Posts Tagged business plans
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?
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.
Companies can achieve superior performance and gain competitive advantage by using the VRINE model emphasizing value, rarity, inimitability, non-substitutability, and exploitability. These five factors influence a firm’s resources and capabilities to compete and achieve superior performance (Carpenter & Sanders, 2009).
First, a resource must add value to meet demand in the market. The ability to compete by itself does not offer an advantage, but can produce a normal profit. The value added assumes the firm can control costs and the product or services offer potential to consumers. Second, scarce (rare) resources can add competitive advantage at least temporarily. Until competitors can normalize this competitive advantage, the firm can achieve above normal profits. Third, if the products or services added are incapable of reproduction by competitors, the firm can achieve a sustainable competitive advantage earning above normal profits for an extended period. These products or services are such that competitors cannot imitate or substitute for them. Last, a firm has to have the capability to exploit the above four characteristics to achieve competitive advantage. The ability to exploiting these resources allows the firm to achieve improved financial performance than if it can only control them (Carpenter & Sanders, 2009).
Small businesses looking to achieve competitive advantage should employ the VRINE model and ask if it can meet these characteristics. The model shows how a firm can sustain superior financial performance by developing resources that meet the VRINE characteristics.
How does your firm do? Does it meet the VRINE model’s characteristics? Learn more.
Carpenter, M., & Sanders, W. G. (2009). Strategic Management: A Dynamic Perspective Concepts and Cases (Second ed.). Upper Saddle River, NJ: Prentice-Hall.
Often small businesses build relations with various suppliers and channel partners only to later find the relation is not as strong as first thought. The small business entrepreneur needs to protect against interruption occurring in the supply chain and make sure that everyone involved is on the same page.
I have had the unfortunate experience of working with a channel partner only to find later the channel partner only had its own interests in mind. I found the channel partner did not share a common vision and did not want to genuinely build a lasting relation. After working hard to build a good relation, the channel partner let the company down by not performing up to expectations. I call this the “snake in the grass” syndrome.
Because of this experience, I encourage small business entrepreneurs not to put all their eggs in one basket. As much as an owner likes a particular channel partner, competition is good and promotes efficiency. An interruption in the supply chain can have devastating effects on the small business. Consider what would happen if a missing link exists in the supply chain. Finding a new channel partner at the last minute is not easy and could harm the quality of the product or the service provided to customers. I suggest finding at least three suppliers for every slot in the supply chain to avoid last-minute problems.
Another step a small business entrepreneur can take is to make at least an annual evaluation of all channel partners in the supply chain. A business is only as strong as the weakest link in its supply chain so it pays to remove weak channel partners and replace them with stronger ones. I suggest developing a formal written evaluation form and think about what is important to the business.
Do you have a procedure to evaluation channel partners in your supply chain? I want to hear your thoughts? If you want to know more about how to remove the “snake in the grass” I urge to get help now. Learn more.
Many times people starting a new business find a partner they know little about. Defining the roles partners play in the business at the start is important to avoid problems later. Looking at a live example might help identify the problem and discover some lessons learned from forming a new partnership. This story applies to either a partnership or a small business corporation such as a limited liability company or an S corporation.
Joe and Jerry worked together as real estate agents at a local brokerage and decided they wanted to start their own. Joe had extensive experience in management and finance. Jerry came from the ministry after serving as an Episcopal priest. Joe and Jerry worked well together as real estate agents, but knew little about each other otherwise.
The two men worked together to develop a plan to start their own business. Joe and Jerry decided to divide the business equally and make an equal contribution. Joe and Jerry did not know is the role each would play in the business, but Joe believed Jerry had excellent marketing skills because of his dealings with people. Jerry believed Joe had excellent administrative and financial skills to run operations, but neither man shared their beliefs with the other or formalized the role each would play in running the business.
The men did work together to find a real estate office available at an excellent location and proceeded to lease the building. Jerry wanted to make the office comfortable and professional insisting on first-class furniture and equipment. Joe wanted to find sales Associates as quickly as possible to train and ramp up sales.
After leasing the office space, the two men worked to redecorate the office and lease furniture and equipment. Jerry took the lead on redecorating the space and Joe worked on incorporating a business. Each man did what he thought important to start the business and prepare for the grand opening.
Once the office opened, Joe worked feverishly to recruit sales agents to start finding business. Jerry showed up occasionally and worked from home. Joe quickly recruited 16 new agents and began to train them, while Jerry continued to work from home expecting a paycheck despite not having enough revenue to earn a salary.
Joe and Jerry started having discussions about how to develop enough revenue to meet continuing expenses. Joe continued working feverishly to train agents and teach them how to sell. Jerry continued to work at home contributing little to the operation. Jerry continued to insist he needed a paycheck despite a lack of revenue. Joe argued both he and Jerry should work the plan keeping the vision in mind for the future. Jerry continued to espouse his mission to earn a paycheck.
Although the sales agents started to develop, the revenue did not keep pace with Jerry’s mission for a paycheck. Joe felt good about the developing sales agents who started to ramp up sales. Jerry began withdrawing from the company because his sole mission relied on earning a paycheck. Joe started to feel overwhelmed because he had to do everything himself.
The lesson learned from Joe and Jerry’s experience is to know your partner and decide on their roles before starting a business. In this case, Joe took the role of the visionary leader to follow plan. Jerry’s only role came from his mission to receive a paycheck. A visionary leader needs to have teamwork. The missionary leader has more selfish motives and sits back waiting for business to develop.
Before taking on a partner consider not just how to divide profits, but what role each will play in running the business. Consider the expected time the business needs each partner to devote and what to hold each partner accountable for. Decide how often partners will meet and go over plans to stay on track. A few questions to ask include:
- How does the company track and share information?
- How does the company decide on use of available capital?
- How are organizing goals decided and carried out?
- Who is responsible for carrying out the strategic plan?
- What steps does the company need to seek more assets?
- Does compensation match with the role of the partner?
Are you thinking of taking on a partner? Have you defined the roles of each partner before starting your business? I urge you to do so before problems start to develop. Do you want help in setting up a plan and agreement for your partner? Learn more.
Think about why some companies succeed despite their characterization as risky. For example, one of the most risky businesses people think of is to start a restaurant. The failure rate for restaurants is high, but those that succeed have some special qualities. A good business needs to adapt to what people want.
I am originally from Chicago and I distinctly remember a restaurant chain that became very successful because of its ability to provide what people want. If you have ever heard of Lettuce Entertain You Enterprises, Inc. you may have a good idea what I mean. Richard Melman with Jerry Orzoff started Lettuce Entertain You in 1971 with $17,000. Melman wanted to start an upbeat restaurant directed at young singles interested in rock music, casual clothing, and healthy food. R. J. Grunts became the company’s first eatery in Lincoln Park followed by Fritz That’s It! in Evanston and Great Flying Food Show in 1974. In 1975 Lettuce Entertain you introduced Jonathan Livingston Seafood and Lawrence of Oregano opened in 1976. Lettuce Entertain You mastered the avante garde casual restaurant business with its unique themes (Anonymous, 2012).
A good business needs to anticipate what customers want like Melman did with Lettuce Entertain You. Traditional restaurant startups do not typically think about what will make a restaurant stand out to a certain crowd and will take a more conservative route. A good entrepreneur has an open mind and anticipates providing a service or product customers will want. Lettuce Entertainment did not stop with the off-beat casual idea, but opened more restaurants with more ambience like the Pump Room on Chicago’s Gold Coast and Ambria in partnership with renowned French chef Gabino Sotelino. Later Melman introduced several other themes by opening a series of other restaurants (Anonymous, 2012). My personal favorite is Tucchetti’s.
An open mind is important to becoming a successful entrepreneur. This notion reminds me of a TED talk by psychologist Jonathan Haidt I viewed not too long ago. Haidt explained five key differences between conservatives and liberals (Haidt, 2008). Entrepreneurs with closed minds often do not succeed because they fail to anticipate what consumers want. Lettuce Entertain You showed how new themes can entice people.
Think about your business! Does your business need an attitude adjustment? Lettuce Entertain You provides a good example of how an open mind can open doors for a new business and keep customers happy. If you want to start a new business I urge you to start now to explore how to keep an open mind by working with us. Learn more.
Anonymous. (2012). Lettuce Entertain You Restaurants. Lettuce tell you our history, from http://www.leye.com/about-us/history
Haidt, J. (2008). Jonathan Haidt: The moral roots of liberals and conservatives. Retrieved from http://www.ted.com/talks/jonathan_haidt_on_the_moral_mind.html?quote=339
I read an article in Bloomberg Business Week about Andrew Mason. Mason is the headwaiter at a Japanese restaurant in Chicago’s Wicker Park. However, the job is Mason’s part-time evening job as by day he is the chief executive officer and founder of Groupon. What struck me reading the article is that Mason has matured from his playful childlike demeanor, which allowed him to develop the Groupon concept. Mason has become a more seasoned entrepreneur trying to hold on to what he started and run it in a more businesslike manner (Etter & MacMillan, 2012).
Although investors and analysts have challenged Mason’s running of Groupon, he has kept a lock on what he created. Mason wants to improve Groupon without giving it away to suitors offering him large amounts of money to buy the company. Mason turned down an offer by Google to buy the company, which would have allowed Mason to cash out. Mason turned down the offer despite problems it has had with profitability and holding up share value. Mason admitted the company has had problems with its operating system and commented, “we have to get good at this” (Etter & MacMillan, 2012, p. 50)
Meanwhile, executives at Groupon have noted the level of seriousness has notched up and the company now employs more lawyers and accountants. Groupon has even purchased other companies and has set up a location in the Silicon Valley in California. Despite his critics lashing out at him, Mason wants to preserve control over the company he started and claims he is in the business for more than just the money. Mason said his company wants to solve a business problem, which is his main motivation (Etter & MacMillan, 2012).
Although Mason may have much to learn, he has the entrepreneurial spirit to perfect and hold on to what he started. Mason still has a vision and he wants to cement it instead of giving it away to someone else. Mason still studies the disconnect in the operating system as maitre d’ of his part-time job at the Japanese restaurant and has learned from the experience. Even though Mason has learned from his experience, he realizes still has much to learn.
Only time will tell if Groupon can get to the next level, but I admire Mason for his stick-to-itiveness. I believe Mason has the characteristics of a genuine entrepreneur as he loves what he does and wants to perfect it. Money is not his only motivation and his quest for perfection overshadows any thirst to get rich quick. Mason continues to learn from his experience and enjoys every minute of it. Mason does not fear failure, but looks it straight in the eye. I believe more entrepreneurs need to reclaim the entrepreneurial spirit.
What is your take on reclaiming the entrepreneurial spirit? I want to hear from you. If you want to develop the entrepreneurial spirit I suggest learning more about how you can starting now. Learn more.
Etter, L. and MacMillan, D. (2012, July 16-22). Groupon tries to ‘Get Good’ at growing up. Bloomberg Businessweek.