Entrepreneurship

Companies built on customer needs are all too rare

factory machine producing customized item based on customers' needs preferences style and requests

Originally published on December 22, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/companies-built-on-customer-needs-are-all-too-rare/article33213377/

After years of fussing over KPIs, management by objectives and zero-based budgeting, I am pleased to see more and more business owners coming to grips with one essential truth: without customers, there is no business.

It sounds so simple. But companies that are designed and built around the needs of customers are scarcer than tulips in December. Businesses are started for many reasons – to put bread on the table, scratch a creative itch, fill a perceived need – but rarely to serve a specific client base. Companies have to learn to put customers’ needs ahead of their own, and it’s a journey that will last a lifetime.

Some of the worst offenders are startups – particularly the high-growth tech startups that Canada is counting on to generate jobs and export revenues. Typically started by engineers and scientists trying to solve specific problems, these companies tend to be product-oriented. When they encounter a setback developing a new widget, they are more likely to tackle the problem with new approaches or technology than by talking with customers to ensure they’re still on the right track. Result: many startups go through a series of jarring, risky “pivots” rather than continuous, informed iteration.

But there are signs of hope in the Canadian startup scene. More companies are joining incubators and accelerators to learn entrepreneurship from mentors, advisers and fellow entrepreneurs. And increasingly these groups are pushing the idea that success doesn’t come from the lab, but from meetings with customers.

In Ottawa, Carleton University’s Lead to Win program is one of North America’s Top 10 university business incubators, according to Swedish research and benchmarking firm UBI Global. Lead to Win was founded in 2002, following the bursting of the tech bubble, to help Ottawa-area technologists become business founders. That meant immersing them in the entire business community: professional advisers, seasoned coaches, service-providers, other entrepreneurs, suppliers, investors, and, yes, potential customers.

“The research is clear: high-achieving technology entrepreneurs operate in a business ecosystem that includes many different stakeholders, including partners, critical suppliers, and market channels,” says Dr. Steven Muegge, an associate professor at Carleton University, and one of the organizers of Lead To Win. Companies applying to Lead to Win go through a rigorous opportunity review process to ensure they’re ready to benefit from the Lead To Win ecosystem in ways that create value for themselves and for their partners, Muegge says: “If the founders are only thinking about the product, they’re probably not ready.”

Although Lead to Win stresses an “ecosystem” approach, its key success metric is sales: companies that earn entry to Lead To Win must demonstrate potential to generate $1-million in annual revenues within three years. “A good product is not enough,” Muegge says. “Revenues are the proof that what you’re doing is valued by customers.”

Program advisers and mentors help the entrepreneurs to identify prospects, build a pipeline, train salespeople, work on their pitch, and arrange customer meetings. Advisers may even sit in on early customer meetings. But what they’re best at, Muegge says, is demanding progress on all of a business’s sales activities. “We train and support, observe and provide feedback, and keep metrics, but the entrepreneurs are ultimately responsible for sales. They know that, on Monday morning, someone is going to ask how your sales call went. It creates accountability.”

In Waterloo, Ont., they’re setting high targets for customer development. Communitech, an industry-led technology association, has launched a six-month sales-acceleration program called “Rev.” Its goal: to give startups the vision and process to scale to $100-million in revenue.

With the aid of experienced product, marketing and sales executives, Rev helps client companies master all the intricacies of sales: segmenting and targeting markets, pricing, developing key messages, building buyer and user “personas,” perfecting their pitch, and building and training a focused sales force. Rev also tackles a challenge most startups overlook: finding large distribution partners to scale up sales quickly. “These are aspects of building the business that most of our founders have never confronted before,” says Communitech executive director David Chalmers. “At Rev, we build that structure out.”

Companies enter Rev with a product or service, and some sales. “Rev tries to work with the foundation they’ve created,” Chalmers says. “But sometimes, there is a reset. When you’re growing companies, what you did historically, might not be the same framework that is required to take the company to new heights.”

The biggest hurdle, he adds, doesn’t usually come from the market – but from the entrepreneurs themselves. “When CEOs come into this program, they have a good understanding of their business. Our goal in Rev is to work with them on the areas that require more due diligence and refinement, specifically those related to revenue attainment and growth. In other words, you need to see your business from the customers’ point of view, identify functional gaps, then build the necessary tools required for sustained growth.”

The good news is that once you accept that reality, your viewpoint shifts immediately. By the time Rev CEOs graduate from the program, Chalmers says, “Their go-to-market strategy becomes very transparent and their business confidence goes right through the roof.”

Open your eyes and ears to your customers. Success is waiting. Up there on the roof.

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Why you need to be selling your company every day

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Originally published on August 2, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/why-you-need-to-be-selling-your-company-every-day/article31141189/

About a year ago, I was listening to a prominent accountant speak to a room full of business owners. His message was both clear and simple: “Each day you should run your business like you are in the process of trying to sell it.”

This simple message created many frowns and furrowed brows. Clearly, people in the audience wanted to respond, “But I’m not selling my business, and I don’t plan to any time soon.”

Not the point.

It doesn’t matter whether you’re thinking of selling your business. Some lucky owners get to simply pass it on to the next generation. But the real point is this: You need to think and act like you are selling your business, every day.

Why? Selling a business is an extended process, often a gruelling one. Compare it to selling a house. The first step is to “stage” the property. This means taking a hard look at your surroundings with fresh eyes, to help you recognize which furnishings and decorations add to your home’s ambience, and which are just clutter.

It’s a tough thing to do. For most people, everything in their home represents a memory or a milestone on the journey of raising a family. Prospective purchasers care nothing for memory or sentiment, seeing every unnecessary element as a flaw that diminishes the value of your home.

When you are selling a business, the process is little different. Prospective buyers go through your numbers, your assets and your records with the diligence of a home inspector. They will scrutinize your sales, margins, inventory, returns, client list, receivables and payables. They will dig through your sales history and your new product or service pipeline, looking for any irregularity, liability, trend or threat that could detract from the value they are paying for your company.

While some may see this as a tedious, time-wasting process, I see due diligence as a very positive exercise. It’s a way to identify issues before they become problems. In fact, this process shouldn’t just be limited to when you buy or sell a business. I believe that entrepreneurs should initiate a mock due-diligence process every year, preferably just before their company’s annual retreat or strategy sessions.

Think about it. Your goal as the owner or manager of a company is to increase its intrinsic value (how much the business would be worth if it were going to be sold). By rigorously and formally questioning all of your business’s habits, assumptions and processes, you’ll develop a culture that embraces change and continuous improvement – and increases the value of your business on an ongoing basis.

In my opinion, your company’s value is the single best measure of how well you are running and building your business. Value incorporates all key time horizons that buyers and evaluators employ when assessing a business – how you are running your business today, what you are doing to keep it relevant and meaningful to your customers in the short term, and how you establish and execute on your grand, long-term vision.

“When it comes time to sell their business, many business owners are surprised to receive a lower valuation than what they had expected,” notes Murad Bhimani, a Toronto-based partner with accounting firm MNP LLP. “That’s why we recommend to our clients that they should operate and build their business as though they could sell it any minute. This keeps you focused on what is critical every day, such as sound operations, diversity of customer base, building a strong management team, and proactive product development.”

If your kitchen’s ceiling is leaking, you wouldn’t wait for a home inspection to find the cause and fix it. Don’t wait to see whether your company is leaking opportunities and profits. Whether or not you’re planning to sell, take a good long look at all of your key performance indicators on a regular basis. Your bottom line (and your wallet) will thank you for it.

And some day your children may, too.

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Why getting in touch with your ‘feminine side’ is good for business

 

for Ken

 

Originally published on July 5, 2016 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/why-getting-in-touch-with-your-feminine-side-is-good-for-business/article30675493/

Sorry, men. But it looks like we are going to have to work a lot harder if we want to be successful in this new age of entrepreneurship. As the voice of the customer speaks louder and louder in the marketplace, the sound of “male authority” in choosing and driving opportunities to market seems likely to give way to better observing and listening skills.

Case in point: I sit on the Conference Board of Canada’s Council for Innovation and Commercialization. When we meet each quarter for two days of innovation talk and learning, we invite an entrepreneur into the room, to listen and learn alongside us, and also to share his or her inspiring story.

Just last month, when we were being hosted by 3M Co. at its Innovation Center in St. Paul, Minn., we were captivated by the passion and energy of Alicia Woods, chief executive officer and creator of Covergalls Inc., from Sudbury, Ont.

You may recognize Ms. Woods’s name and story from Dragons’ Den. Designing and selling coveralls that suit women’s needs and physiques, Covergalls began by serving the mining industry. In no time, Ms. Woods’s understanding that women had different needs – and tastes – from men led her into other products, from bibs and shirts to gloves and tuques. Now, her firm has also moved into forestry, energy, construction and manufacturing – and even ergonomic men’s workwear.

The first time Ms. Woods appeared on Dragons’ Den, in the fall of 2014, she slayed all five dragons – and secured a $75,000 deal from three of them (although two later dropped out during the due-diligence process). Two subsequent appearances on the show chronicled her company’s continuing growth and probably made the reluctant dragons regret their failure to ante up.

Ms. Woods similarly won over the Conference Board’s innovation experts. Picture the scenario: We were at 3M, one of the world’s consistently most successful and innovative corporations. Its innovation centre offers high-tech interactive presentations that both demonstrate 3M’s history of breakthrough products and promote the benefits of partnering with the company’s scientists and innovators.

So why did we find Ms. Woods’s presentation so compelling? She demonstrated the power of simple, observation-based innovation. You don’t need technology and science to create breakthrough innovations – just the vision to see a gap in the marketplace and the determination to keep iterating until you find a winning solution.

In short, she demonstrated three of the most important qualities of the modern entrepreneur: insight, passion and empathy.

* Insight, the ability to clearly understand a situation or opportunity, is paramount. Every marketplace is crowded. A great entrepreneur looks for the cracks and crevices where opportunity is hiding, where the goliaths of industry either missed the signals or were too encumbered by process and bureaucracy to respond. The humiliation of having to wear men’s coveralls in an underground mine – unsafe because of the lumpy fit, and poorly equipped for bathroom breaks – didn’t just make Ms. Woods angry. It opened up a world of opportunity.

* Passion, of course, is the hallmark of every successful entrepreneur. It’s why you so often hear investors, such as those on Dragons’ Den, talk about investing in the person, not the company. If you are not totally engaged in your venture and ready to push through every obstacle, then the long, winding road to success will probably end in a massive sinkhole.

* Empathy is the ability to understand other people’s feelings and needs. To me, the old cliché, “I feel your pain,” is the X-factor for business success today. And as psychologist Dan Goleman, author of Emotional Intelligence, noted in a Psychology Today article, “Women tend to be better at emotional empathy than men.”

Empathy is foundational to both innovation and entrepreneurship. To find opportunities, we have to be looking with our ears and listening with our hearts. I disagree with the critics who play down market research by saying customers don’t know what they want until we give it to them. Clients may not know how to create the actual product or solution that will ease their pain points, but they are certainly the best equipped to articulate their challenges – for anyone who is willing to listen.

People who are highly attuned to the voice of customers, through emotional empathy, will feel their pain best and are most likely to solve their problem first.

Note to the guys: Instead of scoffing the next time you’re told to get in touch with your “feminine side,” it’s time to take it to the bank. If, that is, you want to remain relevant in this age of empathetic opportunity and emotion-driven entrepreneurship.

 

 

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