What does it mean to be an entrepreneur? The archetypal entrepreneur is an inventor working out of his garage. No so. Although entrepreneurship depends on innovative thinking, it needn’t be (and seldom is) based on a technological breakthrough. It is primarily a business discipline that small and large enterprises must embrace in order to maintain a competitive advantage.

Entrepreneurship is good management. The larger, established company is better able to adopt entrepeneurial policies, primarily because it has typically already cracked vital management issues. Nevertheless, a smaller enterprise (including the ‘self-employed’ professional or consultant) can benefit from incorporating an entrepreneurial approach.

By one definition, anyone who doesn’t draw a salary and who works independently is an entrepreneur. That makes most of the street vendors and bargirls in Thailand entrepreneurs, along with Richard Branson, Michael Dell and Oprah Winfrey.

I prefer a more workable definition: 1) the business provides an innovative product or service; 2) you have an exit strategy.

An important aspect of an entrepreneurial business is to develop and implement a number of management disciplines.

  • The first is to determine what is the true value that you provide to the customer. Not what you value, or what you think they value, but what they actually value. Very often it will be different from what you think, so it’s a good idea to go and talk to your customers in a systematic way in order to find out.
  • Define systematic business processes so that most or all of the business can operate without you. At the very least it frees you up to focus on improving and growing your business. It also improves communication – enabling staff or sub-contractors to understand the business and run various aspects of the business independently.
  • This then makes it possible to set standards and provide training based on the work to be done. Training is often wasted by not having a clear idea of its purpose. A description of the necessary processes makes it easier to develop an effective training programme.

An innovation in providing value is where entrepreneurs and professionals alike can gain a considerable advantage. A financial advisor may assume that his customers value investment tips and ways of increasing their wealth. But many customers have no interest at all in investing or becoming wealthy; they simply want peace of mind. An infallible scheme to maintain a client’s standard of living satisfies the desired ‘value’ here.

An innovation could be as simple as the accountant that also acts as a personal assistant for small businesses.

In Thailand, one can often find dozens of fruit vendors all vying to sell identical produce. A competitive innovation based on customer value might be simply to set up a juicing service nearby.

What do tourists value most? Is it the quality of breakfast, or the pampering of attentive staff? Unless they intend to hang around the hotel, it’s likely to be information about where to go, where to find things and how to get there. An innovative service might be to provide comprehensive tourist information & coordination. A small hotel could effectively compete against many larger hotels in this way.

According to Peter Drucker (Innovation & Entrepreneurship), there are three main entrepreneurial strategies that a business can adopt.

The riskiest – yet popularly associated with a successful venture – is to aim for a permanent leadership position. It requires a precise targeting of the market, a massive market presence and an ongoing effort to sustain a leadership position. Only for the likes of 3M, Johnson & Johnson or DuPont… Apple or Sony may have started with a different entrepreneurial strategy, but now it is undoubtedly to retain leadership. Their ‘Value Discipline’ (Wiersama & Treacy) is Product Excellence and their target market is primarily those who want the best regardless of price.

Another strategy is to target the untapped market. It doesn’t necessarily have to involve a technological advance. Edward de Bono (in Sur/Petition) identifies a number of ways to exploit or combine existing technologies to provide a product or service tailored to the customer’s unique value expectations. Some innovations are so commonplace that we forget how absurd they appeared at the time. Whoever believed that there would be a demand for bicycles without wheels!? Check out California Fitness…

What you sell is seldom what your customer buys! Most technical innovators are not market-driven, so they often fail to exploit the demand they create. The mobile phone market is a typical example. In fact, the humble SMS was never intended to be a customer service. It was originally developed as a mechanism for technicians to communicate with each other.

A new technology is seldom fully exploited by its inventor. A classic example is the transistor, invented by Bell Laboratories in 1947, but exploited by Akio Morita (president of Sony). He bought a license and produced a portable transistor radio costing one third the price of a ‘hi-fidelity’ vacuum tube radio, thereby reaching customers that valued portability and affordability over sound quality.

Many dominant companies often overlook their customers’ needs, thereby unwittingly providing an opportunity for a competitor. I had a problem with my Sony Vaio which, despite being stylish and rugged, cannot be serviced quickly and conveniently. Acer sells not only a cheaper notebook but also a warranty programme that guarantees a five-day turnaround. They have understood that it is not the quality and design of a notebook that counts, but its productivity.

The final strategy is to aim to control a niche market. If you develop a solution to one step of an expensive and complicated process then it is unlikely that anyone else will bother to compete, as price is often insignificant in relation to the total process. You can also aim to develop a speciality skill in the early stages of an emerging industry. Regardless of what you drive, the brakes in your vehicle are probably manufactured by Bendix.

You could also develop a speciality market, which often entails developing a relationship with every supplier in the market before anyone else. The bank cards in Thailand probably all come from a single manufacturer.

There are several techniques that can be followed to generate innovative ideas (e.g. Edward de Bono’s Six Thinking Hats, Six Value Shoes & Lateral Thinking, or Systematic Inventive Thinking developed by SIT in Israel), but first a company must actively incorporate an entrepreneurial spirit as part of its overall business policy. Indeed, a Director of Innovation is often required, who has the prestige and authority to explore and implement innovative projects. Procter & Gamble, 3M and Johnson & Johnson go so far as to launch separate business ventures, each with its own project manager.

Entrepreneurship is necessary to maintain a competitive advantage. Those who set aside time and resources, and make it an essential component of the business will thrive.

How to be Rich

3 June 2006

I read Rich Dad, Poor Dad many years ago and was taken in by what seemed to be good, simple advice on how to become rich.

I’ve since learnt that Robert Kyosaki’s ideas about how to become rich are just plain wrong, and his own claim to wealth is almost entirely fabricated. He is wealthy because of his books and seminars, not because he followed his own advice. His advice is that you need to buy property if you want to get rich.

There seems to be a spate of books around about how to get rich, and far too many of them seem to focus on property. Yes, you can make a lot of money out of property. The amazing thing about property is that a worthless piece of land by the sea, say, in the middle of nowhere can suddenly become immensely valuable and make the owner incredibly rich. But only if someone develops a successful tourist infrastructure in the region. Otherwise, the land remains (idyllic, but) worthless. You can also become rich by buying property in a growing economy. So long as you buy at the right time, after property has dropped in value or during a sluggish market.

Unfortunately, predicting when property values will rise or fall requires a lot of knowledge about the area and the economy. And property bubbles are notoriously difficult to understand. It takes a lot of guts and experience to buy and develop property. Not all of us can do it.

The only advice that I consider valuable from Rich Dad, Poor Dad is to avoid spending money on deteriorating assets. A new car, for instance, loses value the day you buy it. (Kyosaki doesn’t follow his own advice, by the way, when it comes to buying cars and watches.)

Some of the best advice I’ve received about becoming wealthy or building a business is as follows:

Rule No 1. Cashflow is King. Many people are asset rich but cash poor. With assets you can raise capital, but you always have to ensure that you can keep your business in business with enough cash.

Rule No 2. Network. Meet people who you can work with and develop alliances. Develop honest relationships with people who can refer you to others. The essence of networking is helping others and, by the principle of ‘paying it forward’, be able to find people who can help you.

Rule No 3. Leverage. You can’t do it all yourself. Find people who are good at what you can’t do well. And learn to delegate or outsource these activities. The art of management is being able to DO WORK THROUGH OTHERS. Learn to manage.

Rule No 4. Think Creatively. Keep your eyes open for opportunities and gaps in the market. Learn creative thinking techniques. Brainstorm with your friends and colleagues. Look at Paul Sloane’s Lateral Thinking Skills, Edward De Bono’s Thinking Course (the BBC edition) and Sur/Petition.

You don’t always need money to be ‘wealthy’. For a life-changing alternative perspective on wealth, read Jonathan Robinson’s Real Wealth.

Rule No 5. Learn to Organize Your Life. It’s not about managing your time, it’s about understanding where and how to focus your psychic/mental energy. Diet/exercise/recreation/rest play a part in this, but it’s also about deciding what’s important and where to ‘spend’ your energy. See Niel Fiore’s The Now Habit and David Allen’s Getting Things Done, and read Stephen Covey’s Seven Habits.

Rule No 6. Always ‘sharpen the saw’. It’s a lifelong process. Academic qualifications have little if any value in comparison to an attitude of continuous learning and personal development.

Rule No 7. Ask. But always understand how you can benefit your benefactor. Always look for ‘win-win’. Read Percy Ross’s Ask for the Moon and Get It.

Rule No 8. Persevere. As Winston Churchill famously said: “Never. Never. Never… give up!

Lao-tzu said: “A journey of a thousand miles begins with a single step.”

But if after all those steps you end up somewhere you don’t want to be… what then? Pooh and Piglet once spent hours chasing after heffalumps, only to find that they were going around in circles and following their own footsteps. Even large multinational corporations, governments and aid organisations get so caught up in the daily management of their business that they lose sight of what they are doing and why. More often than not, the main reason for continuing to spend money on a project is because it wasn’t thought out clearly in the beginning and so it evolves into a beast that needs continuous maintenance and refinement.

One of the first things I ask in a strategy workshop is “What business are you (really really) in?” Then I ask “Why?”

It only takes a little step back and some reflection to make a significant impact on your business. It might not be necessary to spend thousands (or even millions) on that new marketing campaign. Perhaps you don’t need to hire qualified people; hiring on some other basis might be more beneficial to the company. Is market share really that important? Or perhaps short-term profitability is less of a priority than developing a large customer base that can be tapped into five years down the line.

Bill Birnbaum, a strategy consultant, describes a relatively simple approach to help clearly define your corporate strategy.

Ask yourselves:

  • Where are we today?
  • Where do we want to be, and by when?
  • How do we get there?
  • Getting to where you want to be takes 90% or more of your time, money and effort. Surely, if you are going to walk a thousand miles, you should allow yourself a little time to decide on your destination and to fix on a guiding star? It’s so easy to get distracted – and there is nothing wrong with that, so long as you reflect a little on whether you choose a different destination based on new information or simply a change of heart.

    The planning and actual implementation part of having a strategy tends to make a lot more sense if you understand what you are trying to achieve. It also does wonders for corporate communication and team building. Many companies might say, “We are in business to satisfy our customers and make a profit.”

    Hardly an inspiring mission statement.

    But what if your company was dedicated – in a profitable way – to ensuring that every person on the planet owns a mobile phone and can cheaply communicate with any other person?

    Bill Gates had a preposterous vision more than 20 years ago, do you remember? “To ensure that every household has a computer.”

    Your mission and strategy don’t have to be quite so grandiose, but that will probably only mean that your profits won’t quite reach the same proportion as those of Microsoft.

    Start thinking strategically and your company is far more likely to achieve clarity and success and maintain that elusive competitive advantage.