The Bill Bland story: An adventure in entrepreneurship


Matas (2010) shared a story about Bill Bland, a serial entrepreneur, who never worried about change. Bland grew up in Lake Geneva, Wisconsin where he started his first venture, a bicycle shop. By the age of 17 Bland  owned the first Schwinn bicycle dealership in town.  Everyone Bland grew up with could see his entrepreneurial spirit as he found himself just as comfortable with an Allen wrench in his hand as with a harmonica in his mouth or even a paintbrush. Bland had an interest in music and painting at an early age and would tap his talent at any age.

Bland and his first wife moved to San Francisco during the Haight-Ashbury District hippie era to start a sign shop. In 1970 Bland sold the sign shop to move to the old mining town of Jerome to start a new shop concentrating on making root beer, candles, and incense.  Residents of Jerome to this day still refer to the old Bland House. The business did not produce much income, but allowed Bland to study in Phoenix to become a luthier, one who makes stringed instruments (Matas, 2010).

In 1971 Bland and his family moved to Tucson to open Mingus Music on Fourth Avenue. Carolyn Cooper joined Mingus Music in 1973 to help repair guitars.  In 1973 Bland left his wife and formed a partnership with Carolyn Cooper called Guitar Workshop, which lasted 12 years. The shop sponsored Music on the Mountain  in Summerhaven in which Bland performed on guitar and harmonica (Matas, 2010).

Many years after Cooper had left the shop she noted how Bland affected the way she lived her life because of his pro-activity in creating his own life and not waiting for life to come to him (Matas, 2010). Bland’s story shows many traits typical of entrepreneurs including focusing on new opportunities, not worrying about failing, and continually moving forward to something new. Bland’s story highlights how entrepreneurs focus on what they are passionate about and do not let anything stand in the way.

Entrepreneurs have a certain rebelliousness to do tasks their own way and not stick with convention. Entrepreneurs are always willing to learn new tasks within their area of interest. Serial entrepreneurs are always searching for new ideas to exploit opportunities and make a life for themselves. Entrepreneurs learn by doing and take an active role in their communities. Entrepreneurs are comfortable trying different ideas, but routine stymies them.

Not all entrepreneurs find the big prize, but they enjoy the chase! Do you want to find out if you have what it takes to enjoy the life of an entrepreneur? You can learn more about if you have the right skills by clicking here.

References

Matas, K. (2010). Life stories: Parkinson’s merely meant a shift in life for entrepreneur, McClatchy – Tribune Business News. Retrieved from http://search.proquest.com/docview/758062344?accountid=35812

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Small Business Alliances: The Case of Lehman Trikes


During the height of the Great Recession of 2008-2009, Lehman Trikes formed a strategic alliance with Harley-Davidson. Lehman Trikes, a small publicly held company on the TSX Canadian  Venture Exchange, lead the industry in making three-wheeled motorcycles in Spearfish, South Dakota. Harley-Davidson announced it selected Lehman Trikes as its exclusive supplier of its Tri-glide three-wheel motorcycle. Before signing the alliance, Lehman made the three-wheeled motorcycles in the aftermarket. Harley legitimized the three-wheel motorcycle with its announcement bringing it into the established motorcycle market (Looney & Ryerson, 2011).

By the end of the summer of 2010, Harley-Davidson faced difficult times losing half its business. Harley-Davidson did not renew the agreement signed with Lehman Trikes. Harley kept the rights to the Tri-glide brand and granted no residual rights to Lehman Trikes, but in its original agreement clearly laid out its non-renewal rights and terms. Although Lehman feared Harley might not renew the contract, it understood the risks when it signed the original agreement (Looney & Ryerson, 2011).

Do you believe the alliance between Lehman Trikes and  Harley-Davidson met both companies’ goals? Do you believe the alliance had successful results? What benefits did the companies achieve because of the alliance? What risks did the companies face by signing the alliance? Did the alliance benefit Lehman Trikes, the smaller company? Do you believe Harley exercised its rights in a fair and transparent manner? Knowing that ending the agreement would limit its supply of the Tri-glide, did the strategy benefit Harley-Davidson? Did Lehman Trikes have a viable business model or could it have strengthened its model?

Let us know what you think? Do you want to know more about forming strategic alliances? Learn more.

References

Looney, D. C., & Ryerson, A. (2011). Lehman Trikes: A story within a story 17, 35-39. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=ent&AN=69927663&site=ehost-live

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An Opportunity for Small Business Collaboration in Global Markets


Today small businesses find it tough enough to survive let alone expand in the global markets. Opportunity does exist, however, in the global markets through making alliances with strategic partners. The partners to alliances look at alliances as temporary or until considered no longer necessary and the alliance has served its need (Grosse, 2000).

The idea behind strategic alliances is to co-create value, but often businesses find it difficult because of the unwillingness to share or a lack of common values. The small business alliance depends on trust and openness to work toward a common value. The parties to a strategic alliance have to negotiate to fill in their strategic weaknesses and improve the competency of the alliance (Grosse, 2000; Mockler & Gartenfeld, 2001). Mockler and Gartenfeld argued effective negotiation at the start of the alliance cements the likelihood of a successful partnership.

Liu (2009) asserted international alliances should collaborate to find critical technology and knowledge in a strategic alliance and negotiate learning activities leading to competitive advantage. The partners to an alliance should structure the alliance so it becomes a “race to learn” by mixing competition in with cooperation, but this structure leads to instability. Grosse (2000) argued a one-sided alliance leads to unstable relations and the objective should seek to strengthen weaknesses in the competencies of the alliance partners.

Grosse (2000) claimed the strategic alliance partners need to find a strategic fit by settling the cooperation level, the effectiveness of the cooperation level, and molding the culture of the alliance. Partners should seek a significant understanding of each other to form an effective alliance. An understanding will help foster a successful work relation and avoid failure. A successful partnership will promote value creation through knowledge gathering. Planning has a critical role in forming successful strategic alliances.

Do you have what it takes to expand through inter-firm alliances to succeed into global markets? If you need help planning for global expansion contact us to learn more.

References

Grosse, R. E. (2000). Thunderbird on global business strategy. New York: John Wiley & Sons.

Liu, W. K. (2009). Advantage competition of inter-partner learning in international strategic alliance. Journal of Global Business Issues, 3(2), 123-128. Retrieved from http://search.proquest.com/docview/223750245?accountid=35812

Mockler, R. J., & Gartenfeld, M. E. (2001). Using multinational strategic alliance negotiations to help ensure alliance success: An entrepreneurial orientation. Strategic Change, 10(4), 215-215. doi: 10.1002/jsc.536

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Business Culture: Groupthink vs. “Teamthink”


Gibb and Schwartz (1999) argued groupthink paralyzes companies creating a culture that dismisses all social issues as unsuitable for management consideration. Gibb on and Schwartz claimed the best employees in the future will not tolerate a stifling top-down culture because better educated and networked employees will demand more participation. Chen, Lawson, Gordon, and McIntosh (1996) argued good decisions come from leaders who encourage an open decision-making process. Maharaj (2008) argued strict adherence to rules masks open decision-making and evaluation of alternatives and corporate boards should seek diverse skills and avoid groupthink. A well-rounded board leads to improved decision-making that considers its members knowledge and skills instead of perpetuating the good old boys club.

Solomon (2006) challenged the idea that dissent is undesirable and rational deliberation and consensus results in group decision-making. Neck and Manz (1994) explained “teamthink” as an alternative to groupthink as characterized by highly cohesive and conforming groups. “Teamthink” offers encouragement of divergent views, open idea expression, recognizing threats and limitations, valuing unique members’ views, and discussion of doubts. Neck and Manz argued self-managing teams can promote these values to encourage better decision making.

I believe companies still encourage groupthink at top echelons of an organization, but promote “teamthink” at lower levels. I believe this allows an organization to create a double standard to preserve top-down management culture, while promoting improved production from lower levels. The idea is that ultimately “the buck stops here” at the C-level. Does this double standard help or hinder building trust to make the right decisions?

Gibb and Schwartz (1999) suggested without improved participation good employees will leave a company they do not trust and seek employment elsewhere where they can use their education and experience. What do you think? Please leave a comment with your thoughts. If you need help organizing your company more productively I encourage you to learn more.

References

Chen, Z., Lawson, R. B., Gordon, L. R., & McIntosh, B. (1996). Groupthink: Deciding with the leader and the devil. The Psychological Record, 46(4), 581-581. Retrieved from http://search.proquest.com/docview/212668876?accountid=35812

Gibb, B., & Schwartz, P. (1999). When good companies do bad things. New York: John Wiley & Sons.

Maharaj, R. (2008). Corporate governance, groupthink and bullies in the boardroom. International Journal of Disclosure and Governance, 5(1), 68-92. Retrieved from http://search.proquest.com/docview/196323941?accountid=35812 http://linksource.ebsco.com/linking.aspx?genre=article&issn=17413591&volume=5&issue=1&date=2008-02-01&spage=68&title=International+Journal+of+Disclosure+and+Governance&atitle=Corporate+governance%2C+groupthink+and+bullies+in+the+boardroom&au=Maharaj%2C+Rookmin&isbn=&jtitle=International+Journal+of+Disclosure+and+Governance&btitle=

Neck, C. P., & Manz, C. C. (1994). From groupthink to teamthink: Toward the creation of constructive thought patterns in self-managing work teams. Human Relations, 47(8), 929-929. Retrieved from http://search.proquest.com/docview/231490747?accountid=35812

Solomon, M. (2006). Groupthink versus the wisdom of crowds: The social epistemology of deliberation and dissent. The Southern Journal of Philosophy, 44, 28-42. Retrieved from http://search.proquest.com/docview/218152905?accountid=35812

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Small Business Risk Taking: History Repeats Itself


“History repeats itself” is a saying I hear on occasion and often wonder about. Today, for example, some businessmen say they cannot work because of uncertain conditions, yet Adam Smith designed capitalism as the “epitome of risk taking” (Bernstein, 1996, p. 19). According to Bernstein, up to the time of the reformation, the stable Protestant tradition stressed abstinence to avoid risk. Protestants considered the danger inherent in risk-taking as akin to gambling. Adam Smith (1904) introduced capitalism believing the danger attached to risk also came with opportunity. Instead of looking at risk as a zero-sum game where someone wins and someone loses, Smith believed trade resulted in a mutually worthwhile pursuit. Smith believed both parties to trade and risk taking could become wealthier contrary to practice before the reformation that relied on exploitation to gain wealth (Bernstein, 1996).

Recent conversations have talked about how unacceptable the transfer of wealth is from the elite to its underlings. Some business people espouse the pre-reformation idea that wealth transfer should only come from exploitation of underlings, while others see wealth transfer more like Adam Smith did. Smith believed business is risky, but full of opportunity and new wealth came to those adventuresome people willing to innovate (Bernstein, 1996). Today with the coming of supply-side economics, some want to return to the days of exploitation and stymie adventuresome entrepreneurs willing to innovate and create new trade. Does history repeat itself? Has the pendulum swung too far in the wrong direction?

I believe an efficient economic system has to balance opportunities with risk taking. If business people do not take risk, I do not see where innovation comes from under such conditions. Stable well-established businesses do not like to remove themselves from their comfort zone and their products and services eventually become stale and do not satisfy consumer needs. Meanwhile, society needs to provide more incentives to entrepreneurs to innovate and create new trade.

What do you think? Is our economic system returning to the stable pre-reformation days bereft of any risk taking relying solely on exploitation? Are you willing to take a risk in today’s economic setting? What incentives do you believe would help entrepreneurs to resume their efforts to innovate new trade? Please leave your thoughts here. Do you want to know more about incentives to small business entrepreneurship to its rightful role? Click here.

References

Bernstein, P. L. (1996). Against the gods: The remarkable story of risk. Hoboken, NJ: John Wiley & Sons, Inc.

Smith, A. (1904). The wealth of nations (5th ed.). London: UK: Methuen & Co., Ltd.

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Human Capital: Are Employees a Small Business’s Most Valuable Asset?


I have heard the words “employees are our most valuable asset” many times, but have rarely seen accountants embrace the idea of capitalizing human capital as an asset on the balance sheet. The theory goes that companies expense wages as employees earn them. If employees are an asset I believe the part of workers’ employment cost that adds value to the organization should appear on the balance sheet.

Although accounting rules forbid capitalizing human capital, they only recognize human capital on the income statement. Despite this oversight, many call accounting the language of business. At least one article admitted the problem and recommended alternatives for capitalizing human capital. Chen and Ku (2004) concluded, “The succession of the human intellect over machines and equipment in the contribution to industrial value makes a financial statement that relegates human capital expenditure to expenses inadequate if not obsolete” (p. 129). If accounting is the language of business why is the value of its most valuable asset excluded from the balance sheet?

This disparity leads one to believe companies’ accounting standards look at employees not as an asset, but as a liabilities. For example, in finance the main goal of the firm is to maximize shareholder wealth and accounting rules treat human capital as a period cost (expense) instead of an asset. In recent years many companies have reconsidered the view shareholders are the only stakeholders in a firm, and have expanded stakeholders to include customers, suppliers, and employees. Even with the coming of triple bottom-line reporting I have not seen accounting rule-making bodies espouse the capitalizing human capital (Elkington, 1994; Slaper & Hall, 2011).

Similarly, Reimers-Hild, Fritz, and King (2007) described human capital as a continuous investment leading to increased earning power. Reimers-Hild et al. further described human capital as responsible for innovation, creativity, and keeping pace with change.  Chen and Ku (2004) developed a theoretical classification framework that would capitalize certain formation and acquisition costs in early stages of development, learning costs in middle stages of development, and replacement costs in final stages. Chen and Ku argued for disclosing these costs as investments if the costs are unique and add value.

Do you believe employees are your greatest asset? I would like to hear your thoughts. Should your greatest asset show on the balance sheet? Please let leave your comments? Click here if you want to understand more about accounting for human capital.

References

Chen, H. M., & Ku, J. M. (2004). The role of human capital cost in accounting. Journal of Intellectual Capital, 5(1), 116-130. doi: 10.1108/14691930410512950

Elkington, J. (1994). Towards the sustainable corporation: Win-win-win business strategies for sustainable development. California Management Review, 36(2), 90-100. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9410213932&site=ehost-live

Reimers-Hild, C. I., Fritz, S. M., & King, J. W. (2007). Entrepreneurial Career Development: Using Human Capital, Social Capital, and Distance Education to Achieve Success. Advancing Women in Leadership, 24, 1-N_A.

Slaper, T. F., & Hall, T. J. (2011). The triple bottom line: What is it and how does it work? Indiana Business Review, 86(1), 4-8. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=66506015&site=ehost-live

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Lessons in Small Business Organizational Change


About 10 years ago the owner of Bimba Manufacturing Company located in Monee, Illinois decided to sell 90% of his stock to employees through an employee stock ownership plan (ESOP). The company produced aluminum cylinders and had two classes of employees. These classes included the managers who made policies and workers who obeyed the policies and performed the work. Under the ESOP instead of workers just obeying the orders of the managers, the company formed cross-functional teams to address problems and improve quality. The teams decided to meet regularly with customers to consider their needs and improve working relations (Jones, 2004).

The ESOP plan changed the workforce orientation improving working relations, accentuating excellence, and leading to a high quality products. Each cross-functional team hired its own workers and socialized together creating a cooperative new culture in the company. Employees effectively relearned their jobs by actively listening and interacting with each other instead of focusing on managers and workers. Managers acted more like advisers and workers gained a more cooperative spirit. Because of this organizational change the company increased sales 70% and the workforce grew 59% (Jones, 2004).

Although when first starting a business an owner can design a hierarchical organization for expedience, the firm stands to improve performance by reconsidering the organizational form. In my experience, hierarchical organizations in a small business can stymie the growth of the organization. I have personally experienced the difference and realized the benefits of redesigning the organizational form.

A more nimble team orientation can improve performance and cross-functional communication. The organization can respond better to the companies’ customers and better address their needs. The case of Bimba Manufacturing offers a good lesson in organizational change designed to improve worker and customer relations.

Have you reconsidered the organizational design in your firm? I would like to hear your ideas about changes that can benefit the organizational design in your firm. If you need help I urge you to act now and we can start to help you. Learn more.

References

Jones, G. R. (2004). Organizational theory, design, and change (4th ed.). Upper Saddle River, NJ: Prentice Hall.

 

 

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The Multiplier Effect of Small Business Transaction Costs


Jones (2007) defined transaction costs as costs involved in negotiating, overseeing, and controlling costs between people. Organizations need to keep these costs low by managing exchanges between organizations. Jones used the health care industry as an example. According to Jones, 40% of the United States budget for health care has to do with managing exchanges between doctors, health-care providers, government agencies, insurance companies, and other merchants. Imagine if the health-care industry could remove these costs how much less health-care goods and services would cost.

Small businesses also have to manage transaction costs to achieve sustainability. Transaction costs involve many kinds of costs. For example, an organization can experience costs resulting in duplication of effort, power imbalances, intellectual property protection issues, knowledge transfer issues, and preserving alliances. Nooteboom (1993) argued small firms have a particular disadvantage with transaction costs because of scale, scope, learning, and experience. Such costs are bounded by rationality, opportunity, uncertain conditions, and transaction specificity. When many firms add value to products or services each firm adds transaction costs multiplying the cost to the consumer for each firm involved in producing the product. On the other hand, outsourcing parts of the production offers economies of scale to spread the cost among more units. Bureaucracy costs can offset the transaction costs saved by larger organizations because of their capability to deal with scale, scope, learning, and experience issues (Jones, 2007).

Small businesses need to weigh these exchange costs in making their products and services competitive. As in the case of health care 40% is a significant added cost for a customer to bear. Unless a firm has the ability to  deal with transactions costs it can have a significant disadvantage compared with a larger firm that has these skills. Any time a firm can erase these costs or hold them to a minimum the firm will put itself in a better position to achieve competitive advantage.

How do you manage transaction costs? If you have not considered transaction cost management and want to know more I urge you to contact us to learn more.

References

Jones, G. R. (2007). Organizational theory, design, and change (5th ed.). Upper Saddle River, NJ: Prentice Hall.

Nooteboom, B. (1993). Firm size effects on transaction costs. Small Business Economics, 5(4), 283-295. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=eoh&AN=0328531&site=ehost-live http://www.springerlink.com/link.asp?id=100338

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The Role Leadership Plays in Delivering Excellence Throughout the Organization


 Leaders must start the course of delivering excellence by communicating a vision. Friedman  (2006) noted that leaders must align their core values with their vision and convert them into action by owning three skills – authenticity, integrity, and creativity. The total leadership approach is a method that promotes reading background materials and discussing principles that matter. This method is important in assessing and coaching people including giving and receiving feedback, refining ideas and gaining support for them, and reviewing progress and explaining any lessons learned. Newstrom and Davis (2002) described leadership as the “catalyst that transforms potential into reality” (p. 163). People provide the missing ingredient here to transform the vision into reality. 

Galpin (1998) suggested the key ingredient for a leader is to put together a strategy that  motivates and educates people to act on the strategy. Leaders must motivate employees through their influence. Galpin listed twelve critical influences important to motivating people. The twelve influences include goals and measures, rewards and recognition, communication, training and development, and senior leadership. Critical influences also include rules and policies; physical setting; staffing, selection, and succession; information systems and knowledge sharing;  operating procedure changes; organizational structure; and ceremonies and events.

Malveaux (1999) put the issue another way by saying one needs to lead by example. For example, if one sees children as the future, the leader must rise and play a role in their lives. If leadership represents listening, the leader should stop talking and start listening. Malveaux promoted self-reflection in deciding how to lead.

The leader embodies all of these characteristics and then some. A leader must assume responsibility and take credit for his or her actions. A leader must have a core ethical boundary that will not cave under pressure or give in to the influence of greed.

Do you believe leadership drives excellence in an organization? I want to know your thoughts. Do you want to learn more?

References

Friedman, S. D. (2006). Learning to lead in all domains of life. The American Behavioral Scientist, 49(9), 1270-1297. doi: 10.1177/0002764206286389

Galpin, T. J. (1998). When leaders really walk the talk: Making strategy work through people. Human Resource Planning, 21(3), 38-45. Retrieved from https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=1452186&site=eds-live

Malveaux, J. (1999). Too many chiefs; not enough leaders. Black Issues in Higher Education, 16(8), 30. Retrieved from https://search.ebscohost.com/login.aspx?direct=true&db=f5h&AN=1926388&site=eds-live

Newstrom, J. W., & Davis, K. (2002). Organizational behavior (11th ed.). New York, NY: McGraw-Hill.

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The Value and Ethics of Treating People Right


Former Southwest Airlines CEO, Herb Kelleher, gained a competitive advantage over competitors like United, Delta, and Northwest by treating the airline’s employees with dignity and respect. The airlines all had unionized workers, but Kelleher believed Southwest had to dignify its customers by treating its workers right. Kelleher issued 20% of Southwest’s stock to employees to increase their motivation to treat customers well. During Kelleher’s time at the company, United, Delta, and Northwest all experienced damaging strikes by their unions, while Southwest remained profitable. The strikes caused thousands of passengers to miss their flights driving these airlines into bankruptcy (Jones, 2007).

Managing complex relations with pilots, cabin crews, and mechanics affected customer satisfaction for Southwest Airlines (Jones, 2007). Happy workers resulted in happy customers. Southwest Airlines remains one of the most profitable airlines today. Many companies in the airline and other industries today fail to value the importance of building and managing relations with workers.

In my personal experience, I have found managing employee relations can improve performance. I turned around a financially troubled university with a heavily unionized workforce by paying attention to the value of the workers and forging improved relations with them. I fail to grasp why many organizations have such a hard time understanding that happy employees produce happy customers. Happy customers breed new customers and grows the organization.

I would like to hear your thoughts on why building improved relations with workers has become so difficult today. I argue customers and workers are equally if not more important than shareholders. Please let me know your comments or let me know if you want to learn more.

References

Jones, G. R. (2007). Organizational theory, design, and change (5th ed.). Upper Saddle River, NJ: Prentice Hall.

 

 

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