Billy’s Eighteenth Law: The entrepreneur must develop ahead of the enterprise.

A business growing faster than its owner is like a little kid taking a big fast dog for a walk.  Sometimes, we wonder who is walking whom.

Several years ago, I worked with Elizabeth Lake Ledoux of Denver Co. on some consulting concepts relating to business development.  Elizabeth, along with her business partner Dr. Mel Wernimon developed a methodology of moving a business through seven different ‘strata’ with the ultimate goal of developing a sustainable, transferable enterprise. 

When I looked at it, I thought it was great, but that it needed something.  That something was the development of the entrepreneur.  This later became the Entrepreneur’s Strata in their highly successful Entrepreneurial Flight™. 

The eighteenth law emphasises the need for the entrepreneur to develop ahead of their enterprise.  When the businesses’ development outpaces the development of the founder, the results are disastrous. The founder / owner is quickly in over his or her proverbial heads.   If the ultimate goal of a business is to become transferable, then it must have the systems in place that allow it to operate successfully without the founder’s involvement.  This allows for a successful succession plan… through either sale or a family member operating the business. 

Businesses develop through three stages as they become ‘mature’ enterprises:

Nascent:  This is the foundational stage of the business.  The founder is usually an expert in the field, and is now learning about operating the business.  Many founders never develop the business past the nascent stage and are happy to remain self-employed. They own a business that provides them a job.

Developmental:  When the business owner begins to develop the business, they spend less time in operations or production and more time managing the business.  At the same time, there are more specialist positions that develop within the company.  If the business founder cannot develop managerial skills, the business often stalls in this area.

Sustainable: A sustainable business is a systems based business not dependant on any one individual…even if there are essential positions within the company.    The business is often both scalable and duplicable increasing the growth potential.  The founder must now develop even higher level skills called executive skills… thinking about the long term future of the business. 

Matching these levels of business development are levels of entrepreneurial development.  These three roles are:

Operational: In this role, the founder is an essential part of selling the product or service and producing or providing the same.  She works in the store, provides the legal services or helps construction of the products.  The time frame at the operational level is next week!

Managerial:  In this role, the founder is actively managing the business.  Although she is not necessarily producing or providing, she is actively recruiting, hiring and directing the operations of this company.  This stage becomes a trap…with a larger enterprise requiring constant attention.  The time frame is one month to one year.

Executive:  In this role, the founder is directing the long term vision and direction of the company.  She is thinking ahead, and ensuring that the development of the enterprise is consistent with her pre-determined vision and values.  The executive time frame is beyond one year.

The eighteenth law is a warning… if you want to develop your business you must develop your skills before you enter the next phase.  You must develop managerial skills before you leave the Nascent stage and enter the Development phase.  To develop a sustainable business, you must develop your executive skills before you get there.  To use a football analogy you ‘the passer must lead the receiver’ allowing him to run into the ball. 

When I am working with my clients, I am constantly using the term ‘move north’.  I get the owners to spend less time working on ‘today’ and more working on the future of the business.  This inevitably means that others must also ‘move north’ in order to fill in the space left by the owner.  This creates a chain reaction, of people moving north and fulfilling more executive and managerial positions.  The result is a business reliant on positions rather than individuals. 

If you want to develop your business, ask yourself, how much time you are spending on operational, managerial and executive tasks.  The more time you are able to spend in managerial and executive tasks, the better ready the enterprise is poised for business growth. 

If you are interested in more on the Entrepreneurial Flight, purchase Accelerate Your Entrepreneurial Flight: How to Energise Business Value and Entrepreneurial Growth, by Elizabeth Lake Ledoux and Dr. Mel Wernimont, Ph. D. It is available from Amazon.  Alternatively, contact them through their website at:  http://www.vnacelleconsulting.com/

 

Billy’s Seventeenth Law Axiom Four: Control Counts!

I am the master of my fate:
I am the captain of my soul.

From Invictus: by William Earnest Henley

The need to belong and the need for control are, in many ways conflicting needs. We are both communal creatures and fiercely individualistic.  The control need is one of the dominant marketing messages provided in modern marketing…especially in North America. 

Think about your own reaction when someone tells you what to do.  Most of us hate it!  An important factor that makes us adults is our independence.  We want control of our lives…whether in our working lives, family lives, and financial lives human beings need a sense of control.  Advertising uses the control need.  Examples include Freedom 55 (financial services) and Have it your way (Burger King).  In providing price choice we feed into the control need.  If there is only one price , the customer has no control.  If there are multiple price choices, then the perceived control reverts to the customer. 

The control need is often closely associated with one of the other three needs.  An increased sense of control leads to an increased sense in security.  A lack of control may lead to diminishing status within the tribe.  Our very individual identity provides the foundation for our control need.

Let’s consider this from another angle…the loss of control.  Being a Star Trek fan, I cannot help but use the example of the Borg.  The Borg would assimilate other species into the mass collective.  This led the writers to create the line: “We are the Borg…You will be assimilated…Resistance is futile.”  The key to creating any great villain is to play on fear.  The Borg proved to be one of the great Star Trek villains as they threatened the very thing that makes us human…our individual identity.  The threat to the control need hit viewers at a fundamental psychological level.

Trust messages are control messages as much as they are security messages.  They allow the customer to retain control through you.  A delivery date is a control message.  Amazon created Amazon Prime.  For a fixed annual fee, Amazon guarantees two day delivery. The competitive disadvantage for Amazon over retail stores is waiting vs. instant delivery.  If I go to the book store, I get to start reading immediately.  If I buy through Amazon, I don’t know when I will receive my book (lack of control).  To some customers, this disadvantage might not outweigh the advantages of greater selection and better prices.  When regular customers could trust a two day delivery window, they not only paid for Amazon Prime, but also ordered significantly more from Amazon.

In today’s business world, we often cede control to suppliers and take control from our customers as part of a complex supply chain. One of our manufacturing clients subcontracts a specialty service mid-way through the production process.  Our client loses control of the process.  Only trust makes up for this subordination of control.  Likewise, this same fabricator has the trust of his customers, for whom he produces sub-components. 

Control counts.  Ensure you provide your customer a strong feeling of control by demonstrating that you are the kind of supplier and person, who comes through for them.  Ensure you show them how they can gain a sense of control, or avoid losing that control and individuality so important to the human spirit.

Billy’s Seventeenth Law: Axiom Three: Status Counts…Status is important

If you can’t be the bride at the wedding or the corpse at the funeral, why go?

Grandma Nelly

Last week, we talked about the belonging or associative need.  Early humanity formed groups in order to thrive and survive.  We instinctively need people.  There is, however, another side to humanity and that is the importance of the individual.  We are not only social animals, but we are unique … we are individuals.  It is this context that brings forth the notions of the final two emotional needs, status and control. 

Advertisers commonly use status as an emotional buying need.  Status reflects our position, or our desired position within our group or tribe.  The tribe may protect the tribe members from outside threats, but status is often a battle within the tribe.  We want to know our status and, often, improve our status.  We want more.  To quote Abraham Maslow, “Man is a perpetually wanting animal.” (Alternatively, to quote Mick Jagger, “I can’t get no satisfaction.”)

We compete within the many tribes in which we live in modern society.   I have brothers (the Family Tribe) and brothers compete.  (I only have one sister, so I have no insight on how sisters compete.)  We have our work tribes, our school tribes, and our social tribes.  The notion of ‘keeping up with the Jones’s’ is just another manifestation of our desire to enhance our position within our various tribes. Tribes also compete with each other, often with a status method.  Here in my province of British Columbia, the government proudly proclaims it. "The best place on earth."

If the first aspect of status is our position within the tribe, the second is our desired position within the tribe.  This is our aspiration.  Aspiration is also a huge influencer over our behaviour, including our buying behaviour.  The target market for ‘Seventeen’ magazine is not the seventeen year old, but the fourteen and fifteen year old aspiring to be seventeen.  The seventeen year old is perceived to have more status, and thus is desirable to emulate…at least within that demographic tribe. 

Status manifests itself in many ways.  Sometimes, the selection of a brand is in itself tribal.  The Mac vs. PC commercials is classic examples of Mac presenting itself as the ‘cool’ group whereas PC is part of the ‘nerdy group’.  As my daughter would say, “We never really left high school.” 

Status is all about how we look to the outside world.  Status manifests itself differently to differently people.  My friends are real ‘car guys’.  One drives a Mercedes SUV and the other a Porsche.  I drive a Chevy Cruise.  I used to drive a Saturn.  For the most part, I want a sensible car that delivers good gas mileage and has a low cost per km.  On the other hand, I was an early adopter of both the e-book (I had the Sony and now use a Kobo Glow) and pre ordered my IPad.  I could tell you it is all about the technology, but status has a lot to do with these decisions.

Status is important in marketing.  Even Wal-Mart has a campaign called the ‘second look’.  The premise if the campaign is that Wal-Mart carries high-end brands such as Dyson and Samsung.  The message is Wal-Mart is not as down scale as you might think.  (I don’t know how effective this is, however they are certainly using a status based message rather than their usual low price message.)

Buying decisions are emotional.  Status helps your customers achieve their status aspirations within their pier groups.  General Motors designed brands to move their customers through these status stratums.  You could start with a Chevy, move to a Buick and then eventually get to the Cadillac. 

No matter your business, you should ask if it is appropriate to use a status message as a part of your overall promotional message.  Next week, the fourth and final need …the need for control.

 

 

Billy’s Seventeenth Law, Axiom Two: Belonging is powerful!

We all live in a yellow submarine.

John Lennon and Paul McCartney

I am an Old Goat.  That is not just a comment on my age or personality, but a group of regulars at the Dubh Linn Gate Irish Pub in Whistler BC.  My wife and I love the Dubh Linn.  Great food, amazing staff, a great après band, and of course beer!  But it is so much more.  We belong at the Dubh Linn Gate.  Once you belong somewhere, it is difficult to go elsewhere. We are advocates for 'our' pub.  We recommend it to our friends.  I recommend it when I am talking to my fellow skiers when on the lift.  The staff and management know us...they took the time to get to know our names.  They make us feel welcome.  They ensure that we belong. 

Belonging is a fundamental human need.  We are a naturally social animal.  Our ancestors realized that the only way for this small, hairless ape to survive was to form groups.  We needed to associate in order to survive.  The pair bond between men and women is the starting point to survival of the species.  Love is the most primal of belonging needs if only from an evolutionary perspective.

Our first associative experience is the family.  The human child is defenceless, and needs care and nurture for years to become independent.  The extended family becomes the clan…the clans form tribes and so on until we get such units as cities, provinces, states, countries, Kingdoms and empires.  The need for belonging is deep in the human psyche.

We can see evidence of the belonging need throughout society.  The Olympic Winter Games just wrapped up in Sochi, Russia.  My wife and I got up at 4:00am to watch Canada play Sweden in the Gold Medal Hockey final.  Alexandre Bilodeau raced to gold in the Men’s Moguls event.  While watching his performance, I noticed my heart rate racing as he raced the course.  Nationalism, for better or for worse, is a powerful binding mechanism. 

This is true of sports, religion, families and even schools.  James Twitchell, in his book Lead us into Temptation: The Triumph of American Materialism states:

Because increasingly, store-bought objects are what hold us together as a society, doing the work of "birth, patina, pews, coats of arms, house, and social rank"—previously done by religion and bloodline. We immediately understand the connotations of status and identity exemplified by the Nike swoosh, the Polo pony, the Guess? label, the DKNY logo.

 

He links the Shopping Mall as a substitute for Church and logos for religious icons.  Twitchell exaggerates to make his point, but his point is important.   We want to belong.  Businesses want ‘friends’ clients and advocates to help their businesses thrive.  

As you create your message…tell your story…make a compelling presentation, can you show the customer how they will increase their need to belong?  Can you help your customer to join you…to become a part of your ‘tribe’?  When telling your story, are you demonstrating that important belonging need? 

Terms such as love, community, national and together conjure familiar feelings reaching into the depths of our emotional needs.  Even the language we choose, in presentations and ad copy.  ‘It’ (third person) is cold.  ‘I’ (first person) puts the emphasis on the speaker not the listener.  We or Us (second person plural) brings everybody into the conversation.  Consider the following phrases:

• Bill Erichson develops strategic plans for small businesses.
• I develop strategic plans for small businesses.
• We work together and develop a plan specifically designed for your business.

The ‘ownership’ language of the last sentence encourages that sense of association meeting that important emotional need.  This is in a business to business context.  Businesses to consumer situations are more emotional, and therefore building on the associative need is even more important.  This cannot be manufactured or contrived, but must come from your desire to help and to ensure your customer 'belongs' to your tribe!

 

Next time, we look at our place within the tribe and examine the importance of status!

 

 

 

 

Billy's Seventeenth Law: Axiom One - The Need for Security

In previous blog entries, I have indicated that there are four emotional needs that help to drive decisions.  This week examines the first need, the need for security.  Of all of our most fundamental human instincts, the need to survive and replicate the species is the dominant.  If we are in an insecure situation, we react in a manner known as the ‘fight of flight’ response.   Our adrenal glands kick in, and our heart rate and blood pressure increases.  In fact, that tickling in your stomach you experience on a rollercoaster is the body taking blood away from less important organs and channeling them to the heart, lungs arms and legs.  We avoid danger or react to danger instinctively. 

For the most part, people do not live their lives in imminent danger.  Our security need, however; still affects our behaviour, including buying behaviour.  We desire physical security, emotional security, and financial security.  Appealing to the security need is an important part of developing a balanced promotional message.  The ‘trust message’ is a powerful way in which to tap into the security need.  (A great advertising campaign proudly trumpeted that, “Nobody ever got fired for buying a Xerox.)

Closely related to the security need is risk.  Helping customers avoid risk has the added benefit of reducing price as a sole decision making factor.  Customers often make low risk, low reward choices.  For example, given a choice between receiving $5.00 guaranteed, and having a 50% chance of receiving $15.00, most people took the guarantee despite the fact that the second decision has the higher mathematical expectancy.  This example is adapted from the book Priceless: The Myth of Fair Value (and how to Take Advantage of It) by William Poundstone.

One of the most powerful promotional messages is the threats to security.  Financial ads often worry people about their retirement future and security firms show the vulnerability of not having the latest alarm system.  The contra-emotion to security is insecurity, risk or threat.  These bring forth powerful and even irrational buying behaviours.  This form of advertising brings forth the problem very clearly, leaving the customer to draw the conclusion that the solution.

Business groups do not solely use this advertising.  In health, we are encouraged not to smoke due to the health implications.  A Canadian study reported a 17.2% incidence of lung cancer among male smokers as compared to a 1.3% risk to non-smoking males.  This kind of promotion (promoting smoking secession) drives right to the security need, as does the recent series of ads from preventable.ca, discouraging risky behaviours such as Jay Walking, Distracted driving, and medication safety.  They are appealing to the same emotional needs.

When developing a promotional campaign, whether for a website, brochure or a sales presentation, see if there are ways you can show your customer how they increase their level of safety and security as a result of using your product or purchasing from your company.  Assure your customer that they are making the right decision for the specific needs you have identified.  This core human need goes directly to the heart of the decision making process.

Billy's Seventeenth Law: Never underestimate the power of emotions!

That’s the power of Love.

Heuy Lewis

Emotions are powerful things.  Emotions have an amazing impact on decision making…often overriding the rational in favour of the irrational.  Over the next few weeks, I want to examine the influence of emotions on customer buying.  I have begun to read more books and articles on the topic of the brain, and specifically on the ways in which decisions are influenced by the rational and the emotional centres of the brain. Books such as Blink, by Malcolm Gladwell or Buy-ology and Brandwashed, by Martian Lindstrom help explain how we think and how we decide.

I was teaching a marketing course in Penticton BC, and attempting to illustrate the point of ‘customer stickiness’; the notion that the more habitual the buying the more sticky the customer is to the supplier.  This is not a matter of loyalty, but rather a matter of deeply ingrained habits.  (An interesting example of this is in the United Kingdom, where people are more likely to change a spouse than a bank account.  Given the banking situation in the UK, this is certainly not due to any great love shown towards the individual banks.)

As a part of this exercise, I asked everyone in the room and tell us which local grocery story they frequented.  Grocery shopping is very habitual, and I could then move from the difficulty of getting customers to change grocery stores to the challenge of getting customers to change to my students’ potential businesses.   

As we went around the room, one of the participants mentioned that she shopped at Safeway.  Another participant, not a Safeway fan, berated the original respondent for her supermarket choice.  The original participant immediately began to defend her choice of Safeway in incredibly emotional terms.

The whole thing was bizarre.  These two rational adults were getting into an emotional argument about grocery shopping.  They were emotional in their responses to each other.  I didn’t know so much emotion could come from grocery stores. 

According to consulting firm APCO, consumers respond to companies along eight dimensions: Understanding, Approachability, Relevance, Admiration, Curiosity, Identification, Empowerment, and Pride. The company then surveyed customers to determine the most loved companies in the world.  The number one company for 2013, by this measure, is Disney.  By the way, the most hated company last year, according was McDonalds…partially for their treatment and low pay for their employees. 

As we move forward, I will focus on four foundational emotions, where they come from in and why they are important.  Finally, I want to display a model showing you how you can best sell to both the left (rational) and right (emotional) brain, creating a complete promotional message for your customers.

This week’s quote, from my favourite business writer, Tom Peters:

All businesses success rests on something labelled a sale, which at least momentarily weds company and customer.

 

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Billy's Sixteenth Law: The inverse relationship between responsibility and control.

When you start your business, you have total responsibility and total control.  As your business grows, you have more responsibility, but less control.

Think of the early days of most businesses.  They start small.  Think of Hewlett & Packard, Wozinac & Jobs, or Gates & Allen.  In your business, you probably did a great deal of the real work and had your eyes on everything happening in your firm.  As your business grows, more people are doing more tasks of which you are unaware.  This is creates increasing dissonance, especially since most entrepreneurs are control freaks. 

Two factors drive business growth. Sometimes businesses increase capacity.  This simply means that they can do more of what they have always done. Sometimes, they increase their capabilities.  This means that they can provide additional products or services to their customers.  Either way, the owner must step back and allow other people to do work that he or she used to do.

Think of a store.  The owner is usually the store manager, merchandiser and head buyer.  If, however, she opens additional outlets, she must hire for many of these operational functions.  She counts on each store manager to ensure that the stores look good and the customers are well treated.

Think of a professional services firm.  Suppose an electrical engineer wants to add civil engineering to the portfolio.  This means hiring an engineer with a different competency of skills.  The owner must trust the new engineer to perform his or her function in a professional and timely manner.

Some people start businesses because they are good at something.  Being good at something is not the same as being able to manage a business.  Many businesses that work at a smaller size fail when the owner attempts to grow the business.  Sometimes, it is the fact that their business, or business model, is not scalable.  It works well as a small operation, but the things that made the company special or unique are lost when the business grows.  Some businesses are not scalable do to the inadequacies of the founder.  The skills set important for start-up are not the same for growth.  This skill gap becomes evident as a company grows from one person, to five people, to twenty people to fifty people.

Unfortunately even while the owner loses control over the businesses operations, he or she is still the owner and therefore responsible for the results, or lack of results, of the business.  This is frustrating for business founders who have a clear, yet unarticulated vision for what their company is and what it stands for.

Planning for growth is important, however when growing a business be aware that as your business grows, your business environment changes.  Those people who joined you when the company was, "Just like a family", blanche at the idea of the working in a more formal environment.  As a company grows, the change from familial to structured is inevitable. This inevitability means that the unintended consequence of business growth is staff turnover. 

Starting a business is hard.  Growing a business, especially when you grow it rapidly is harder.  Make a conscious decision to grow, plan for growth, and do so with the full understanding that your future firm will be larger and different.