Paul Wallbank – Brilliant Communications

Category: business advice

  • The entrepreneur’s biological clock

    The entrepreneur’s biological clock

    In backpacker circles, when you turn thirty people ask “what’s wrong this guy? What you can get away with in your twenties, you can’t get away once you’ve passed the big “three-oh”. It’s not dissimilar to the “biological clock” many women in their thirties confront as they perceive their days of easily having children are coming to an end.

    A similar phenomenon exists in the business world, both for employees and business owners, that there are age limits on what someone can easily do. Like the backpackers, it’s more a perception than a reality.

    Once upon a time you were past it at fifty years old. Through the 1980s, 90s and the early part of this century that “past it” age contracted, along with the deskilling of the workforce, to 45, then 40 then 35.

    In the eyes of many in the corporate world today should you not have an established corporate career path by your mid-thirties then you are well “past it” and destined for a middling career and income.

    With entrepreneurs a similar quandary exists, once over forty there’s a feeling that the aspiring business owner should just stick to buying the local doughnut or lawn mowing franchise. Startup land is no country for old men.

    The underlying cause of  this view is the belief every successful business founder is rich beyond their dreams by thirty – Bill Gates and Mark Zuckerberg come to mind – that’s clearly silly given most businesses never come close to the successes of Microsoft or Facebook  but it’s a persistent one nevertheless.

    When the entrepreneur turns thirty, things begin to get tricky; sleeping on a friends sofa, working eighteen hour days and living on instant noodles isn’t an option when you have kids, partners and mortgages. At the same time, family, friends and potential employers start to ask “if this guy’s so good, how come he isn’t a millionaire?”

    To make things more difficult, risk adverse peers start bragging about how their safe, well paid job is allowing them to buy second homes or go on holidays most business owners can’t contemplate.

    Probably the hardest thing though is that the doors of the corporate world start slamming shut; for a 40 year old entrepreneur who has been running their own businesses for 15 years, it’s difficult to get a job in the business world and any position available won’t recognise the skills developed in running your own enterprise.

    Similarly, the warning to anyone with a decent corporate career who chooses to leave their safe office job to run their own business is usually “how can you risk throwing all of this away?”

    Risk is the difference between the ages; once you’re over 40 with there being little prospect of a plan B involving returning to a nice corporate position, then the cost of failure is a lot higher.

    In some ways this can be better; an individual staring down the prospect of a long, poverty stricken retirement has a very good incentive to get their business right and doesn’t have time to waste on speculative or “me-too” projects.

    The idea there’s an age limit to launching new, innovative businesses and products is silly, but it’s a persistent one nevertheless. The great thing though with being your own boss is you don’t have to pay attention to other people’s dumb ideas and this one is a dumb as it gets.

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  • Choosing the business battlefield

    Choosing the business battlefield

    Across the world industries are in turmoil as the Internet and globalisation allow new competitors into once safe markets. How do the incumbents deal with the upstarts and how do innovators challenge the establishment?

    One way is to redefine the market, instead of taking on the incumbent or challenger on their own terms, aim the product at a segment that hasn’t been properly developed. The best example of this is Apple’s iPod.

    When the iPod was released there were hundreds of MP3 players on the market including those from Sony who were expected to continue their dominance in the personal entertainment device market which they had developed around the Sony Walkman in the early 1980s.

    Apple took that market and redefined it on their terms, they then repeated the strategy with both the iPhone and the iPad.

    While not every business will have Apple’s design talent, or the market opportunities that allowed Apple to time their entry with those products, their experience shows how choosing where you fight your market battles matters.

    In the United States, major airlines are deciding not to compete with cut price carriers on travel websites, the reasoning being that these online comparison services only compare products on price which is not the legacy carriers’ advantage. Instead airlines like American and Delta are pushing their own websites that emphasise their advantages such as free baggage allowances, lounges, inflight meals or downtown check-in facilities that their low cost competitors don’t offer.

    Qantas in Australia carried out a similar strategy when faced with low cost carriers entering their market. They set up Jetstar as a low cost carrier which started flying the price sensitive routes, mainly the leisure and holiday services, leaving the expensive full service legacy operations to focus on the business dominated routes that weren’t so concerned about price.

    In doing this, Qantas chose where they were going to fight and on what terms, which has helped them remain profitable at a time when many other legacy airlines have struggled.

    Traditional retailers are facing a similar problem to the airline industry as online stores are taking growing share of the shopping market. Some commentators are suggesting they need to compete with online services, but for many entering a field where someone else has the advantage would be a mistake.

    Instead it may be better to choose where a business’s existing strengths lie and build upon those. For a bricks and mortar retail store, this may mean service and convenience.

    A good example of this is the cornerstore of our grandparents days. With the rise of supermarkets, most of these smaller shops went out of business as they tried to compete with the better range, prices and convenience of the self service stores. We saw a similar process happen with speciality shops like butchers and greengrocers.

    In recent times we’ve seen the corner store being reborn as retailers have discovered that consumers are prepared to pay more than supermarket prices in return for convenience. The modern convenience store is different to the corner shop of our grandparents’ days, but it is a recognisable descendant which caters to the changed society and customer needs.

    This changing society and evolving customer demands is what today’s retailers, and every other industry, needs to consider as they look at the future of their business. The economy is going through a period of massive change and disruption.

    Building on strengths and recognising other’s advantages and weaknesses is the key to survival in such an environment. For a traditional, bricks-and-mortar appliance store, an e-commerce solution might be the answer as could a social media strategy or offering bid discounts to Internet shoppers.

    The key is to choose the marketplace where your business have the strengths, either by redefining markets as Apple often do or by focusing on key advantages like Qantas and the US airlines are trying to do.

    A similar rule applies when challenging the incumbents in the marketplace, in fields where barriers are low and it’s difficult to simply undercut the established players, you have choose the areas in which they are weak and the demand is strong.

    This isn’t to say incumbents shouldn’t adopt new technologies, they should and they can use them to build on areas they are strong while looking at how new methods can fix their weaknesses. Similarly upstarts can compete in an incumbent’s core market if the existing players are weak or aren’t adapting to changing conditions.

    Choosing the battlefield is the key, whether you’re an incumbent protecting your market position or an upstart looking at building a new market, working from a position of strength makes success far more likely.

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  • The customer is always right

    The customer is always right

    From the beginning of 2011 a new consolidated set of national consumer laws took effect across Australia. These change a number of definitions and rules on business matters like sales, refunds and contractual arrangements that businesses need to be aware of.

    While most of the regulations are revisions of existing Federal and state laws ­– the main changes seemingly aimed at tying down definitions of things like unconscionable conduct – there are few gotchas which even the most well intentioned business owner or manager needs to be aware of.

    For most businesses the most difficult aspect will be the ACCC’s definition of “unsolicited supplies”. It appears the main thrust of the changes is to tighten up on invoice scams and dodgy door-to-door sales people, but the Commission’s interpretation of what is unwanted work may be a bit too restrictive in the real business world.

    “If the client didn’t ask for it, they don’t have to pay” is the ACCC’s interpretation of the new laws. On the face of it, this black-and-white view seems fair enough but often what the client and supplier agreed isn’t so easily determined.

    In fields where quoted work is the norm, the “unsolicited supplies” definition means the ACCC will now advise your clients not to pay any part of a bill they believe wasn’t authorised.

    Most scrupulous service providers already check with customers before going ahead with additional work. The example in the ACCC’s handbook of a car repairer is a good case, as most mechanics already call up customers should they find unforeseen problems which will add to the bill.

    One interesting aspect of the ACCC’s interpretations is how they will fit in with the duty of care that mechanic, just to choose one example, has to the customer should they find the car unroadworthy; do they repair the dangerous items and risk wearing the bill or do they let the customer drive off should they be unable to agree on the cost of making the vehicle legal and safe?

    A more common example is the tradesman who finds midway through the quoted job that there’s a serious problem that prevents them completing the agreed work.

    Does this mean the plumber who finds a tree root blocking a pipe, a carpenter who uncovers an extensive termite infestations or a computer technician who discovers a dying hard drive simply down tools until an agreement on the cost of the extra works has been agreed?

    These are the sort of issues where the ACCC’s black and white interpretation of the law may come unstuck.

    Another area where the narrow definition of the ACCC will fall down is where customers say “just fix it” with an ensuing argument over what was fixed. Advising the customer not to pay the bits they believe are excessive puts an unfair burden on the merchant and may not stand up to review by the courts.

    It’s safe to predict the ACCC will find their interpretations being challenged in the courts sooner rather than later, though for the moment businesses will have to live with these definitions.

    As a consequence businesses have to be precise in defining what work is covered in a quotation and scrupulously note every conversation and instruction from your clients, particularly ensuring you have clear approval for any works that might fall outside your initial agreement.

    For businesses operating in areas where it’s difficult to give a fixed quote with a defined scope of works such as emergency plumbing or computer repairs, it’s probably going to be best to accept the uncertainty and just build an extra overhead allowing for these disputes into your cost structure.

    Apart from the “unsolicited supplies” aspect most of the guidelines around these rules are general commonsense and there’s little that’s really changed for ethically run businesses.

    The full guide to the new regulations is available for download from the ACCC website. You and your staff – particularly your sales team – need to read and understand how these rules affect your business.

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  • The invisible hand

    The invisible hand

    It’s great to be passionate and believe in your business, without them it’s difficult to see how an enterprise can succeed.

    But if you simply can’t make money out of your passion then it’s the market telling you there is no demand for what you believe in.

    Sometimes a slap from Adam Smith’s invisible hand of the market is the best wake up call we can have in business.

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  • The innovation myth

    The innovation myth

    Innovation is the buzz world of the moment, along with the belief is that all organisations have to innovate to survive. Recently the Massachusetts Institute of Technology’s Sloan Review looked at what they believe are the five myths of innovation.

    All five have good reasoning behind them, particularly the rebuttal of the idea that every innovation requires a “Eureka” moment as most good business ideas are steadily developed over time.

    One of the writers’ ideas that can be taken issue with is that today’s innovations are now about business processes. This overlooks that  innovation and the resulting competitive advantage throughout the industrial revolution – such as Henry Ford’s mass production, Josiah Wedgewood’s sales stategies and Alfred Sloan’s building of General Motors – were about applying innovative business processes to new production technologies.

    While dispelling some myths, The article perpetrates one of its own by concluded “innovation is the lifeblood of any large organization” as not all organisation are innovative, or need to be innovative.

    The innovative drive might actually be the wrong thing for many institutions. For instance, we certainly don’t want doctors and nurses trying out innovative treatments without first going through various ethical and safety tests.

    For public service departments, being innovative is usually outside their mandate as they are legally required to carry out a function, such as registering a motor vehicle or collecting statistics. While innovation may help them carry out their mission it isn’t necessary or the lifeblood of the organisation.

    In the private and public organisations innovation can be anathema to many managers who didn’t get to where they are by taking risks. In many larger organisations, successful managers are a group selected by survivor bias, they are there because they didn’t take risks and their innovative colleagues long ago dropped away when their ideas “failed”.

    Many of those big corporations operate in markets where two companies dominate the market, so there’s little incentive to be innovative, just do enough to differentiate yourself from the competition through some expensive marketing. Telecommunications providers, television stations and cable TV companies are good examples here.

    Some of these businesses, to be fair, are highly regulated so managers and staff are cautious to be innovative as they are wary that implementing new ideas or business processes may find them in breach of various laws or regulations. This particularly true in industries like insurance and the legal professions.

    We can also see how innovation doesn’t matter even in companies that appear to be innovative; the tech sector provides some case studies where businesses like Microsoft and Google have steady cash cows so the innovative sides of their businesses don’t matter. They just need to do enough to protect their critical cash cows and all other innovation, while fun and stimulating, is largely irrelevant.

    Innovation is the lifeblood for high growth and start up businesses. If you are challenging existing players, as Google did with Yahoo!, then you need to be innovative and if an organisation wants to grow fast, it needs to be innovative in what it offers to its customers.

    While innovation is important it isn’t the lifeblood of many organisations, particularly bigger ones. That’s where the opportunity lies for new businesses.

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