The Business Book (DK)
People all along want to gain a business edge. Specialism resulted in economics of scale. It is important to value-add to products. Industrialization took off in the 1800s. One needs to manage production. The problem is conflict between the management and the staff. Management understood that worker welfare was important too. Human relations cannot simply be cast aside. Now, businesses use advertising heavily. The Japanese embraced methods like Total Quality Management and Zero Defects Management. The Kaizen level of skill was adopted. Management experts like Peter Drucker emerged in the mid to late 1990s. Now, there is much emphasis on business strategy. The dot-com boom happened in 2000. E-Commerce is now very crucial. Corporate M&A is now more prevalent than in the past. Social responsibility is also gaining prominence now. Business is all around us as we consume goods every day.
Start Small, Think Big – Starting and growing the business. An idea is the most important for a business. Risk must be pursued in a business in order for it to grow. A business needs to be funded. The idea must also be profitable. An idea must have a unique selling proposition (USP). A company needs to find a target customer group. Companies need to re-invent themselves. At a big stage, experienced people and rigorous systems are necessary for the system to grow. At this stage, professional management is necessary. Some founders do not make good corporate leaders.
If you can dream it, you can do it. The dream is risky and people are in it for various reasons. One needs to be willing to take risks and possess business acumen and most importantly, determination. Companies can get funds from VCs. For smaller entities, crowd-funding is possible. A lack of cash will kill a business. Tony Fernandes bought over AirAsia.
There’s a gap in the market, but is there a gap in the market? Markets are getting more niche as there is wide variety of products/services out there already. Twitter is an example who found a niche in short-form communication in social media. Does the gap contain enough monies for you to generate a profit Snapple won because it focused on natural ingredients? Many gaps are illusory but tempting.
You can learn all you need to know about the competition’s operation by looking at his trash can. Always study the competition and perform SWOT analysis on them. See what the customer didn’t manage to finish and end up throwing away. Perform SWOT. This is taught in many business courses. A company can make informed decisions by analyzing SWOT. Market mapping is important too. This could be done via a map. This method will help you identify gaps. Sometimes, different products might cannibalize one another. Market research is important. SWOT was invented by Albert Humphrey.
The secret to business is to know something that no one else knows – Stand out in the market. There are rarely monopolies nowadays. Products must have a high USP at every stage in order to thrive. Differences can be copied and will not generate profits for long. Branding and brand imagery come to the fore. Superdry is a British brand that has influence from Japanese graphics. IKEA differentiates itself via contemporary design and low prices. They also have the self-assembly option. McDonalds has unparalleled consistency across different regions and countries. Differences have to be believable if they are reliable. Sustaining differences is the key in the marketplace.
Be First or be better. Amazon was one of the first to enter the online retail market. Google was not the first search engine, but it was superior to others around. ‘The key is that in order to gain a competitive edge in the market, a business needs either to be first, or it needs to be better.’ Amazon has dominated the industry since 1995. First movers have a huge edge. Amazon also patented the use of their ‘OneClick’ system. Patents help to produce a short-term advantage. Market timing is crucial for success. Later entrants can learn from those who entered the market earlier. Google developed algorithms for their search engine. However, first-mover advantage will not work if the business model is flawed to begin with. Sometimes, luck and timing play a big factor as well. In markets with high technological change, first mover advantages do not last long. P&G values long term relationships with their customers and suppliers. There are no guarantees a first-mover can emerge victorious.
Put all your eggs in one basket, and then watch that basket. Risk must be managed carefully. Risk management must be initiated. Oversight and management of risk are crucial. This is a continuous strategic process that is constantly on-going. Diversification is an issue too. Risk must be quantified and managed well.
Luck is a dividend of sweat. The more you sweat, the luckier you get. The more you sweat, the luckier you get. Make your own luck by having a good business plan. A good plan reduces your reliance on luck.
Broaden your vision, and maintain stability whilst advancing forward – Take the second step. Aspiration is a key factor. Access to capital is difficult. Business owners must take risks.
Nothing great is created suddenly – How fast to grow. New businesses fail because they grow too fast. They often run out of cash. Measure the inventory turnover and the cash cycle of the company. This is known as the SFG – self-financeable growth rate. When market is growing faster than SFG, employ the following: cash flow, reduce costs or raise prices. Growth can destroy company values if not managed properly.
The role of the CEO is to enable people to excel – from entrepreneur to leader. Not all founders can enter management. This is because not all founders have that management discipline and possess leadership skills. Founders need to learn how to delegate work. Growth requires a different set of skills.
Chains of habit are too light to be felt until they are too heavy to be broken. Companies need both structure and flexibility. Too much process can stifle growth and innovation. Middle management is important in this process. It is the company’s infrastructure that makes growth possible. Middle management also helps drive functional efficiency in the workplace. Business practices must evolve over time. Enablers help to foster growth.
A corporation is a living organism and has to continue to shed its skin. Technology is changing really rapidly. Markets are never static in nature. Adaptation and re-invention are crucial. Apple iTunes revolutionized the music industry. Netflix allow users to buy entire tv series. Internal processes must be revamped when demand is static. In such cases, operational efficiencies are crucial. Samsung re-invented itself in the 1990s and entered the cell phone market big time. Reinvention is a continual process.
Without continual growth and progress, success has no meaning. Growth often brings about crises. These must be managed using the Greiner curve. There will be 5 major crises in a business cycle. 1) leadership; 2) autonomy; 3) control; 4) red tape; 5) growth. There are 6 stages of growth. They are 1) creativity; 2) direction; 3) delegation; 4) co-ordination; 5) collaboration; 6) alliances. Richard Branson likes to handover businesses once they are big to professional managers. Some businesses simply choose to remain small. It is possible to be large but agile at the same time. Spotify seems to have done well so far.
If you believe in something, work nights and weekends – it won’t feel like work. Personal passion is an important ingredient. Starting an internet business doesn’t require much start-up capital. The risk is time for a weightless start-up, not money. Now, there are more micropreneurs. These are people who run a small business on the side and hold full-time jobs. The path is never straight-forward.
You have to really believe in yourself and know that, in the worst-case scenario, if it doesn’t work out, you still built something really cool. – Kevin Rose
Lighting the Fire – Leadership and Human Resources. Managing people is never easy and it requires strong leadership. However, leaders need to rely on managers as well. Effective teams are productive and innovative in nature. The work environment and office arrangement in Google is conducive for work. Money may not be the best motivator. A strong organizational culture is more important. A good leader requires a high level of EQ.
Managers do things right, leaders do the right things. Managers need to implement the strategies that their leaders set. Leadership is about setting the right agenda. Leaders have to be brave in the face of uncertainty. Leadership renewal is important.
None of us is as smart as all of us – the value of teams. Working in groups gives people a greater sense of belonging. Teams must be chosen carefully and supervised.
We might complain about routine and familiarity, but research shows that human beings have an innate need for some degree of stability. Without rules, norms, values, and expectations, people begin to feel anxious, rootless and confused. – Unknown
Innovation must be invasive and perpetual; everyone, everywhere, all the time. Many adults lose their inner joy of creativity. Encouraging creativity in the workplace helps to improve company’s competitiveness. We have an innate desire for autonomy, purpose and mastery. It is important to think differently.
Dissent adds spice, spirit and an invigorating quality. Beware of the ‘yes’ man. ‘No’ is ultimately more useful than ‘Yes’. It is important to be right all the time. It is important to inculcate a culture of collective responsibility. Delivering bad news is a skill in itself. Dissent in the form of debate can be healthy at times.
No great manager or leader ever fell from heaven – Gods of management. There are 4 different types of culture. They are club, role, task and existential. Every company exhibits a variation of the different cultures.
A leader is one who knows the way, goes the way and shows the way – Effective leadership. It requires action. One can’t rely on charisma to lead. Leaders must have integrity, trust, empathy and empowerment too. He must be confident and secure. Leaders need to walk the ground and be there when it matters.
Teamwork is the fuel that allows common people to attain uncommon results. Effective teams help to produce synergy. Shortcomings are balanced. There are many benefits for great teamwork. Storming, norming, performing and adjourning are the 4 stages of teamwork. Small wins help to build motivation. Sir Alex Ferguson is very good on managing talent. Talent management is important and it cannot be underestimated. Teamwork encourages listening.
Leaders allow great people to do the work they were born to do. Make the most of your staff’s talent. Engaged employees are definitely more productive. People want to feel a sense of achievement as this will spur them to work harder in their jobs. Work better and not harder.
The man who does not work for the love of work, but only for money, is likely to neither make money nor find much fun in life. – Charles M Schwab
The way forward may not be to go forward. Businesses are always in flux. Hence, it is useful to think out of the box. Motivate staff to avoid fixed thinking. Linear thinking might lead to the downfall of businesses.
The More a person can do, the more you can motivate them. Higher pay might encourage you to work harder for a while. However, this effect doesn’t last long. There are also hygiene factors that must be in place. Recognition, responsibility, opportunities for advancement are all important. Hygiene factors must be present. When present, they do not motivate but helps to reduce job dissatisfaction. The top-paying companies are rarely those who are the best employers.
Be an enzyme – A catalyst for change. Disruptive thinking and radical business strategies are the way to go. Disruptive tech are the game changers. Apple is a company which employed disruptive technology and did well. An example includes iTunes + iPod. The leader must take responsibility and stand in the spotlight when things go wrong. Companies need to have the courage and conviction to stay the course.
The Worst disease that afflicts executives is egotism. Successful companies can fall from greatness. Success can lead to overconfidence. Hubris is a form of blind faith. They are blind to changes that happen in the company. Arrogance breeds indiscipline. Many companies are not even aware that they are in stage 3. Stage 5 results in a company’s death. It is still possible to recover in stage 4. However, the company must turn things around and beat the odds.