Category Archives: Business Strategy

What Happens if a Supplier Enters your Market?

Google-wireless-competitor-threatGoogle just announced plans to offer wireless service. What might this mean for AT&T, Verizon, Sprint and T-Mobile? How would you respond if one of your suppliers announced they are going “upstream” and will now offer the exact same product or service you offer?

I was amused when I read about this announcement, including the quotes provided by Google, and the reporter’s assessment, so I thought this might be a good topic to explore in greater depth.

To start, the words “Google is now entering your marketplace” are likely to bring considerable levels of concern to most business owners. It just isn’t good to have another competitor – especially if they are Google or Apple – given they often see the world quite differently. These types of companies have a history of being disruptive technology providers.

With regards to the impact of this announcement on the wireless Telecom industry, I suspect it is not all bad news. In order to help understand what this type of announcement might mean to your business, it is helpful to review the Porter’s Five Forces model, as referenced in this article.

Porter’s Model

According to the model, there are five “forces” that determine your competitive environment (the Google announcement clearly applies):

  1. Supplier Power: This force is more from a cost and control perspective … worst case scenario is if you have only one supplier; they can then charge you top dollar, and you have no negotiating ability to achieve better terms.
  2. Buyer Power: This force comes from your buyers – how effective can they pool purchase decisions across channels and geographies to drive down prices?
  3. Competitive Rivalry: This force speaks to your competition. If you face multiple competitors offering similar products, then you don’t have much negotiating strength to drive higher profits.
  4. Threat of Substitution: This force is similar to what competitors you face and how “generic” your product or service is; for example, if your service can be performed by your customers, then a price ceiling exists – above that price will result in zero sales, as your customers will simply do your service or build your product themselves.
  5. Threat of New Entry: This force is the threat of the unknown, so to speak. Worse case is if it costs little in time or money to enter your market and compete … if your profits suddenly increase and anyone can enter your market, then it won’t be long for profits to drop. Those seeking to create or sustain monopolies are trying to address this force.

 

So What’s Going on with the Google Announcement?

I would propose each of the above listed forces might be in play, with some more so than others. Google doesn’t have a monopoly in providing handsets. Samsung and Apple are viable competitors. Google admitted in the article that the last thing they want to do is to disrupt their current sales model selling Android phones to the carriers; Google must tread lightly.

Another key factor for Google is the last force – the cost of entry. The wireless Telecom industry has a significant barrier to entry … in the billions of dollars range. If you want to be a national carrier, then you will need to build out a nationwide footprint, and, you will then have to replace it every 7-10 years as new technology advances go mainstream. This is a big investment, and one that Google won’t take lightly. In the announcement, it was mentioned that Google has established wholesale agreements with the carriers, so is not looking to make that big investment today.

What Should the Carriers Do?

Right now, after perhaps losing a heartbeat or two, the best response is that of a calm business partner seeking to expand a mutually beneficial relationship. This strategy is quite common in the Telecom industry, primarily based on the fact that the cost of entry is so high. Revenues get allocated between the carriers, but, it is a big revenue “pie” to share from.

Google explained in this latest announcement that their intent is to test new technologies and to ascertain what innovations are possible from a Telecom or infrastructure provider‘s perspective.  For now, this is likely a true statement. The Public Relations team working at Google should be very careful what future announcements are publicized, as well as the specific wording of such future communications. Clearly it is in both parties interest to maintain a civil relationship. Should the Telecom provider’s relationships sour with Google in the years that follow, then that might not be taking the best long-term perspective, given the enormous buying power of Google – as a customer and as a supplier.

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

3 Comments

Filed under Business Strategy, Marketing Strategy

Build vs. Buy: What is the Best Path to Grow Your Business?

As a business owner (or an aspiring one), an important consideration is the quest for future growth. From a strategic perspective, there are really only two choices: grow organically or by acquisition. By “organic,” I simply mean to grow by closing more deals, through efforts such as expanding your sales force or introducing a new product line.

When writing a business plan, it is important to consider each of these growth strategies – whether you are starting a new business, or expanding an existing one.

This decision is actually quite important, with big repercussions as to what your company will ultimately become. Given the significance of this choice, it is smart to carefully consider both options.

Grow Organically

If you are starting a business, then the biggest challenge is what I’ll call “finding your way.” Starting from scratch means you don’t have any processes in place. Everything is a variable, so picking it all right the first time is highly unlikely. Instead, you will pick an initial path to pursue. Then, you will spend a lot of time adjusting and evaluating that decision. This process will then continue until you start getting traction and find the right path for growth.

Having a long “runway” with sufficient funds to make a few changes is critical for long term success. Early mistakes can be costly – a big one could sink the company. So, it is necessary to plan for some setbacks. Other suggestions are to surround yourself with as many experts as you can, and to have a well thought through business plan.

Grow by Merger or Acquisition

This option, in many ways is the exact opposite of organic growth. First, existing processes, employees and a business plan are already in place. If you are seriously considering the purchase of an existing business, you must see something desirable – enough to buy it! So, your challenge is how to integrate the new business into your existing company – from a people and process perspective, as well as from an IT systems and go-to-market strategy.

Alternatively, if you are considering starting a business through acquisition, then the one integration challenge is that of acclimating yourself to being the new owner or manager. Process “integration” is not really an issue … it is more your evaluation of the existing processes. What makes sense and what doesn’t?

business plan writing helps M&A strategy

In many ways, an M&A strategy is similar to the decision to have a dog. This is a picture of my own dog, Rusty.

In many ways, I see the success of a business acquisition to be akin to getting a new dog as a pet. Here are three ways I see these two activities to be in close alignment:

  1. There are many different types of dogs, and there are many different types of companies – you need to research the strengths and weaknesses of each if you want a good fit with your existing lifestyle, and/or the culture of your business. For example, if you live in an apartment in NYC and don’t have many “jobs” for a dog to do, then getting an Australian Sheep dog might not be a good fit. Similarly, if your company has rigid processes and procedures, then purchasing a startup out of the Silicon Valley with a young management team might not be a good fit either. It is really important to match the culture and temperament of an acquisition to your existing company or family to achieve a good fit.
  2. If you don’t spend time with your new acquisition, then the relationship will sour – this holds especially true with a puppy. Young dogs have a lot of energy, so they will either play games with you, or chew up your clothing, furniture and anything else they can find if you are not around. In the same way, employees at a newly acquired company will be looking to see their new role. If you don’t quickly give them guidance and a compelling reason to be part of the newly combined entity, they might lose interest and leave. The amount of time you need to invest in this task is going to be more than you thought. And, this requirement doesn’t go away after the first 60 days. If you are not ready to invest the time, re-think this acquisition decision.
  3. New dogs and new companies need clear lines of demarcation to know what behaviors are acceptable – for those of you who are parents, you know this analogy applies with young children too. We all need clear direction on what is expected and how we are to perform to achieve success recognition. Without this communication, pets, employees and children will come to their own decisions, likely pushing boundaries to new levels in search of a definitive line.

 

A careful evaluation of “build vs. buy” will help avoid surprises before you have made an investment in either a new company, or a new member of your family. Once the decision has been made, it is usually quite difficult to undo … and will cost you a lot of time, effort and resources. Plan ahead to avoid the pain and achieve the gain, and go into these transactions with eyes wide open.

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

Leave a Comment

Filed under Business Plan, Business Plan Writer, Business Strategy, Marketing Communications

5 Reasons to Choose a Niche When Starting a New Business

Select a business niche when writing a new business planThe Wall Street Journal recently published an interesting article on Artificial Intelligence (AI), written by Christopher Mims (see article). The article describes two new businesses that are making great strides in how AI can be used to help make our lives easier.

What struck me as most interesting, however, was the incredibly narrow focus these businesses have with regards to what they hope to accomplish, and the value proposition they offer. As Mims points out, this is actually a very smart approach – one that is in complete alignment with my own perspective. If you seek to launch a new business (and write a new business plan as part of the process), then you too can benefit from this strategy.

In the WSJ article, one of the new businesses described is X.ai, which seeks to help simplify the task of making calendar appointments with others. We have all experienced this challenge. It can be an annoying and time consuming. The investment community agreed. The company was recently funded with $2.1 million to develop their virtual assistant called Amy (see announcement). Considering all the tasks an administrative assistant could do, it is notable that the company will just address the task of making appointments.

Here are 5 reasons why this is a good strategy:

  1. Once the development work has been completed and it is time to start generating awareness or “buzz” for the company, the message of simplifying the task of calendar appointment setting is crisp, easy to understand, and will resonate very well with nearly everyone that hears it. Another term for this strategy is KISS, or Keep It Simple, Stupid.
  2. The focus on just one task means that the “use cases” or examples of problems that can be solved will be equally focused. Employees will quickly become experts at the challenges tied to setting appointments when you can’t see each other’s calendars. Training time, effort and cost will be minimized, as will time spent on the phone doing customer support.
  3. Sales cycles should be accelerated, or at least simplified. This will likely also lead to streamlined support and future sales leads, helping the company to grow at this critical point of its life.
  4. Market awareness programs will be better understood to yield better results. Given the overload of information that potential customers hear every day, the chance to quickly address a common challenge will resonate well, resulting in greater retention and brand recognition.
  5. Future expansion decisions will be simplified, and cost less. For example, if the company sought to ease appointment setting, time card completion and file storage, then you will have new complexity when deciding the best direction for future growth. Where do you invest next? Time card tracking, appointment setting or file storage? Having initially invested in all three services, you will likely continue that strategy, and it will cost you more resources and investment. Alternatively, going with a very narrow focus to a specific audience offers a more cost effective approach to expansion. Getting just appointment setting right, for example, could then be applied to several different types of user profiles, ranging from corporate business workers to small business owners to “soccer” moms. This type of expansion will be much easier and cost effective to execute, so will have a greater chance for success.

 

So why don’t more business startups pursue such a narrow focus and strategy, including how they write their business plan? Experience has taught me that when working for a small startup it is very difficult to say “no” to a new sales opportunity. The sales and/ or management team is afraid to see a possible sales opportunity walk out the door. When you are at a startup, things are tight, so every possible sales angle takes on greater attention. But those with the strength and discipline to do just one thing, and do it well, will be rewarded with less risk and, hopefully, a better chance of survival.

 

Gordon Benzieis a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

Leave a Comment

Filed under Business Plan, Business Strategy

Policy Change, or New Trend Opportunity?

trend_or_new_business_opportunityI recently had the opportunity to go to France on a business trip. Despite the increasingly “flat” world we live in, each country definitely has its particular nuances on how business is done and what social customs are acceptable. Fortunately, I was able to spend a bit of time in restaurants where I enjoyed the wonderful French cuisine.

One thing that caught my attention was when it came time to pay my bill. I was aware that when using a credit card, the tip had to be referenced early so as to be included with the authorization approval. What struck me as odd was that a tip amount could no longer be included with my credit card charge.

Shortsighted Policy Shift

This policy change surprised me, so I asked further what the thought was behind it. My server told me that it was causing too much taxes to be charged to the restaurant – apparently VAT or other taxes are applied to not only the food bought, but the services tipped. So, the solution was to simply stop including tips with credit card bills.

My next question was to my server – what did he think of this change? You might guess his response, “It is terrible.” I can only imagine. Personally, I carry little cash with me, relying heavily on plastic to cover my expenses, especially during a business trip. I didn’t have any Euros on me, so had to explain I would be back later to reconcile my shortcoming (which, by the way, I neglected to despite good intentions).

Industry Change, or Window of Opportunity?

My next thought was whether this change was government-mandated, or just the establishment’s decision. After doing a bit of research, it appears this was an isolated incidence (please let me know if I missed something). Given my server’s response, if the policy was country-wide, I suspect we would have all heard about it by now!

Given that this appeared to be an isolated change, what do you suppose will be the outcome? To start, I have a lower opinion of the restaurant – why do I want to support an organization that is clearly not thinking about their employees?

Further, I am inclined to believe the hired help will seek employment where tips can be added to the receipt. This might even create a cycle (and a reputation) that this business owner may, or may not truly understand. Those that can’t find “full payment” employment opportunities might ultimately become the staff at this establishment – effectively lower the bar on the quality of staffing. These folks might have to accept a lower payment in exchange for a lack of experience, poor work history, bad reputation, or some other challenge that precluded their working elsewhere.

As a competitor, this opportunity could be viewed as a window of opportunity to initially hire away the best employees, and in the future, to convince new recruits to not even consider their competitor for employment.

Alternatively, if this were a broader industry shift, such as a new government mandate, then the window of opportunity might be with a different perspective. For example, a new business plan that might now gain traction could be to provide mobile payment via a new app capable of digitally paying a bill while bypassing the restaurant’s own internal billing format. From a marketing communications perspective, the waiters could then become your own distributed sales force, offering this service to those without cash on hand.

Those with a keen sense of what was driving the change and what the perspective is of those impacted by the change will stand to benefit – if they can move quick enough to provide a new solution before everyone else.

So, next time you observe a shift in a routine, it might be worthwhile to pay particular attention to what is driving that change – a new business plan opportunity might be just around the corner!

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+.

Leave a Comment

Filed under Business Plan, Business Plan Writer, Business Strategy, Marketing Communications, Marketing Consulting

Marketing Strategies to Deal with a Disruptive Event

disruptive_event_microscopeIn my last post, I presented a real-life disruptive event that manufacturers of microscopes are now facing – the emergence of a new competitor selling a product that apparently is unbreakable, can be transported to literally anywhere in the world, and, could retail for $.50 each.

I chose this example not only because it is a current, but because of the severity of the disruption. Professional microscopes used by research facilities or drug manufacturers likely cost thousands of dollars, so the price difference is significant, to say the least! Here are some observations and tips I would suggest, if I were the one responsible for realigning the strategic direction of an existing Microscope manufacturer.

Why are you in Business?

I don’t mean to imply you should just recite your mission statement, or to try and present the merits of preparing one. I am simply suggesting you look to your roots and decide why you are in business in the first place? What is the reason you started your company, or in the case of large, publicly traded companies, what difference are you trying to make in the world? Assuming it is more than just collecting a paycheck, a careful reflection on this point will help guide next steps.

For example, if your mission was to provide under-developed countries with medical assistance through the production of affordable microscopes, then I would propose you now have two choices: (1) Join forces, or (2) Exit the industry. Manu Prakash and his students at Stanford have built a better “mousetrap” as the expression goes, so you really can’t expect to disrupt his breakthrough – it is unlikely.

Alternatively, if your mission is to provide the highest quality instruments so researchers can gain insights into the deepest depths of molecules, atoms or whatever else these individuals do to help find cures to diseases, then your response might be different. The paper microscope was created to serve markets where the primary purchase decision is based on cost, ease of use and transportability. The research market, however, has money to spend and is typically is located in a developed nation where breakage issues are not a driving factor of a purchase. So, this market might see value in features that better serve its needs.

Product or Market Differentiation

Marketers like to call this strategy product or market segmentation. Ideally, it is best to “own” a particular market segment. Narrow the focus on what you think you can “own” so as to provide the best possible product to serve the specific needs of that particular group of buyers.

For example, it may be that a larger model is better suited for research purposes. In this hypothetical scenario, it might make sense to “go big” and introduce a much larger version with specific features that a researcher might highly value. This way your product gets positioned as serving a different need, so will less likely be compared to the paper product. A great way to execute upon this concept is to come up with a new name for the market you seek to dominate – it will help to make the buyer feel more comfortable, and that they are not overpaying for a product that could be purchased for under a buck!

Service Differentiation

Another business strategy to make your offering different than the rest is to include or associate a type of service with the physical product. In the software world, some clients have highly sensitive data, processes or actions that are being performed by their software at all times of the day or night. These clients will happily pay for 24/7 service to be available at a moment’s notice to fix an issue if it comes up, so as to avoid lengthy downtime. In the same way, some of the microscope manufactures might decide to come out with a highly sensitive, highly accurate model that might be the Ferrari of models – both in terms of performance and nurturing necessary to maintain that performance. Clients interested in this type of product might be willing to pay extra for the support or maintenance services associated with such a high end machine, making the focus being more on providing the valuable expertise to keep the equipment running at all times. This is certainly a different business model than that of providing the “buck” model.

To conclude, when faced with a disruptive event, it is often helpful to first think about your business purpose. This insight is more than just to include in the writing of a business plan – it can genuinely be a life saver to help you get over the shock of a disruptive event that might happen in your industry. With this insight well thought through, the choice of a responsive action might be easier to see, identify and put into place.

Do you have a disruptive event that occurred in your industry? I would be curious to hear what you did and how it played out. It will be interesting to read about the microscope manufacturing market in about 2 years to see how these industry players decided to respond.

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

 

Leave a Comment

Filed under Business Plan, Business Strategy, Marketing Communications

What is Your Business Plan to Deal with a Disruptive Event?

black_swan_eventHaving worked in the technology industry for the past 20+ years, I have seen a few significant changes and technological breakthroughs. Most of the time they are unexpected – there is a reason why these are called “disruptive.” Few can truly see it before it happens.

According to Wikipedia, Nassim Nicholas Taleb coined the term “Black Swan” as a theory to explain:

  1. The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology
  2. The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)
  3. The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs

The bottom line is you won’t see it coming, and the announcement that brings it to light will be shocking, to say the least.

A Microscope for the Masses

One of these events just occurred last month. I read about it on Yahoo! News on March 24, 2014, where it was announced that Manu Prakash, a professor at Stanford University and his students have developed a new microscope that is literally “built” out of a flat sheet of paper, a watch battery, LED, and optical units that when folded together, much like origami, creates a functional instrument with the resolution of 800 nanometers – basically magnifying an object up to 2,000 X.

Adding further impact to this breakthrough, apparently it is unbreakable, can be transported to literally anywhere in the world, and, could retail for $.50 each.

What do you do if you work for Carl Zeiss, Leica, Nikon or Olympus, some of the leading microscope manufacturers in the world? I suspect these companies are right now doing their very own business plan evaluation to try to answer this question.

How Would you Respond?

I suspect that the day the news announcement was made, there were a few “oh sh%@” comments that made it through the halls of these manufacturers! No one likes to be surprised, and everyone usually, at least initially, thinks the worse.

To start, this is an interesting case study that will unfold before our eyes. The reason is that from a humanity perspective, this really is a good thing. Now under developed countries might have a way to scan for blood diseases, in locations that were never before deemed possible. New medical breakthroughs might even result. Lives might indeed be saved from this invention.

So, from a public relations perspective, the last thing a company should do is to attempt to discredit the competition, or in any way try to make the product sound inferior or to be avoided. In fact, words of congratulations might even be in order, almost from a peer-to-peer perspective. Here is where crisis PR avoidance tactics should be studied and adhered to.

Simply stated, what these microscope manufacturers might now have to do is to redefine the marketplace such that their product line is differentiated enough from this new competitor that there is still a need for purchasing their product. This is one of those “easier said than done” statements. The classic case is the buggy whip manufacturer story. The disruptive event of inventing the “horseless carriage” or automobile basically wiped out their industry – leaving the only defendable segment being that to provide Hollywood props for movies such as the Indiana Jones series.

According to Mindspring.com in their review of the Microscope industry, Carl Zeiss and the E. Leitz component of Leica are mostly German made. They tend to be more expensive than the Japanese made Nikon and Olympus. Their segment is the very high end, likely for researchers. Sometimes they are worth the extra money and sometimes not. In the bio-med market, Nikon and Olympus are the real powers, likely due to either features offered or a reputation they have developed within this industry.

In my next post I’ll offer some strategic tips on how one might tackle such an event, and how that strategy might be part of the foundation of what your business plan story should tell.

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+.

Leave a Comment

Filed under Business Plan, Business Strategy, Public Relations

What is Your Exit Strategy?

business_plan_exit_strategyThere are many reasons to start a business, ranging from launching a new product, defining a new market segment or fulfilling a passion to address a market gap. Regardless what your reason is for creating a business, if you need outside funding, then you need an exit strategy. Why? Because an investor needs to know how they will get their money back in the end. After all, they are investing in your business with an expectation of making money.

As I speak with clients, this is sometimes a difficult concept to understand. I hear questions such as “I don’t want to sell my business?” or “How do I know what its value is in the future?” These are reasonable questions that need to be addressed as part of writing a business plan.

Valuing Your Business

With regards to the “mechanics” of business valuations, there are a few different approaches. In the end, however, value is most closely tied to the revenue your business generates, either in the current year, or what “proforma” revenue is expected to be next year. Having said this definition, it is still part “voodoo” and part science. A recent article on Bloomberg pointed out that MLB teams are now theoretically 35 percent more valuable than just a few months ago – ten teams are now valued over $1 billion! See article here.

If you are a buyer, you will likely push for current year’s revenue, and vice versa if you are the owner. In some industries, gross revenue is a suitable measure; in others net revenue is an industry standard. Personally, I think that gross revenue is a better guide to evaluating income opportunity. Net income reflects both the market potential PLUS how well you can keep a lid on costs. Expense management is more closely tied to how you, the operator, manage your business. Either way, a number can typically be negotiated as a reasonable baseline for valuation.

Industry Potential

The next factor to consider relates to what industry you operate, to then incorporate an expectation of future growth. The rationale is simple: If your industry is expected to grow rapidly, then there is a higher expectation of value, which translates into a higher income “multiplier.” As a buyer, I will pay a higher price if I think my investment will grow more in the future.

Having worked in the software and high tech industries over the past two decades, I have seen some of the highest income multipliers in the business – as high as 10X! Other industries don’t have such lofty expectations, so may only have an income multiplier of 1X. What this means is that a buyer will only pay 1X income as a purchase price.

Exit Options

Now you have evaluated a valuation strategy, the last step is to identify how you will sell your business. Here are five options to consider, each of which can provide your investor with in an exit strategy:

  1. Another new investor can replace your current investor’s position
  2. An outright sale of the business can occur to a new entity, such as another owner or business
  3. The current management team or owner can do what is called a “Management Buy Out” or MBO or “Leveraged Buy Out” (LBO), which means that new debt is issued for the current team to buy the business themselves
  4. An Initial Public Offering (IPO) can be performed, leading to public ownership of your business through shares on a stock exchange. Note that this exit strategy typically requires a minimum level of income in the $100 million range or more, so this exit strategy may not be right for everyone
  5. A trade could be arranged whereby you now own a different asset in exchange for relinquishing control of your business

 

An exit strategy is a necessary component to a business plan’s financial model, as it demonstrates that an investor’s money will not simply “disappear” once you collect the check. An exit strategy is part of an investor’s lifecycle. Without this expectation, it is unlikely that any new businesses would be funded, creating enormous problems for those entrepreneurs seeking to challenge the status quo or those inventors that have the next greatest thing that we don’t yet know we can’t live without!

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

Leave a Comment

Filed under Business Plan, Business Plan Writer, Business Strategy

When is the Right Time for a Business Plan?

Choosing a time to write a business plan is challengingOne of the questions I hear frequently is that of timing … when is the right time to devote the time and effort to prepare a more formal business plan? It is an important question, and one that must be considered carefully. If you write too soon, your idea may be completely different than what you ultimately go to market with. If you wait too late, much of the benefits will be foregone. How far along in lifecycle in your future business does it make most sense to more formally document your vision?

To start, there is no one “right” answer. Some will argue that there is no point in writing a plan at all, at least in the beginning, as so many factors are subject change. I am reading an interesting book right now by Clayton Christensen titled “How Will You Measure Your Life?” In it, the author talks about the need for two business strategies – a deliberate and an emergent one. I found this analogy quite good. In order to begin a new venture (or adventure), it is necessary to have an initial direction to follow. The author coins this initial decision as being a “deliberate” strategy. He gives the example of Honda entering the U.S. market with a large bike that will directly compete against Harley Davidson’s products. Soon, however, it became apparent that this strategy wasn’t working, as evidenced by a lack of sales. Meanwhile, a group of employees began using Honda’s smaller bikes off-road, and were having a great time doing so. This “unplanned” activity and market segment became an “emergent” strategy, which ultimately gave Honda a foothold into the lucrative US market for motorcycles.

Using this author’s methodology, a formerly written business plan can be a great tool to validate an initial or deliberate strategy. This effort can give you a way to rationally defend your initial decision to pursue a new product or market expansion. As part of this process, you will either gain a greater comfort level with what you are doing, or not. Regardless, valuable conclusions will result (do I “stay” or do I “go”?)

An emergent strategy, however, might be best viewed as opportunistic, and one that might need further validation prior to making the investment in preparing a full, formal business plan. This approach then lets you be open to new “emergent” opportunities while at the same time realizing that you did pick your deliberate strategy for a reason – you need to give it a fair review and effort to validate that it either works, or that it doesn’t. Writing a business plan on the initial deliberate strategy is a great approach to help validate if this initial idea is indeed worthy of the effort.

Christensen states that about 93% of all startups change their strategic direction at least once before getting it right. So, flexibility and preservation of initial capital are clearly critical for survival. But, an initial direction is still needed before you can begin engagement in your idea.

Two Reasons to Write a Business Plan

The role of writing a business plan is really two-fold. The first is to better clarify the strategic direction you want to purse with your business endeavor. If, for nothing else, the act of writing down your objectives, strategic direction and competitive differentiation forces you to really think about these critical thoughts. You can’t go to market unless you are really comfortable in telling your story. Writing it down in a business plan forces you to review all the points, including those you might be inclined to gloss over for lack of interest.

The second role of writing a business plan is to get funding. An outside bank, business partner or venture capitalist will want to have some sort of documentation explaining in detail what it is you plan to accomplish. After all, it is their money that you will be investing. At this point, a more formal business plan starts to make sense. Note that while an angel investor might prefer to hear your “elevator pitch” and in a few minutes, and then decide whether or not they will fund you, it still is very helpful if you have gone through the exercise of more formally reviewing your target market, competition, product positioning and pricing strategy to better understand how to turn a profit.

Alternatively, if by flushing through your new business idea in greater detail, you discover that there is an inherent flaw in your plan, it is better to have found out earlier versus investing considerable effort, resources and money into an idea that really couldn’t work.

The Right Time

Getting back to the question of timing, as you come up with an initial idea for a new business or product line extension, it probably doesn’t make sense to prepare a business plan. First, you need to do some “gut” checks to see what sort of viability your idea might have. That review process might include talking to industry experts, potential business partners, friends and family. If your business involves the manufacturing of a new product, then it might also make sense to get an idea of what costs are involved and what possible patents might be required in order to avoid potential infringement issues.

Once your initial review is accomplished and you feel comfortable your idea definitely has merit, now is probably a good time to consider writing a plan that captures the salient competitive and marketing requirements to get your idea off the ground. Through that process, you will soon realize whether or not your idea could work, at which time it is highly likely you will need to consider the use of outside funding. As your plan will be virtually complete by that time, having the plan already written will let you continue forward without delay.

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

Leave a Comment

Filed under Business Plan, Business Plan Writer, Business Strategy

5 Reasons to Hire a Marketing Consultant

By Gordon Benzie

 

direction_to_follow_to_hire_marketing_consultant

Most business professionals have a budget or a fixed level of resources to work with. Those working at startups must be extra vigilant, as extended budget overruns could sink the company. When you are operating within these types of constraints, it is easy to get into the mindset of thinking “I can do it all,” or “I have to do it all” because I can’t afford to pay someone else to do what I can do, which in the end gives me a greater chance for survival.

Entrepreneurs justify these actions under the umbrella of “I can do this task better” than anyone else, further validating the decision to “in source”. Interestingly, this philosophy can be either highly beneficial OR detrimental to a young, growing business’ success. It just depends. An Entrepreneur that spends the time to really understand their client’s needs by giving them a lot of personal attention might be doing the right thing. The same logic, however, may not apply to other activities.

Because of this ambiguity, I thought it might be helpful to provide a checklist of five potential benefits to consider in your decision to hire a third party marketing consultant.

 

  1. To obtain a third party perspective from someone who doesn’t have a vested interest in your current marketing strategy, lead generation or messaging campaigns. A consultant will be more likely to point out an inconsistency or ambiguity of your current programs, simply by what questions are asked. Fresh eyes and ears are valuable as a “bouncing board,” such as what your objectives are or who you’re trying to speak to.
  2. To remove (or at least reduce) politics from making the right marketing decision. Consultants are less likely to be as caught up in office politics for the simple fact that they are typically brought in to “fix” an already acknowledged problem. If you really need to know if a marketing campaign proposed by the founder or CEO, it might be difficult for a Vice President of Marketing to express concern.
  3. To provide a weighted perspective to break through tough, “logjam” decisions. Product naming exercises are one of the most challenging marketing tasks to perform, right before creating a whole new website. In these complex and often emotional thought processes, a third party consultant can operate better as an intermediary to break “ties,” or even better, to provide the rationale and leadership to make better decisions. If you are paying for a marketing consultant’s advice, why not actually use it!
  4. To hear an “outside in” perspective, ideally from a perspective gained while working in other industries. Quite often, the marketing challenge you are facing has been dealt with already in another industry, so why re-create the wheel? Well-seasoned consultants benefit from the simple fact that they have worked with clients in similar situations in other markets or geographies. Embrace these other viewpoints to gain greater value from your investment in your consultant.
  5. To address an issue faster than trying to uncover it yourself, for a problem that might be new or unknown to your marketing team. A consultant typically understands they are there to fix one or a few specific issues, so won’t focus as much on “justifying” their existence to keep collecting a paycheck, as a new hire might be more inclined to do. Of course, there are always exceptions, but consultants typically are laser focused on quickly identify the problem and then remedying it with the fastest solution available. I would propose that this concept further applies to those outside consultants who are in strong demand, as they have other billing clients eager to hire them next.

 

Hopefully these perspectives help to give you an expanded perspective on why it might not be the right choice to apply the “DIY” philosophy to all marketing activities. It might make sense to hire a consultant if the value delivered is accomplished quickly, or if an issue is fixed that you may not have even understood exists. Of course, there are good consultants and there are bad ones. Each of these objectives all fall by on the wayside if your consultant is not experienced in solving your problem. But, once you find a good one, it can be an excellent investment of your resources to periodically bring them in for a marketing “tune up,” or to review of your current campaigns to help assess whether or not you are on the best path to success!

 

Gordon Benzie is a marketing adviser and business plan writer that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

Leave a Comment

Filed under Business Strategy, Marketing Communications, Marketing Consulting

What Role Does Social Media Play in your Marketing Plan?

Like it or not, social media is here to stay. It has changed the way we communicate, the way we shop and the way we share these experiences. Consumers would rather buy from someone they know. Absent this type of referral, a product or service review by an independent third party is deemed as nearly as valuable and certainly more credible that what a company says about itself.

According to a recent McKinsey research survey, “Social technologies as a group have reached critical scale at the organizations represented in our survey. Seventy-two percent of the respondents report that their companies are deploying at least one technology, and more than 40 percent say that social networking and blogs are now in use.” The below charts published in the McKinsey report demonstrate the consistent growth social media has experienced within the business world.

 

There are two ways you can leverage social media as a business tool: As an internal means to improve productivity and efficiency, and as an external means to further engage with your customers.


As an Internal Tool

Social media can be used as a collaborative platform to better share ideas and solve customer issues faster. Here social media is being used as a shared IT application, no different than the use of browsers for web surfing or applications for word processing. As a collaboration tool, it should be centrally managed with a set of agreed upon usage guidelines to encourage appropriate behavior that isn’t offensive and makes good business sense.

 

As an External Tool

Here is where inflated expectations sometimes lead to unrealistic lead generation, branding or awareness assumptions. The likelihood of acquiring a million users that want to use your product after reading your twitter feed is probably unrealistic, unless there is a highly compelling event that can give you the exposure for such traffic volumes. A more likely scenario is one where your customers reference and, ideally, praise your product or service within their existing social media sites and usage patterns.

The critical question to ask consider is “How easy are you to work with?” How difficult is it for one of your customers to extract data from your service and upload it into their social media sites? If it is easy, then social media might indeed have a role in your future growth. Also, what content are you providing? Is this information that will be helpful for them as part of their purchase decision and evaluation? What is of primary importance, however, is that you think about it now, and that you realize that the way we use social media will likely change over time. Today we are in the middle of a communications transformation. This means you have to be ready to make the time, effort and financial investment to stay current and learn with the rest of the other companies.

Just in the same way that every marketing and business plan should have a competitive review and a strong positioning, companies today writing a business plan or marketing plan must now have a Social Media component. Businesses must now recognize that this is not a trend that will quietly go away. Social media is an important communications vehicle that should ideally be used both internally and externally as part of your marketing and communications plan.

 
Gordon Benzie is a marketing adviser and business plan writer that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+.

1 Comment

Filed under Business Plan, Business Strategy, Marketing Communications, Social Media