enforce personal disciplines. For example, balancing here-and-now with strategic mindsets can be developed using basic time management tools; you allocate suitable time for both.

Being goal oriented is also related to the time management tools of short term objective setting. You may not naturally be inclined to behave in a certain way, so set up simple systems that force you to behave correctly.

Learning to be opportunistic, if it is not part of your personality, is more than a personal discipline. I have found that when a person has learned some degree of self-awareness about how they respond to customers and they have learned the two easy-to-learn skills of listening carefully and evaluating options, they become more sensitive to opportunities that customers bring and more able to choose whether to take them up or not.

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Developing employees to manage crisis

The current problems of James Murdoch and News International highlight two problems relevant to bquest readers:

1) The sons and daughters of successful business leaders are not always cut out to take over. OK, this is an obvious statement, but like many obvious things many small family businesses choose to ignore it. You never really know whether someone is capable until you let them have a go. And the evidence of James Murdoch’s performance before a British Parliament select committee shows that, even with his Teflon denial’s of ‘I didn’t know’ and ‘I am right, he is wrong’, he can’t hack it at running a large business.

This is going to hurt News International, but not catastrophically. They will survive and, we hope, learn and do better as a consequence. But in a small business, the behaviors of James Murdoch might well be terminal for the company. In a small business, choosing the situations to let the next generation ‘have a go’ needs to be done with great care.
2) All businesses, big and small, need to have advanced crisis management systems and skills. When working with bquest clients on crises, we often find there is a lot to learn, but the results are very worthwhile as having the systems and skills make for a much more secure and manageable company. Here, I highlight two aspects of crisis management:

Crisis prevention - In addition to having the usual things like a data backup system, fire prevention, an informed and supportive bank manager, insurance for downtime, etc. (you do have these, don’t you?), the James Murdoch story shows you need to prevent future crises by learning from and really solving current problems. When faced with information and advice some years back about the deeply embedded culture of phone hacking, Murdoch (or his people, depending on whom you believe) ‘solved’ the problem by addressing the symptoms. They paid off people to keep quiet. And then buried their heads in the sand. They did not get to the root of the problem. And, as often happens, that failure has led to a crisis.

They are not alone of course. BP is another horror story of failing to prevent a crisis by solving the real problems earlier. The current Eurozone crisis is another. I am sure you can identify many, many others.

So, small business manager, whenever you have a problem, you should get relevant people together and invest some time to get to the root of it. Simple. But have you learned how to ask the right questions to do this? Have you developed the mindset to be open to self-criticism and unpleasant facts? Could you benefit from an external and objective person who can facilitate a deep review process?

If you set up a problem review team, many, many crises can be prevented

Crisis management – Some problems move so quickly that you cannot prevent them becoming a crisis. Then you need to have a crisis management system and skills.

A data crisis will be solved by the data backup system kicking in. This should be straightforward for all such simple crises. A serious downturn in business may be solved with some redundancies, other cutbacks, and a re-focus on core, profitable products. Again, if you have the right systems in place and the right management skills, you can manage this more or less easily.

James Murdoch’s crisis is more complicated and dangerous however. It is, I expect, being managed by a team of people with varied skills brought together for the period of the crisis - a lawyer, a PR specialist, a coach to help Murdoch answer difficult questions, a PA to collect data about the timeline and relevant documents, and dad Rupert as a mentor and backbone. I expect these people, whoever they actually are, have all agreed a strategy and goal, and have developed a common message to give the outside world. (Unlike James Murdoch’s questioners in the select committee who sometimes seem to have their own agendas and goals.)

In a small business, you can also benefit from having a small team of specialists – relevant to the crisis – to work together. One person cannot deal with everything. One person cannot see all perspectives. One person cannot carry all the emotions and stresses of a crisis.

Take a few minutes to think about potential crises that may happen to your business. A sudden loss of a big customer? The loss of production for two weeks because of a flood? The collapse of your currency? A big company dumping their products at a loss on your customers? The departure of sales director? A patent infringement lawsuit from some sharks in Texas? (All real crises for someone.)

How would you manage, preferably prevent, your crisis? Who would you involve? bquest can help you answer these questions, and develop your systems and skills.

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Developing employees to manage the unexpected

The Black Swan by Nassim Taleb argues convincingly that, whatever lessons we have learned, and however sound and deeply thought-through we think our assumptions are about the present and future, there are always the unknown unknowns or impossible-to-predict events that will upset our plans. The ‘Black Swan’ refers to the fact that for centuries Westerners believed all swans were white, until an explorer in the 18th century discovered a species of black swans in Australia.

Most of the relevance of the Black Swan theory applies to the finance sector and big business strategic planning, particularly to risk assessment. Managers try to anticipate extreme events by looking to the past for guidance. They use advanced statistical analysis tools to give them psychological certainty, despite the degree of uncertainty that is built into them. And they try and squeeze the maximum out of a situation and fail to allow any slack.

Why is this of interest to small businesses?

In 12manage (well worth joining), someone has posted in a discussion forum a post saying that while we cannot prevent Black Swan events, we can (and should) prepare for them.

So, small business owners and managers, what do you do to prepare for the unexpected?

You can:

1) You can ask “What if….?” questions. “What would happen if…… we lost our biggest customer tomorrow?” “If we had a flood that wiped out production for a month?” “If the dollar (euro, pound, whatever) lost 20% overnight?” Or, for positive Black swans, “What would we do if….. a key customer placed an order for 200% of our production capacity?” “If our main competitor suddenly withdrew from the market?”

Depending on your imagination – and your willingness to spend time of what many people would think of as the impossible - you might identify a whole range of possible Black Swans, some of which might actually have some probability of happening. And then you can make plans to manage them if they do happen. (You do have contingency plans to manage the consequences of a fire, a strike by transport workers, bad weather…. don’t you?)

But, while you can do some predictive work, Black Swans are by their very nature impossible to predict and prevent. So you need to move onto 2).

2) Prepare for Black Swans by building into your company:

Agility – the flexibility and adaptability (production, services, supplier and customer base) that allows you to move to other ways of generating income and even to move from one business model to another if needed.

Learning – to underpin agility, the ability for key employees to learn how to deal with situations that are new to them.

The bquest system creates in small businesses a permanent culture of learning and development that helps you prepare for the bad, and good, Black Swan events that inevitably happen.

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Learning to manage growth in small businesses

Here’s a typical example of what we do in bquest employee development. At a reception last week, I got into discussion with an enthusiastic and entrepreneurial young man early on in his business career. He is a carpenter by profession but has got involved in retro installing a new type of thin double-glazing in sash windows. He works with a partner. They do a good job because word-of-mouth referrals means they are getting more and more demand for their services. So how should they manage this growth?

One of the pleasures of bquest is sometimes meeting people who know what they want and are open to getting help to achieve it. In this case, the young man knew he wanted to grow his business in a way that he could less of a doer and more of an organiser. How often do we meet business people who are really knowledgable and skilled at their job but who cannot or will not stop doing and move into management and ownership?

So, how to grow? The first question we discussed was ‘What sort of business model do you want?’ Sometimes you know what you want, sometimes you only know you’ve got the business you want when you’ve got there. In this case, we discussed four options:

  • Employ more people.
  • Develop partnerships with other companies.
  • Sub-contract all or part of the installation work.
  • Franchise the product.

When you can distinguish the options like this you can then do some serious analysis to compare the merits of each. But in the short time we had we agreed that some of the options are more long-term and that he needed to respond to the demand in the short term, to solve the current problem by employing people.

We moved the discussion onto identifying what he needed to learn and develop to employ people effectively and efficiently (and I hope you know the difference between these and why both they are both important). Anyone who has recruited people – and done a decent job of it – will know there is a simple process model to follow that applies more or less to all situations:

  • Define the sort of people you want – identifying the competencies, knowledge and skills, experience and values you want.
  • Recruit – get the sort of people you want to hear about you and attract them to apply.
  • Select – pick the right people through some sort of systematic, valid and reliable assessment method.
  • Take on – getting them into the company and into the company’s culture, giving them direction and objectives, identifying any immediate gaps in their competencies, knowledge and skills, giving a contract and meeting any other legal obligations, having a system for pay, taxation and maybe pension.
  • Motivate – having a formal and informal ‘system’ of motivation and remuneration.
  • Control – having a system of monitoring performance and quality, and giving feedback.
  • Develop – develop people in line with their capabilities and aspirations, and with the company’s growth probably through on-the-job development actions and using a coaching style of management.
  • Retain – having a strategy in place to keep the employees you want to keep.

If you haven’t done this before, there’s a lot to learn!

You may think only big businesses do all these things, but if you are a small business that wants to grow you really do need to get the right people. Big businesses can probably get away with making mistakes and sometimes appointing the wrong person, small businesses can’t. Small businesses need to do the above process in a simple way without all the bureaucracy – easy!

And this is where the bquest system comes in. With a plan of learning and development, the two partners will develop their competency to employ people over the next 3-6 months, on the job, actually employing people but doing it in a planned, thoughtful, and structured way using a model of good practice.

In 6 months, they will have solved the first problem of managing the extra demand, and they will also have developed the competency to employ and manage people, a key competency that can be used whenever they need it in the future.

 

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Developing your employees to be good partners

For some small companies, or perhaps I should say for some people inside a small company, anyone outside the company is the enemy. Customers included. Some people are so competitive or so paranoid that they cannot trust anyone or they have to out-compete everyone. Are you one of these people? If you are, stop reading because your mindset will block any further rational discussion about partnering.

Why is partnering worth considering? Well, anyone who has a regular supplier or customer is already in a form of partnering relationship. You get to know each other, you get to understand each other’s strengths and limitations, you reach a degree of trust. Maybe you even sign a long-term contract or memorandum of understanding (MOU) that puts the relationship on a more formal setting. Most companies are already partnering to some extent.

What other forms of partnering can there be? One client of ours has been developing a relationship with another company in the same industry. The other company was told by one of its key customers to find a backup manufacturer who could take over production in case of some emergency. This would protect the key customer’s supply chain. Who to turn to? The only companies with the capability to produce their products are actual or potential competitors. They approached our client.

Our client - who have an open-minded management – was willing to produce samples of the other company’s products to show they could provide backup. The other company has agreed to do the same for our client. So, the two companies now have the beginnings of a working relationship and a degree of mutual trust.

At bquest, we wondered what else could they could collaborate on. At a getogether – personal contact is important – the two companies discussed:

  • the possibility of selling each other’s non-competing products in their own territories
  • benchmarking costs and performance, and production optimisation
  • joint projects

Selling each other’s products should allow each company to increase the range of products it can offer to its customers, but at no extra cost. Benchmarking is good for both companies as it helps identify where you are not performing and what can be optimised. Maybe some development costs or purchasing costs could then be cut by working together. And, working on joint projects should allow you to compete togther for business which you might not be able to compete for alone. All good things for small businesses who don’t always have enough muscle to go it alone.

Who knows where this will end up. Maybe nothing much more will come of it. Or maybe the two companies will get closer, maybe at some future point even merge. Whatever, for the moment, both companies are engaging in ‘coopetition‘.  (Here’s a book summary.)

So, coming back to the title of this blog, what knowledge, skills and mindset do you need your employees to have to partner with other companies?

  • a willingness to collaborate, and a willingness to compromise (See Thomas Kilmann – this is about managing ‘conflict’ but it is a valuable mental model for raising awareness about and skills in collaborating and compromising in any relationship.)
  • ways to build trust – if you have some interactions that work, even simple ones, then you have the basis for building trust further.
  • a creative and positive mindset – what can we do together, what opportunities can we see?
  • a sound partnering model such as coopetition.

These can all be learned with bquest.

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Employee development for the next generation

So Steve Jobs has announced his retirement from Apple. And people are asking if the heart has been ripped out of the company. Some have even asked, “Is Apple doomed?” The markets reacted by knocking several percentage points off Apple shares immediately after the announcement. Others though are saying that Apple will continue to be successful because o its brand, product line and fanatical following, and because of its design team. But, they also worry that, without Jobs, Apple will become just another bean-counting corporation, without any creative zing or mojo, a good company but no longer a great one. Obviously no one knows however and we will have to wait and see what actually happens.

But this retirement event – and it is an event since Apple are one one of the biggest, most successful and most influential companies in the last 50 years, and Steve Jobs has been the key player in it – should give all companies, big and small, food for thought. Is company life and succession after the retirement of the boss, especially such an influential boss as Jobs, properly considered and planned for?

IMHO, Steve Jobs may correctly be considered one of the all-time great company leaders, while he was there, but unless he has created the necessary conditions for someone(s) to succeed him and for them to continue leading the company more or less in the same way that he has, then his greatness will have had its limits.

The Apple board have already named the successor, the internal appointment of the former COO. And they have a wonderful team of people at the top. (Or at least they have wonderful people at the top who have been key to Apple’s success, but whether they are a team and whether they can operate as a team without Jobs is another matter.) So at least some of the conditions for effective succession and continuation therefore appear to be in place.

But, and this is a big but, I wonder whether the new CEO and his team allowed themselves to be disempowered by Jobs’ charisma and genius while he was there. I wonder, did they tend to rely on his intuition and not on their own when making strategic decisions?  Did they try and second-guess what they thought he would say rather than working things out for themselves?  Did they always defer to him rather than asserting their own views? These are the sorts of behaviors I have seen senior managers exhibit when there is a ‘great’ leader in the top job. And if they got into the habit of behaving like this when Jobs was around, I think they will have difficulty thinking for themselves, making decisions by themselves and for taking full responsibility.

If you are a CEO, whether of a small or large company, have a look at Jim Collins’ view of ‘Level 5 leadership’. However good you are as a CEO, you should always be wary of attracting power and responsbilility from the next generation to yourself. Instead, you should act to empower them as much as they can take so they can effectively take over from you when the time comes and continue your good work. Maybe Jobs has done this at Apple, we’ll see, but when a great leader departs, great companies risk going from Great to only Good.

In the bquest employee development system, we encourage participants to value the development of the next generation as part of their own development.

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