Archive for category American Business
Your consciousness has put this little nagging idea in the back of your head. It’s your curiosity that gets you to the point of deciding if it’s a good idea and even more importantly if it is one worth pursuing.
This curiosity comes to life thru an endless stream of questions. Each question gets you a little more information and helps you add color to your idea and to define if and how you move forward.
Basic questions like:
- How did it get this way?
- Has it always been like this?
- Why do they do it that way?
Help you gather deep background information on the industry and possible competitors.
As you begin to develop an understanding more complex questions are asked. These might include:
- How much does that cost to do?
- What are the cost drivers?
- What are people paid?
- What are the margins?
- Where does that come from?
- What skills are required?
- How do they acquire customers?
- Who are their suppliers/partners?
- Who else does this?
- Who are competitors?
These questions give your target detail and help you decide if you should continue to invest your time. Many of the answers might be guesses which will be revised later sometimes many times. Answers might also not be readily available but they help raise the entrepreneurs consciousness for things to be on the lookout for in the future.
An example of this is a company that I am working on with some of my students. The company is called “nomo” and it is an app that gives college students a place to find out everything that is happening on and around campus. This includes sporting events, club meetings and even parties. All of the content is entirely user generated and kept away from administrative control.
The idea came from one student making the comment that the “administration needs to fix the website because you can’t find out when anything is happening.” This lead to question “how do you find out what is going on?” being asked informally of many students on many campuses. As the onion was peeled back and the question why was asked it became apparent that there was a wide spread problem that cut across every campus in the US. As a follow up some quick financial questions about how much this might cost to develop and run. And who would be interested in gaining access to these students gave answers that demanded that further work be done.
There are similarities between how this curiosity guides you and the six sigma process. Many doing the six sigma process advocate using the five why’s. This informal process involves asking the question Why do you do that? Or Why is it that way? and when you get an answer you ask Why? again. Each successive time you get deeper and deeper into the problem until you are theoretically at the root cause.
As an entrepreneur it is by peeling back these layers that you develop an understanding of the strengths and vulnerabilities of a company or industry and gives you the tools and knowledge to capitalize on your idea.
Next Month: Creative
For an old Rocket Guy (I used to work on the space shuttle), and an entrepreneur, this is very exciting.
Bloomberg reports that onMarch 6, at the Conservative Political Action Conference (CPAC), NJ Governor Chris Christie had this to say: “We need to talk about the fact that we are for a free-market society that allows your effort and ingenuity to determine your success, not the cold, hard hand of the government.” Your effort and ingenuity determine your success, not the government. Sounds great, if only it were so.
In 2008, Tesla Motors began selling all electric cars to the public. Elon Musk, an early investor and current Chairman and CEO of the company dared to enter a market with a product that experienced senior car executives said was not possible. Through tenacity and perseverance (and a lot of government help – but I won’t go into that) he and his team created a new type of car and a new type of car company. Because the company was developed in the 21st century they realized that they didn’t need to be shackled by old ways of doing business andcould take advantage of how consumers are doing business today.
This clean sheet of paper would allow Tesla to sell cars directly to consumers, something that the incumbent auto companies would love to do. A Goldman Sachs report in 2000 estimated that such direct sales would save consumers $2,225 on a $26,000 car. One can only wonder what the savings on a $75,000 Tesla S would be.
But just like Charter Schools dramatically show the flaws in the public school system, this new distribution model shows the flaws in the existing dealer networks. In this case the dealer lobby has played the role of the NEA and fought this new system tooth in nail state by state.
We aren’t talking about putting existing dealers out of business (like Obama did with the Chrysler and GM restructurings). No we are just talking about competing with them side by side with a different model. It’s as ridiculous as if HP fought Apple Stores because computers are complicated and all computers should only be purchased at a Best Buy where the consumer can get the assistance that they need.
The dealers have won in Texas and Virginia, and last week they won in NJ when the NJ Motor Vehicle Commission declared that all cars needed to be purchasedthrough franchisees.
To be clear, I do not have a dog in this hunt. I am not anti Christie and I am not a Tesla fan boy. (Although, I had the privilege of driving a Model S once and it was the most amazing ride I have ever had.) I am opposed to all of the subsidies that Tesla and it’s buyers have gotten and as a NJ native I respect what Christie has been able to do as Governor. But once again, I am disappointed in Christie. He claims to be a new kind of Republican and then shows that he is just another politician.
As an Engineer and an Entrepreneur chaos is not my friend. When executing on a business plan chaos is the last thing that I want. It scares your two most valuable resources, capital and people. Investors want surety and employees want stability. When designing a warehouse space chaos only gets in the way. The whole idea behind any facility design is order and predictability so things move smoothly from manufacturing to the customer.
But I have learned to embrace chaos. Driving along Rte 128 around Boston during rush hour or walking through Rockefeller Center in NY at 2:00 in the afternoon you see chaos all around you. People moving through close proximity but with wildly varying starting points and destinations. To add to the lack of order, the variation amongst what they are driving or what they are wearing would drive any central planner to drink.
But that’s the point. Each person driving on that highway got there based on decisions that they made. They decided what type of car they wanted to drive based on their budget, tastes, driving style and experiences. They decided what time to leave based on when they needed to be at their destination, the weather and their knowledge of local traffic patterns. No one told them what to do, they got to decide for themselves and that’s what makes it work. That’s what makes Chaos beautiful.
We all have defining moments in our lives. As strange as it sounds for me one of mine was when I was 27. I was a consultant working for Kmart (back when they mattered) and I was tasked with fixing their distribution network. One day I was standing alone in a 1,500,000 sq ft warehouse (almost 40 acres) looking around at TV’s, housewares, clothes and various other products stacked 40’ tall. People were moving all around me, the din of the conveyors made it hard to hear myself but I was in awe of the beauty of it all. Totally chaotic but it was the embodiment of the free market system at work. There were no central planners deciding what to produce, no government agents setting prices. Just products flowing based on consumers in 100’s of stores sending signals by buying things. Those signals flowed up the supply chain via orders for restocking and new purchase orders. An economy working. To me it was more beautiful then the Mona Lisa in the Louvre.
Politicians abhor chaos. They want order. They believe order allows for knowledge and control. Anytime a new regulation is enacted or a law is passed chaos is reined in and the free market dies a little. Yes it would be much more efficient is we all drove a Ford Fusion. Just think of the economies of scale that could be achieved. But where is the fun in that.
As you go through this holiday season, I encourage you to observe the chaos all around you. In the grocery store with tens of thousands of products all begging for you to put them in your cart. In the mall with 100’s of options (styles, colors, fabrics) of where to shop and what to buy your mom for Christmas. On the streets with people going here and there, running errands, picking up kids or just enjoying a cup of coffee. Every where you look people are making literally thousands of little decisions everyday. All of these tiny unorganized chaotic decisions when added up create our economy.
Merry Christmas and embrace the chaos.
Yesterday it was announced that Ron Johnson was dismissed as the CEO of JC Penney. He came into the company 17 months ago with great fanfare. Johnson was the genius behind the Apple Store and was going to change department store retailing as we know it. Opps.
Johnson’s main principle was that he was going to do away with heavy promotion and focus on everyday value. The lesson here should not be that the strategy was flawed. It should be that fundamental change like this is virtually impossible in a relatively healthy company. There is no compelling reason to take the risk. Employees don’t feel the change in their guts and customers aren’t behind the change. If this change is to happen it will come from a new entry into the market place. Only with a new entry will customers be taking control and making a positive choice to spend money there.
Creative Destructionism at it’s finest.
This morning I was at the local Midas listening to the manager talk to a frequent customer. He mentioned that sales go up by 30% over the summer. This happens because people open up their windows while they drive and they hear lots of new noises.
Why is this important? I don’t know… now. But somewhere down the road it might be an important little tidbit that leads to a new business idea. Good entrepreneurs are always talking little facts like this, combining them together and coming up with new business opportunities. You never know where these facts will come from so you have to always be listening.
The other value that little non obvious facts like this have is that when you weave them into your assumptions and drop them on your investors they can give you tremendous credibility.
What are the little facts for your business?
Yesterday, I found out that an old colleague of mine is leaving Redbox. He wasn’t just any old person at Redbox, he was the founder. He saw the company that he created change an industry.
The way that he built Redbox was inspiring, he started out with one idea, listened to the customer and pivoted based on customer feedback. Over the last 11 years he has created what is arguably one of the two most important companies in the movie business (Netflix being the other). No they don’t make movies but they can MAKE a movie. If you can get into their machine your movie is made. Any where that he goes across America he is bound to run into one of his machines. I wonder how he feels when he sees that ubiquitous red box.
Now as he leaves the company I can’t imagine the emotion that he is feeling not only leaving the scores of people that he has worked with, but leaving his “baby”, the idea that became the industry.