Trends for 2008

Looking over the Horizon

I have always maintained that it is important for entrepreneurs and business leaders to be conscious of trends and changes in lifestyle and behavior that affect their industry in a direct or indirect way. Trends is is defined as follows:

Trends - directional tendencies in lifestyle, commerce or demographics. They may be obvious or imperceptible.

Euromonitor 2005

One of the best websites for monitoring trends is tendwatching.com. They recently published: "8 TRENDS TO CAPITALIZE ON IN 2008" report. It is really worth taking the time to read this report if you want some insight into some of the ways consumers may think, act or respond in the year ahead. The report is filled with brilliant insights, great examples and cool pictures to illustrate ideas.
The 8 TRENDS TO CAPITALIZE ON IN 2008 are:


The brief idea behind each trend:

Status spheres - a variety of lifestyles, activities and persuasions, which can be mixed and matched by consumers looking for recognition from various crowds and scenes.

Pemiumization - no industry, no sector, no product will escape a premium version in the next 12 months.

Snack culture - he phenomenon of products, services and experiences becoming more temporary and transient; products that are being deconstructed in easier to digest, easier to afford bits, making it possible to collect even more experiences, as often as possible, in an even shorter time frame.

Online oxygen - control-craving consumers needing online access as much as they need oxygen.

Eco Iconic - Eco-friendly goods and services sporting bold, iconic design and markers, that help their eco-conscious owners to visibly tout their eco-credentials to peers.

Brand butlers - Think baby food or diaper brands opening a lounge area, including diaper-changing facilities and microwaves, for parents and their offspring at a major airport or in malls. Or a bank installing secure, high-tech lockers next to the beach, so beachgoers can safely store their belongings when going for a swim or walk.

Make it yourself (MIY) - having come to expect to be able to create anything they want as long as it is digital, and to customize and personalize many physical goods, the next frontier will be digitally designing products from scratch, then having them turned into real physical goods as well.

Crowd mining - when co-creating, co-funding, co-buying, co-designing, co-managing *anything* with 'crowds', the emphasis in 2008 will move from just getting the masses in, to mining those crowds for the rough and polished diamonds. How to do that? Shower them with love, respect and heaps of money, of course.

For all those taking a break in December, read this before you go as it will fuel your mind to consider out-the-box ideas as to how you could leverage off these trends for business success in 2008.

Here's how understanding trends may help:

1. Vision—Do these trends have the potential to influence or shape your company's vision?
2. New business concepts—Can these trends point you to new business concepts, or entirely new ventures?
3. New products, services, experiences—Can these trends inspire you to add 'something' new for a certain customer segment?
4. Marketing, advertising, PR—Will these trends help you speak the language of those consumers that are already 'living' a trend?

See trendwatching.com for more detail.

Business Models 101

The What? Why? When? and How? of Business Models

What?
A business model is a description of the profit engine within the business; it is framework describing how the business will generate revenue in excess of costs.

Why?
Very few entrepreneurs spend enough time thinking about and refining their business model. So many people approach a business venture with a predefined paradigm of how that venture will generate revenue that they never consider different business model options. Those who do think about how they can refine or apply a business model in a unique an innovative way often create huge amounts of value. Consider these recent examples:

• Netflix applied a “monthly subscription” business model to DVD rental as oppose to the traditional pay per use model.
• Flexcar apply a “pay per hour” business model to the rental car industry compared to the traditional pay per day
• Dry Soda apply a “wine distribution, positioning and pricing” model to a soda soft drink

When?
Many entrepreneurs think that they need to have their business model completely refined and mapped out before they even begin. This may seem like the logical and safe thing to do but history would suggest that it my not be the best thing to do. Many of the most successful entrepreneurial companies in recent times have worked out their business model as they have gone along. Consider these examples:

• Google was formed as a company in 1998 but the pay per click advertising model that sustains the Google revenue line was only introduced in 2001 after they played with a number of different revenue generating options leveraging the page rank search algorithm.
• PayPal was launched as a business that would enable people to transfer money from one PDA to another, they only refined their business model into a per transaction service focused on eBay customers after 12 months in operation
• eBay was launched as sort of pet project by Pierre Omidyar. It was only after realizing that he would incur hefty web hosting bills that he realized he would need to turn it into a revenue generating business.

So the underlying message is, don’t rush into defining your business model. Come up with some ideas, test them, refine them and keep exploring until to unlock something that shows huge potential.

How?
Many of the most successful business models in an industry have been created by borrowing ideas from another industry or by combining elements of different kinds of business models. Look outside your industry. Consider where other business models seem to be succeeding and consider whether such a business model could be effectively in your circumstance. Could you apply a pay per click model to your business? Would it make sense to become a broker? Would you rather have a subscription or a pay per use model?
As you do go about defining a business model, here are some key questions you can consider to bring clarity and focus to the process:
What are the sources of revenue for the business?
Single or multiple revenue streams?
Payment terms – upfront, over a period of time or post delivery?
What are the cost drivers for the new business?
Major costs incurred to generate revenue?
Nature of costs – fixed, variable or semi-variable?
Payment terms – upfront, over a period of time or post delivery?
What size capital investment is required to launch and sustain the business?
To sustain a positive cash balance?
To make profit?
What are the critical success factors for this business?
Identify the issues that will determine the success or failure of the business
..........................................................................
Business Model Options
Here are some of the common types of web based business models that one could consider:

Brokerage - Brokers are market makers: they bring buyers and sellers together and facilitate transactions. Brokers play a frequent role in business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each transaction it enables. The formula for fees can vary.
Examples: eBay, Expedia

Advertising - The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free) and services (like email, IM, blogs) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized. Examples: Google, Facebook

Infomediary - Data about consumers and their consumption habits are valuable, especially when that information is carefully analyzed and used to target marketing campaigns. Independently collected data about producers and their products are useful to consumers when considering a purchase. Some firms function as infomediaries (information intermediaries) assisting buyers and/or sellers understand a given market.
Examples: Nielsen, Farecast.com

Merchant - Wholesalers and retailers of goods and services. Sales may be made based on list prices or through auction.
Examples: Amazon.com

Manufacturer (Direct) - The manufacturer or "direct model", it is predicated on the power of the web to allow a manufacturer (i.e., a company that creates a product or service) to reach buyers directly and thereby compress the distribution channel. The manufacturer model can be based on efficiency, improved customer service, and a better understanding of customer preferences.
Examples: Dell Computer

Affiliate - In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the affiliate model provides purchase opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites. The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model -- if an affiliate does not generate sales, it represents no cost to the merchant. The affiliate model is inherently well suited to the web, which explains its popularity. Variations include, banner exchange, pay-per-click, and revenue sharing programs. Examples: Google Adsense, Amazon Associates

Community - The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking.
Examples: Red Hat, Wikipedia

Subscription - Users are charged a periodic -- daily, monthly or annual -- fee to subscribe to a service. It is not uncommon for sites to combine free content with "premium" (i.e., subscriber- or member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined.
Examples: 37Signals, Netflix

Utility - The utility or "on-demand" model is based on metering usage, or a "pay as you go" approach. Unlike subscriber services, metered services are based on actual usage rates. Traditionally, metering has been used for essential services (e.g., electricity water, long-distance telephone services). Internet service providers (ISPs) in some parts of the world operate as utilities, charging customers for connection minutes, as opposed to the subscriber model common in the U.S.
Examples: Amazon S3

The typology for different business model types is adapted from work by Professor Michael Rappa at University of North Carolina - digitalenterprise.org

Lessons from the 2000 dot.com BUST to avoid a 2007 Web2.0 BUBBLE

Ten Lessons from the Internet Shakeout

The past boom and bust of the Internet sector is one of the biggest business events of the past several decades. In the interest of finding lessons that help us avoid similar debacles in the future, here are ten observations about the dot com shakeout.

1) Nothing changes overnight. The single most fatal miscalculation investors made regarding the Internet was to massively overestimate the speed at which the marketplace would adopt dot com innovations. That assumption of speed dictated the rapid pace and scale of investment by both VCs and public investors - and the resulting over-investment led to the inevitable bubble and bust. We somehow believed it was different this time. It wasn't. It will always simply take time and lots of it for people to integrate innovations into the way they do things.

2) New stuff doesn't replace old stuff. History tells us repeatedly that innovations almost never replace existing products but rather typically worm their way into the mix and inhabit their own niche. Yet, many dot coms and their funders persisted in modeling businesses that assumed a zero-sum game in which, say, online retailing displaces a significant percentage of existing retailing. In retrospect, all we had to do was look at the history of catalog marketing to predict that e-tailing might wriggle its way into some minority of purchases, eventually reaching its natural saturation point. Recognition of historic precedent could have spared some large and costly investments.

3) Too early? Too bad. Timing issues continually pop up in the post-mortem of the dot com shakeout. Many of the web's wrecks came to market with high-cost products well before the infrastructure was ready to receive them. The digital entertainment category is one good example. Companies like Z.com, Pop.com, Icebox.com, Digital Entertainment Networks and Pseudo Networks all may have had good products, but they were much too early for the broadband marketplace.

4) Many startups were fundamentally uncreative and "un-Internet." Many failed Internet startups began with ideas that involved little more than shoveling an existing business model onto a web site - or copying another company that did it. Just as "shovelware" in the content world involved transfer of magazine or other traditional media formats directly to the Internet, so too did much e-tailing simply export catalogs to the web. Online retailing of "stuff" is perhaps the most obvious and uncreative use of the Internet, and like shovelware, it largely fails to take advantage of the interactive features that give the Internet its power. The more creative - and sometimes successful - e-commerce startups leveraged Internet tools to produce such innovations as pricing "bots," collaborative purchasing, person-to-person trading, e-procurement systems and name-your-price bidding systems for perishable inventory.

5) All we, like sheep, will go astray (with enough pressure). Amid speculative bubbles that last as long as the dot com one we have recently witnessed, even the most disciplined investors can conclude that the rules really may be different this time and eventually give in to the wicked ways of the herd. Ironically, it is many of those most righteous hold-outs that inherit the iniquity of us all - those that capitulated and invested just as the bubble was about to burst lost both their shirts and their integrity. By contrast, the prodigals that jumped on fads with the alacrity of 13-year-olds had already cashed out handsomely. Few of us are immune from speculative frenzies.

6) Free is folly. The junkyards of many innovation cycles are piled high with business plans built around the idea of giving something away free and "making it up on XYZ." A decade ago while I was working at Ziff-Davis we received a business plan that called for giving away free fax machines and "making it up" on faxed advertising. That's only one step sillier than giving free exercise machines to health clubs in order to sell advertising blasts to sweaty boomers. The numbers simply don't work out for most free models. The Internet's low incremental distribution costs nourished a large crop of freebie wannabes - and now the "F" section of our shutdowns list is very long indeed with names like FreeInternet.com; Freerealtimeworld; Freeride; FreeTaxPrep.com; freeWebStuff.com; freeworks.com - you get the picture. Next time around - we'll focus on our value proposition a bit more closely.

7) We used narrowcast to broadcast. A surprising number of entrepreneurs, presumably in the search for the big play, decided to use the Internet, the ultimate narrowcasting medium, to reach the widest and most undifferentiated consumer markets imaginable. In using the WaterPik of the Internet to water the broad consumer garden, entrepreneurs bypassed the many rich demographic lodes that the Internet enabled them to mine for a fraction of the cost of the big play. Many of the big and broad consumer startups ranging from Value America to Webvan went aground on the inherent low margins and the massive marketing and infrastructure costs of such ventures.

8) The $50 million rule can kill. Many dot com casualties fell victim to the temptation to gin up business plans to meet the size criteria of the typical venture capitalist. A typical VC firm, in order to justify the time it spends on an investment, needs to dispense fire-hose amounts of cash, implying that the recipient business must be fairly big, able, say, to generate revenues of $50 million in three years (hence the $50 million rule). The resulting dynamic creates a sort of theme park of co-dependency - VCs dangle big carrots to encourage bigger thinking on the part of entrepreneurs whose DNA already is programmed for grandiosity. The sad result is that many of these inflated business plans were overfunded. They were never destined for the fifty-mil world, but would have made nice $10 million to $20 million businesses had they been more appropriately financed. In retrospect, angel investing, with its ability to funnel smaller jets of funding, would have been more appropriate for many of shoulda-been-niche plays.

9) It's hugely difficult to build chicken and egg simultaneously. Many of this past year's disasters stemmed from business models that required the startup to build both a critical mass of buyers and a critical mass of sellers - and do it at the same time. Many B2B marketplaces fell into that category, as did collaborative purchasing models, rewards programs and many others. It requires huge amounts of money to create either half of the equation in a many-to-many model. Investors that want to create the next eBay had better plan to spend a lot of time and even more money to do it.

10) Prediction tools must improve. As we observed above, the biggest mistakes of the dot com bubble were mistakes of timing - of misjudging the speed and direction of development and adoption and placing investment bets accordingly. In order to avoid those mistakes in the future, we need better predictive tools to plot the speed at which new technologies will spread. Spreadsheet gymnastics by 20-something b-school graduates should not dictate our investment decisions. We can produce better predictions. We have the data - from decades of technology innovation. We have the ability to analyze the data - after all, Everett Rogers wrote "Diffusion of Innovations" 40 years ago. We have the history. The dot com bust suggests we should begin to learn from it.

From "The Business Plan Archive" -- a brilliant collection of business-planning documents from businesses envisioned during the initial commercialization of the Internet (1995 through 2002)

Comic Relief - Ali G "pitching his idea"

New Life New Direction

For all those MILLIONS of you (actually its only a few) who have been faithful readers of this blog, thank you. I have been quiet in the past two months as I have settled into my new life on the West Coast of the USA. I am now living in Seattle, studying at the University of Washington and lapping up the technology focused entrepreneurial culture of the Pacific Northwest.

My focus over the next few years is on BUSINESS MODELS . I am looking at how entrepreneurial success is linked to the business model of a business. As I have worked with, studied and been part of entrepreneurial ventures over the past few years I have developed the belief that too little attention is paid to the concept of a business model.

A business model, as the profit engine within the business, is central to the survival and success of a high growth entrepreneurial business. Without a clear model for generating revenues in excess of costs, a business cannot survive in the long term. Yet very little is understood about what differentiates one type of business model from another, what impact a business model has on firm performance and how a business model is created and develops over time in young, entrepreneurial organizations.

So this will be focus over the next while and as a result, much of what I put on my blog will relate to business model creation, evolution and performance.

Pitching Your Business Idea

Having just been through a series of "elevator pitches" with MBA students this online video and networking site caught my eye. Pitching the next great idea to prospective business partners, investors, service providers and fellow entrepreneurs is daughting taks that just got easier with Vator.tv. Based on the proverbial elevator pitch—the notion that you should be able to sum up a new business venture in the few minutes it takes to ride an elevator—Vator.tv is an online marketplace for new ideas. “Anyone, across all industries, at any stage, can share ideas, products, services and businesses with the rest of the world, mainly through video.”

Here's how it works: users sign up for a free account. They then create pitches for their ideas, projects or businesses in a rich media environment by uploading video, images, PPT or PDF files. They can choose to share their pitches with a personal network or with the entire Vator.tv community. Users build their networks by inviting friends to join or browsing through other ideas and connecting with like-minded people on the site. The website includes tips on creating compelling pitches, such as how to pack the most punch into a three-minute video clip.

Vator.tv’s revenue will likely stem from advertising and sponsorships. Launched in June 2007, Vator.tv has some big names behind it, including angel investors Peter Thiel, co-founder of PayPal, Richard Rosenblatt, former Chairman of MySpace, and Georges Harik, a former Google executive who helped build Google's AdSense technology. What's more, the company is already putting its money where it's mouth is by hiring a Pakistani group of web developers who won the business through their very own video pitch. Another promising application of video technology in a Web 2.0 environment, Vator.tv is one for entrepreneurs and investors to keep their eyes on.

Website: www.vator.tv
Contact: hello@vator.tv

The Oracle of Omaha

Warren Buffet, the second richest man in the world who has recently donated $31 billion to charity was interviewed on CNBC.

Here are some very interesting aspects of his life:

1. He bought his first share at age 11 and he now regrets that he started too late!

2. He bought a small farm at age 14 with savings from delivering newspapers.

3. He still lives in the same small 3-bedroom house in mid-town Omaha, that he bought after he got married 50 years ago. He says that he has everything he needs in that house. His house does not have a wall or a fence.

4. He drives his own car everywhere and does not have a driver or security people around him. 5. He never travels by private jet, although he owns the world's largest private jet company.

6. His company, Berkshire Hathaway, owns 63 companies. He writes only one letter each year to the CEO's of these companies, giving them goals for the year. He never holds meetings or calls them on a regular basis. He has given his CEO's only two rules. Rule number 1: do not lose any of your share holder's money. Rule number 2: Do not forget rule number 1.

7. He does not socialize with the high society crowd. His past time after he gets home is to make himself some popcorn and watch Television.

8. Bill Gates, the world's richest man met him for the first time only 5 years ago. Bill Gates did not think he had anything in common with Warren Buffet. So he had scheduled his meeting only for half hour. But when Gates met him, the meeting lasted for ten hours and Bill Gates became a devotee of Warren Buffet.

9. Warren Buffet does not carry a cell phone, nor has a computer on his desk.

Buffets advice to young people is to remember:

A. Money doesn't create man but it is the man who created money.

B. Live your life as simple as you are.

C. Don't do what others say, just listen to them, but do what you feel is good.

D. Don't go on brand name; just wear those things in which you feel comfortable.

E. Don't waste your money on unnecessary things; rather spend on those who are really in need.

20 Commandments for High Growth Startups

These 20 commandments for high growth startup businesses are complied from a list on the Web 2.0 (Entrepreneurs) grouping on Facebook and from listening to a series of podcast interviews with high growth entrepreneurs on Venture Voice. Enjoy.

1. Your idea isn't new. Pick any idea and at least 50 other people have thought of it. Get over your stunning brilliance and realize that execution is what really counts.

2. Slow moving, stealth startups suck. You're not working on the Manhattan Project or the first lunar mission. Get something out as quickly as possible and promote the hell out of it.

3. If you don't have scaling problems, you're not growing fast enough.

4. If you're successful (either as a business or in raising venture capital) don’t brag about it in the media. Success paints a target on your back. Rather stay under the radar as long as possible to avoid competitive action and law suites.

5. People will tell you they know more than you do. If that's really the case, you shouldn't be doing your startup. Get to know as much as you possibly can about your focus area.

6. Outsource effectively, or be effectively outsourced.

7. Your competition will inflate their numbers. Take any startup web traffic number and slash it in half (at least).

8. Perfection is the enemy of good enough. Leonardo could paint the Mona Lisa only once but you, Joe Smith, can launch a beta v1.0 followed by a beta v2.0 followed by a beta v2.1 and so on…so don’t be a perfectionist.

9. The size of your startup is not a reflection of your manhood. More employees does not make you more of a man (or woman as the case may be).

10. You don't need business development people. If you're successful, companies will come to you. The deals will still be distractions and not worth doing, but at least you're not spending any effort trying to get them.

11. You have to be messed in the head to start a company – it is much easier to work for someone else (and if you do it well your wealth to risk ratio is far more favorable) BUT entrepreneurs have all the fun and their decisions actually count.

12. You will have at least one catastrophe every three months. Get used to coming back from the brink.

13. Your startup isn't succeeding? You have two options: go home with your tail between your legs or do something about it. What's it going to be?

14. If you don't pay attention to your competition, they will turn out to be geniuses and will crush you. If you do pay attention to them, they will turn out to be idiots and you will have wasted your time. Which would you prefer?

15. Startups are not a democracy. Want a democracy? Go run for class president.16. People will think your idea sucks. They're probably right. The only way to prove them wrong is to succeed.

17. A startup will require your complete attention and devotion. And you thought your first love in High School was clingy? You can't take out a restraining order on your startup.

18. The best way to get outside funding is to be successful. Stupid but true. Most web based start ups don’t really need the money so avoid the temptation to take it. By the time VCs coming running you probably don’t need their money. Nurture your equity stake.

19. Stress and ambiguity are part of the game. Seize them, relish them and learn to thrive in a stressful, ambiguous state.

20. Frightening Terror. Overwhelming Joy. Monstrous Greed. Cutting Competitiveness. Embrace and harness these emotions – they are your new reality.

Sizzling Semler - Getting into the Mind of One of the World's Most Innovative Managers

One of the first business books I ever read was Maverick by Ricardo Semler - it was a GEM!!! If you have not read it then you must get your hands on a copy. Ricardo Semler took over the family business at the age of 20. By 26 he had a breakdown due to stress and overworking. He re-looked at the concept of work and management and over the next 15 years created the world’s most innovative, unusual workplaces. His thinking process and ability to execute are extraordinary. It is awesome just to get into his mind.

A week or so back he was in South Africa talking to 700 leaders in Joburg. This was another fabulous opportunity to be challenged by one of the most interesting leaders / managers of our time.

Are you doing anything different?
If successful business depends on innovation: "Why are automobiles made essentially the same way today as they were in Ford’s first assembly line 100 years ago?" Parallel parking is one of “ the stupidest things we do,” says Semler, “If we had a day, could we not by tomorrow afternoon figure out a way to make a car” that handles better in this common situation -- or, on a grander scale, escape from the “silly concept” of oil dependent transportation altogether? The problem, Semler figures, is that there’s “something fundamental about organizations and … leadership that makes it almost impossible for people inside a business to change their own industry.” Industries are based on “formats that are basically legacies of military hierarchies,” says Semler, which neglect or deny the power of human intuition and democratic participation.

Are you looking outside the industry in which you operate for the next big idea?
Bell Labs in the US keep records of all new technologies and they point out that less than 2% of new technologies that have disrupted an industry were created by someone from within the industry. When we are in an industry we get caught in a rut. We get into a situation where we just “learn to emulate” – if you lined up all the new cars coming off the lines of different manufacturers currently and took of the badges – in all likely hood you would not be able to tell the difference between many of the different makes of car – they all look the same because of mass emulation. Which ever industry you look at current incumbents are just emulating what’s already there.

Are you addressing the issues?
Why in a city with traffic problems like Jhb do we all try travel at the same time – at Semco in Brazil, where they have similar traffic problems, they calculated that the 4000 employees spend 1,1 million hours per year in traffic. Surly there must be better alternatives than 1,1 million wasted hours spent in traffic per year. So alternative solutions: working at a company location closer to home, flexible working hours to avoid having to travel at the peak times, setting people up to be able to work from home. With technology this is now a possibility.
Are you leveraging human intuition? The secret to successful management is to leverage the power of intuition – not just your intuition but the intuition of everyone in the organisation. A great tool is to ask “why?” 3 times in a row: · Ask why once and it is easy to answer· Ask why again (like a 4 year old would) and it becomes more difficult · Ask why a 3rd time to get to the real essence of the issue and discover new perspectivesThis is what is needed to really challenge ones thinking.

Are you taking care of peoples needs?
When people are young they have lots of time and good health but no income; when people are of a working age they have reasonable health, lots of income but no time, when people are old they have lots of time, no income and poor health. Think of a graph :

• Income is a bell shaped curve.
• Time is an inverse of a bell shaped curve.
• Health is downward sloping curve – starting high and dropping off
  

So Semco said to its people would you trade some of your income now to pursue some of things you love and dream about doing in your retirement. So you forgo 10% of your income now but on Wednesday you go and do what you dream about doing in your retirement thereby moving the income and time curve closer together. In other words Semco sold Wednesday back to employees who wanted to buy it back. He tells this story to prompt thinking about how we can rethink the workplace. This kind of thinking seems to make a difference – the average employee turnover globally is 22% per annum i.e. in 4-5 years, all employees have changed. At Semco the employee turnover rate is less than 1% per annum over a 14 year period.

Are you leveraging the power of small groups?

People only ever work effectively with another 9 or 10 people – it’s the reason battalions, church groups and sports teams are all in the regions of 10 people in size. What if you were to think of your organisations as 1000 groups of 10 people as oppose to 1 group of 10000 people? If you really think about it most people only ever really interact with about 10 people in the organisation on any one day. Groups of 10 offer people flexibility, intimacy, purpose within a team and sense of meaning.

Key message: THINK DIFFERENT

This world is not one in which we can afford to just copy stuff – too many people are doing that. We need to look at new ways of doing things – break with the past and as leaders explore unexplored domains.

Semler did a similair presentation at MIT earlier this year - you can watch it or listen to it over the web at http://mitworld.mit.edu/video/308/

Me Inc. – Your Personal Brand

Loyalty and seniority don’t carry much weight in the new economy. Today, a successful career depends on how others perceive you. This means getting ahead increasingly depends on creating, managing and punting your own personal brand.

Many people think branding is the domain of big business. The concept of branding has however evolved vertically. Brands now extend upward to countries and downward to individuals.
Branding is about creating a brand personality that people immediately associate with and creating a brand identity with which people form strong emotional connections, because it promises benefits of some kind or another.

Brands actually have no personality and no real reason to cause an emotional reaction in people. But they do, because it’s all about the power of perception: the perception that you are better off choosing one brand over another.

Everything people see, hear and feel about a brand matters. People do not differentiate between their experience of a brand in a company’s foyer or through media advertising. What they care about most is whether a brand affirms or misrepresents its promise to them during those interactions


The same branding principles apply to personal brands. Everyday your personal brand represents you in a number of ways, either working for or against you. Everything you say, do and portray leaves imprints on the people you interact with.


This means if you don’t take control of your personal brand, it will take control of you.
You need to find that strong and unique identity that is immediately recognisable as you, that creates the perception that an employer or client is better off buying you than someone else.
Celebrities like Oprah Winfrey, Richard Branson and Nelson Mandela have mastered their personal brands by defining what they stand for, what makes them unique and desirable and living their lives accordingly.

Although each of us already has our own personal brand, very few of us have actually sat down to think about what it is. We need to take stock of who you are; of what's clever and special about you, and what you offer as a person.
Ask yourself:

Who am I and what do I stand for?

What makes me unique?

What is immediately recognisable about me?
The success of any brand depends on how people feel about themselves when they interact with a brand. People brands are no different. It is what people say about you that ultimately determines whether they see you as someone who adds or erodes value, no brand statement is more powerful than making the people around you feel comfortable about themselves when they interact with you.
In ascertaining whether you add value or not ask yourself a number of challenging questions:

How do people perceive me?
Have I asked them?
Is that how I want to be perceived?
If not, can I change it?
If I decide to change it, what will I change it to?
Will I be able to live up to my new brand?


Be honest, because once you define your brand, everything about you needs to reflect this
In creating your personal brand, the 6 Ps of branding will assist you in defining your brand.

Purpose
Building a strong brand is about more than just making money. It is about serving a purpose; something you really believe in.
Action: Define your purpose. Remind yourself of your purpose – write it down, pin it up and talk about it as often as possible.

Passion
Great brands are fuelled by passionate people.
Action: Get excited. Capture people’s hearts and minds. Keep yourself energised, as your energy will be transferred to others.

Planning
Great brands don’t just happen; they are built over time according to a plan.
Action: Decide what you want your brand to be known for, consider what it will take to get there and then put a coherent plan in place to take you from where you are now to where you want to be. Be specific and deliberate in putting your plan together.

People
Great brands are built by teams of people who come together and feed off each other’s energy, play to each other’s strengths and work synergistically to make things happen.
Action: Work hard on fostering powerful relationships. Connect with those who want what you have. This does not mean sucking up, it just means that you, like any other brand, need brand advocates – people in positions of influence who appreciate your brand so much that they will advertise you.

Play
Great brands are built when people have fun.
Action: See the process of developing a brand as fun, engaging and energising. Life is short; play more.

Perseverance
Truly great brands are built through resilience and a willingness to solve a problem when things go wrong.
Quoting Robbie Brozin, the Founder and CEO of Nando’s: “There is a very, very, very fine line between success and failure…. It is about being constantly hammered and coming back from the hard times and low moments.”
Action: Personal branding is as much about distinguishing yourself as it is about taking yourself to new heights. Believe in yourself.

Insight-Humour-Insipration

I love the internet because with an explorative attitude one can get access to so many great learning experiences that have taken place all across the world. I recently came across a panel discussion from an organisation called THE CHURCHILL CLUB

The title of the discussion was:
No Plan, No Capital, No Model…No Problem: Companies that Defied What VCs Will Tell You

This is a brilliant, amuzing, funny, engaging discussion on how with a good attitude, some experimentation and some luck one can start a great business with no real plan and very little capital.

The panelists included:
Marcus Kazmierczak, Chief Engineer, Mayasmom.com
Markus Frind, Founder, PlentyofFish.com
James Hong, Co-Founder, HotorNot.com
David Lu, CEO and Co-Founder, Fanpop.com
Karen Northup, CEO and Founder, CoreFino
Moderator: Guy Kawasaki, Managing Director, Garage Technology Ventures

The discussion can be listened to as a podcast available for download via Guy Kawasaki's Blog

Wikinomics – How Mass Collaboration Changes Everything

In the last few years, traditional collaboration—in a meeting room, a conference call, even a convention center—has been superseded by electronic collaborations on an astronomical scale. Today, encyclopedias, jetliners, operating systems, mutual funds, and many other items are being created by teams numbering in the thousands or even millions. While some leaders fear the fast growth of these massive online communities or fail to understand the power of mass collaboration, those entrepreneurs and managers that leverage the power of the internet for information sharing and innovation are reaping huge benefits. Wikinomics explains how to prosper in a world where new communications technologies are democratizing the creation of value. Anyone who wants to understand the major forces revolutionizing business today should read and embrace the principled in Wikinomics.

Some the great case studies and examples in Wikinomics:

How Wikipedia, the online encyclopedia, has created a phenomenon in the world of knowledge sharing.

How Boeing design and build plans using a global network of outsourced partners

How Amazon open up their website backend code to developers all over the world so that they can experiment to develop new innovative tools for Amazon. When such tools are developed and applied, both parties benefit. Amazon by having the most innovative retail website and the developer by earning revenue off transactions resulting from the tool he or she developed.

How clever innovators are mashing together different web applications to create value – e.g. mash together Google maps and a hotel review website so that you can see the different classes of hotel in a city on a Google Map

How the opensource software development movement continues to thrive and produce great products. How IBM supports this movement vigorously for the value that they get from it.

There are many more great examples in this rich, well researched book. It will get all business leaders thinking how these principles can be applied in their industry.

P.S. The book inspired me to run an entire MBA course via a wiki – cutting out all paper and hardcopy files and facilitating sharing between students. See gibs-mba-entrepreneurship.pbwiki.com

More cool (simple) tools for entrepreneurs

I love it when people design products that are (1) very USEFUL, (2) SIMPLE and easy to use and (3) they allow you to try them for FREE.

Here are some cool products that I have been using recently to help me get organised, stay up to date and be in touch.

1. BRILLIANT COLLABORATIVE "GETTING ORGANISED" SOFTWARE - 37 Signals

37 Signals is a company I read about in Time Magazine and then I heard an interview with the founder, Jason Fried, on Venture Voice. The philosophy of the small but impactful organisation is to make this simple, to strip out the clutter and unnecessary stuff and just give us what we need in (1) project management software (2) collaborative work spaces (3) CRM software (4) organisers. The software is VERY cool - especially for business people and entrepreneurs working from dispersed locations. The company also has a pretty interesting book called "Getting Real" that captures their "simplicity" philosophy and a blog of their internal musings that is worth checking out. If you are an entrepreneurial team wanting to get more organised - check out 37 Signals.

2. CREATING A WIKI - PB wiki
I recently created a wiki for an entrepreneurship programme I was running. This gave the opportunity to quickly and easily set up a participative workspace where I could communicate with students, students could communicate with me and we could as joint group build and share ideas to make the programme as meaningful as possible - see gibs-mba-entrepreneurship.pbwiki.com . I was able to do this because PB wiki made it so easy. It is quick, easy and free to set up and start playing with a wiki. Ideas for entrepreneurs: (1) create your own internal knowledge bank using a wiki - enable all people in the organisation to contribute i.e. create a "wikipedia" for your business (2) plan a holiday, event or strategy session using a wiki - allowing everyone to contribute and share ideas and insights See the course wiki I created for an MBA trip to the USA: gibs-mba-usa-westcoast.pbwiki.com (3) use a wiki as an internal "open source" communication tool - have general queries in the organisation posted to a wiki (instead of emailed to a few individuals) and encourage others to respond.

I LOVE the simplicity of both these tools. Why not give them a try*.

*PS - I am not getting paid to "endorse" anything - just wanting to share what I think is useful.

Marc Andreessen - The High Tech Startup GURU

Marc Andreesen co-founded Netscape and sold to America Online in 1998 for $4.2 billion; he co-founded Opsware (formerly Loudcloud), a public software company with an approximately $1 billion market cap; and now Ning, a new, private consumer Internet company.
he has also been exposed to a large number of internet / technology startups as a board member, angel investor, advisor, venture capitalist.

This series examines the intricacies of building a high-tech startup business in a brilliantly insightful way. Each one of the five articles is very well written with so many gems of advice.

Part 1 looks at he UP-side and DOWN-side of being an entrepreneur (with a wonderful video at the end to illustrate an analogy.

Part 2 looks at how one can and should respond when a potential funder of a new business says NO. It has a great section toward the end on risks in a startup and how to mitigate those risks (a must read for every entrepreneur looking for funding)

Part 3 looks at how to reach the funders. It is not as simple as just slipping a business plan in the mail and waiting for a response. If you do that you will go NO WHERE, EVER. Marc tips on reaching VC's are the kind of insider knowledge you won't read in text books.

Part 4 analyzes what really matters in driving the success of a start up - TEAM, PRODUCT or MARKET. Marc looks at these factors and ideas from different angles and view points.

Part 5 looks at dealing with Moby Dick (i.e. the unpredictable animal of a big companies). How to start up firms manage the erratic and unexplainable behavior that emanates from large organisations.

These blog posting of Marc Andreessen really rock - if you have any interest high-tech start - please read them (for your own good).

3 BRILLIANT Websites for Entrepreneurs

After spending a great deal of time hunting for entrepreneurial resources and tools on the web - I have found 3 brilliant sites that all entrepreneurs should check out:

1. springwise.com
Springwise reports on the coolest new businesses and business concepts from around the world. It has a huge database of businesses and business ideas that can serve as a brilliant source of inspiration for other new concepts. Springwise and its network of 8,000 spotters scan the globe for smart new business ideas. They report these on a single website (for free) and send out a free weekly newsletter. Worth a visit.

2. venturevoice.com
I love entrepreneurial stories and I love to be able to listen to them on my iPod in my car. Venture Voice interview interesting entrepreneurs and then podcast the interview via their website. The interviews are each 45 mins long and incredibly interesting. With these interviews loaded on my iPod, I get excited for a congested commute to the office in the morning. Once again - its all for free. Well done Greg Gallant on the great work you doing.

3. PlanHQ.com

PlanHQ is a well designed business planning tool that allows you to collaborate online with others in the process of developing your business plan. it has received excellent reviews and in my opinion is a really useful planning tool. Give it a try - you get a 30 day free trial.

Mavericks At Work: Lessons - Questions

Mavericks at Work is a great book that profiles 32 remarkable US entrepreneurs who have battled bureaucracy and challenged the status quo, and won, while redefining success in their industries. The authors William Taylor, founding editor of Fast Company, and Polly LaBarre, a former writer for Fast Company, uncover some remarkable examples of how businesses are succeeding in hypercompetitive industries by being distinctively different.

Their findings are centered on 4 key themes and they sum up each of these key themes with some probing questions that will challenge any business owner:

1. Be different and pursue more than just money: Successful mavericks are fearless about breaking with outdated traditions and confining standards. Making money is only a small part of a bigger mission which they are deeply passionate about. Examples include Southwest Airlines, the company that pioneered low cost air travel and democratized the skies. The book highlights how Southwest saw it as their mission to make air travel accessible to all and by going after this wholeheartedly they innovated on different ways to save cost such as using second tier airports, not serving food and seating people on a first come first serve basis. Keeping this mission at the centre of the organisation has differentiated them from the competition and enabled them to consistently make profits is a loss making industry.
Key questions:
- Do you have a distinctive disruptive sense of purpose that sets you apart from your rivals?
- Do you have a vocabulary of competition that is unique and compelling to your employees and customers?
- Are you prepared to reject opportunities that offer short term benefits but distract your organisation from its long term mission?
- If you went out of business tomorrow, who would really miss you and why?

2. Tap other people's brains: The innovators of today rely on more than just their own insight and intelligence. They create systems to enable and encourage others to help them solve problems and come up with ingenious solutions. Examples include TopCoder Inc., a software development house for many large multinational organisations. They create competitions for technology geeks from all over the world to come up with solutions for software problems in return for lucrative prizes and prestigious ranking points. In this way they are able to use the wisdom of many to solve very specific software development challenges.
Key questions:
- Are you tapping other peoples brains and broadening your range of participants for solving problems and coming up with new products and services?
- Are you having fun?
- Do you share the benefits with those that offer you solutions and ideas for new products and services?
- Do you focus people on the key issues and challenges that face your business and incentivise them to come up with solutions?

3. Connect deeply with customers: Connecting with customers is about a lot more than just traditional advertising, it is about really understanding what customers’ value and connecting with that value system in a deep and meaningful way. Jones Soda asks customers to contribute photographs to be used on the labels of their cool drink bottles. Customers submit photos plus the story attached to each photo. Many photos are selected and placed on the bottles to be distributed in the region in which that customer lives. This creates a massive interest in the community as they discover “who is on the label?” and “what their story is?”
Key questions:
- Do you know which customers are most valuable to your organisation?
- Are you enhancing the brand through the culture and the culture through the brand?
- Are you doing more than just advertising to connect with customers?
- Have you moved past counting the dollars and cents in creating brand value?

4. Partner with your employees: Maverick business enable employees to really understand what drives the business. They are given the opportunity to freely contribute to the overall mission of the business and be rewarded for doing so. At Cranium, a fast growing, innovative board game manufacturer in Seattle, the Chief Financial Officer holds companywide meetings on the company's numbers. He tutors the staff on cash flow and financial ratios, and every employee then assesses his or her own productivity. He recognizes that this helps keep the whole company focused on the right priorities.
Key questions:
- Why should people join your organisation?
- Do you know a great person when you see one?
- Can you find great people who are not looking for you?
- Are you great at teaching your people how your organisation works and wins?

Check the books website and blog at http://www.mavericksatwork.com/

Greatness?

How To Be Great: Research has shown that the lack of talent is irrelevant to great success. The secret lies in hard work, focus and extreme dedication. I have a feature article in the April edition of Entrepreneur Magazine (SA Edition) in which I define greatness, propose greatness criteria and unpack how you can take yourself and your company to greatness.

I followed this article up with some profiles of a number of local and international business icons who have gone beyond good to great. They personify the greatness criteria and we can learn a great deal from them.

Greatness profiles include:
Howard Schultz (Starbucks)
Warren Buffet (Berkshire Hathaway)
Mark Lamberti (Massmart)
Adrian Gore (Discovery)
Anita Roddick (Body Shop)
Herman Mashaba (Black Like Me)
Richard Branson (Virgin)

Buy the April issue of Entrepreneur Mag in South Africa to check out these articles.

Riding the Wave: Global Trends

Success in the business world can be compared to surfing: A surfer sits on their surf board behind the breaking waves staring out at the horizon watching for the next big wave. When they see a big wave building up they turn their board toward the shore, lie down and begin paddling to build some forward momentum so that when the wave reaches them, they can catch it and ride it towards the shore. The bigger and more powerful the wave the better the ride. To be successful in business one also needs to ride waves, these waves are called trends. As an entrepreneur one needs to be “looking over the horizon” for the next big trend and positioning oneself to ride the trend when it arrives. The bigger and more powerful the trend the more successful the ride.

Trends are directional tendencies in lifestyle, commerce or demographics. They may be obvious or imperceptible.

Here are some of the trends shaping the world around us:

West to East Power Shift: Economic power is shifting to Asia in terms of investment and output, with a growing “middle class” globally, but consumption remains driven by developed markets.
The Nub:
The percentage of manufacturing imports of high-income countries from developing countries had risen from under 15% in the 1970s to nearly 40% in 2003 and is projected to reach 65% in 2030.
Global output, on current trends, will double from 2005 to 2030; developing countries’ share will rise from 23% to 31%.
By 2030 over a billion people will form a new global middle class, around 16% of the world’s population versus 8% in 2000.

New Consumer Groups Emerging: Globally the population is becoming older, more urban and Asian, with increasing diversity as more people are on the move - new consumer groups are emerging, demanding more involvement in and customization of consumption experiences.
The Nub:
By 2015, there will be at least 750 million more people in the world, 97% of the increase will be in developing countries.
By 2050, 1 in 3 people in developed countries will be aged 60+, with 2 older people for every child (13).
A new generation of content-creating and publishing communities, e.g. YouTube, is driving new business models, as well as technical and environmental headaches.
In 2006, approx 161 billion gigabytes of digital information was created, captured and replicated – that’s more than 3 million times the information in all the books ever written.
Between 2006 and 2010 the amount of information added to the digital universe each year will increase sixfold.

War for Talent: A raging global war for talent for both skilled and “low cost” jobs is increasing. Asia continues to become increasingly important and outsourcing is on the rise within and across borders.
The Nub
By 2020 there will be 600 million more people active in the economy, mainly in the developing world – where labor costs will continue to be low, although increasing fast along with productivity.
Labor supply will generally shrink in the developed economies.
Low skilled workers will come under increasing pressure globally – the nature of work is shifting to require higher skills as businesses become more knowledge and service intensive.

Changing Geopolitical & Security Landscape: The networked global economy is being driven by rapid and largely unrestricted flows of information, ideas, cultural values, capital, goods and services, and people. Globalisation is enabling new dimensions of power beyond military might, including economics, resources and technology, but the new global landscape is not yet stable: risks and uncertainty are rising with the unrestricted flow of information. Regions, countries, and groups feeling left out and left behind will face deepening economic stagnation, political instability, and cultural alienation. This will foster political, ethnic, ideological, and religious extremism, along with the violence that often accompanies it.
The Nub:
Geopolitical instability is increasing – at the same time as trust in international institutions and the US is decreasing.
There are existing tensions between “old” and “new” powers e.g. between China and Japan, the US and Russia, India and Pakistan, based on history – and new ones emerging as the global economy shifts east, e.g. isolationist sentiment in the US.

Serious Resource Strain: Basic resources are under threat, including water, energy, food and habitats/climate as consumption rises faster than the planet can sustain it – public and institutional activism is rising. Al Gore and many others are raising awareness of the grave threat of global warming and slowly the response to these threats is gaining momentum in political, social and economic spheres.
The Nub:
Researchers estimate that in 2002 humanity was consuming ecological resources 23% faster than the Earth can replenish them.
The cost of climate-related events is growing: financial losses from weather-related disasters in 2005 were estimated as the largest ever at US$ 200 billion.

Changing Technology Landscape: A global technology revolution continues to evolve, crossing national borders and scientific disciplines – biotechnology, nanotechnology, media technology, mobile technology and information technology will continue to reshape industries and our daily lives.
The Nub:
By 2020, feasible technology applications include: widespread cheap solar energy using nanotechnology breakthroughs and mass-producible organic electronics, targeted drug delivery through molecular recognition and wearable computers
In just 12 years since the first GSM digital mobile network, telephones have been transformed into small but powerful multipurpose terminals. The future will bring further, revolutionary changes in this market.
Media technology will make everything personal, customized - it will transform the way we access, store and retrieve information.
In 2006, BAe announced the creation of an artificial surface that grips incredibly tightly without glue or pressure – inspired by the gecko’s ability to run up vertical surfaces.

Accountable or Nothing: Non state actors ranging from business firms to nonprofit organizations are playing increasingly larger roles in society. The stakeholders of such institutions are actively demanding transparency and accountability. The quality of governance will substantially determine how well organisation and societies cope with global forces and challenges. Corporations with ineffective governance will not only fail to benefit from globalisation, but may be vulnerable to major failures and financial downfall, ensuring an even wider gap between the eventual winners and losers.
The Nub:
The number of international NGOs with membership doubled from 1990 to 2003, to almost 300000.
Overall 67% of consumers in the US and Europe claim to have boycotted a food, drinks or personal care company's goods on ethical grounds.
Trust in global companies has fallen faster than for other institutions such as the UN from 2001 to 2005.

Open-sourcing Innovation and Knowledge Generation: Exploding connectivity and channels for information are making open-source innovation a global imperative – networking and linking in with broader knowledge and idea sources is critical, but gaining an edge and protecting knowledge is tough.
The Nub:
Surveys suggest R&D spending levels had no apparent impact on sales growth, gross profit, operating profit or market capitalization. The only relationship was to gross margin, but once non-operating costs were added in the link between spend and performance disappeared – “the R&D silo is succeeding in the traditional role of making “better mousetraps”… But these…aren’t catching more mice.” Only 10% of companies produce significantly better performance per R&D dollar compared to others in their industry.
P&G has succeeded by shifting from a R&D Strategy to a Connect and Develop Strategy i.e. a strategy in which they look outside the organisation for solutions and ideas as oppose to relying on just the R&D Dept.

Business Model Shifts: Business models are becoming global AND local, as shifting power along the value chain and the emergence of BRIC multinationals means more intense competition – innovation is critical to avoid being “stuck in the middle.” Companies are being forced to decide what they do and more importantly what they don’t do so as to create competitive advantage in relation to a much wider array of players.
The Nub:
In Europe by 2011 74% of adults will shop online versus 58% in 2006 – 176 million shoppers, up from 100 million.
Record levels of M&A are radically restructuring industries, with outbound deals from BRIC countries accelerating dramatically.
Fluid, extended network business models are taking over from “straight-line” value chain configurations – increasing complexity and pressure on margins.

References
These ideas are gleaned from:
1. Forty Key Trends for the Next Decade: 20 Key Global Trends and 20 Key Consumer Trends 2005-2015, Published: November 2005 Published By: Euromonitor International
2. World Bank Reports
3. IDC White Paper, The Expanding Digital Universe, March 2007
4. IMD Summary on Global Trends

Learning from South African Entrepreneurs

One of the most exciting assignments that I get MBA students to do in the MBA course on entrepreneurship is a “Case Study of a South African Entrepreneur”. Each student is required to interview a South African entrepreneur and write a 6 – 8 page case study highlighting the person’s journey of starting and running a new business in South Africa. The entrepreneur should be person who has launched a new venture in the past 12 years and has achieved annual revenues of at least R3m.

The last part of the assignment requires students to identify their key learning’s from this exercise. Here are some of the things that have been identified as key learnings.

Passion Counts
The most common learning across the group was that passion is an essential ingredient to entrepreneurial success. Passion is the fuel that drive the new venture creation process so do something that you are passionate about and get excited and energized by your business or you are doomed to failure.

Making the Leap – Individual to the Business
There is a distinct difference between being a “self employed individual” and an “entrepreneur”. An entrepreneur builds a business that is able to exist independently of the person building the business i.e. the business has value even if the entrepreneur is not there. A self employed individual is the business and if they leave there is no value. The real challenge is making the leap from being a self employed individual to being a entrepreneur that has a business independent of oneself

Perseverance and Hard Work are Part of the Deal
The journey is almost never easy. Entrepreneurial success is dependant on lots and lots of hard work and the ability to persevere in the face of adversity. Don’t bother embarking on this journey if you not willing to endure through some tough times and challenging moments.

Managing Growth = Staying Cash Flush
Growth is what so many entrepreneurs hunt. They go after more and more sales to increase revenue from one month to the next. Growth is good if the company can afford it i.e. they have the cash flow to fund the growth but not all growth is beneficial for the business. Growth costs money and therefore the successful entrepreneur needs to ensure that they grow at a rate that they can afford to grow. If you are growing ensure that you have the cash to pay for new inventory and to pay staff at the end of the month. Few businesses are liquidated for slow growth and no profits; most businesses are liquidated because they run out of cash.

The Power of a Network
To make it in starting your own business you need to rely on a broad range of connections. A strong network can pay huge dividends in opening doors for new sales, providing links to suppliers, enabling one to hire good people and to connecting with financiers. A good entrepreneur fosters their network all the time, even when it appears not to matter they are building relationships that will help them in the long run.

Be Motivated by the Bigger Picture
Successful entrepreneurs are motivated by what could be, by what they imagine their business will become. Even if the business is small now, they have a plan for how it will be bigger, more successful and more influential. This is the vision that drives them to keep moving forward and making things happen

Understand what You Want
Different people want different things from a business. Some want the business to provide a sustainable income for them and their family and enable them to lead a particular lifestyle while others dream of being a revolutionary, of changing an industry and building an enterprise with global reach. Understanding what it is that one wants facilitates decision making and strategic planning to achieve the kind of growth and outcome that you want.

Overcoming the Challenges to Entrepreneurial Funding in SA

The truth is that within South Africa level of entrepreneurial activity needs to increase if we are going to avoid JOBLESS GROWTH in the current economic boom. As I interact with entrepreneurs and SMEs on a daily basis, the complaint I hear more than any other is "I can't seem to get any outside funding for my business therefore the growth of my business is restrained".

The development of efficient markets for funding entrepreneurs in SA is critically important. The development of entrepreneurial financing markets will require a concerted effort on the part of all contributors to the market: capital providers, entrepreneurs and government.

Check out a piece that I wrote on this topic for the GIBS website :
http://www.gibs.co.za/home.asp?pid=2166

You can also download the podcast relating to this topic from the same link.
I would love to hear your comments!!!!

To Be or Not To Be: More Entrepreneurial as a Nation (South Africa)

The latest Global Entrepreneurship Monitor (GEM) data shows that SA’s entrepreneurship ranking has dropped to 30th position (out of 42 countries) from 25th position (out of 35 countries) in 2005 from 20th (out of 34 countries) in 2004.

South Africa’s Total Early-stage Activity (TEA) was only 5.2 percent in 2006, compared with over 15% in countries such as New Zealand, Thailand and Venezuela

Why?

When I asked an MBA class to discuss and debate the reasons for this low level of entrepreneurial activity in SA, these were some of the themes that emerged:

Regulatory
Red Tape
The regulation and legislation in SA are impediments to the development of new business:
· Labour legislation makes it risky and difficult for new businesses to hire (and fire employees)
· Tax rates are high for a developing economy making it expensive to do business in SA.
The administration that for the registration and legalization of new businesses makes it a slow and painful process. There are many forms to be filled in, they take time to be processed and thus many entrepreneurs are put off or crippled by the bureaucracy.

BEE and Employment Equity
There are DIFFERING views on the impact of BEE and employment equity on entrepreneurship. Some people argue that the educated black business people are being trapped in high paying corporate jobs instead of looking for and going after entrepreneurial opportunities. The big monthly pay check for black professionals working in corporate is acting as an barrier to entrepreneurial activity. It is also argued that black professional setting up new BEE companies are just looking for deals instead of actually looking to build sustainable businesses that actually create and deliver valuable goods or services.

The opposing view is that employment equity legislation gives previously disadvantaged individuals the opportunity to gain skills in corporate jobs that they can ultimately use in starting new businesses and the BEE legislation creates good opportunities for black owned start ups to win contracts and get businesses. So there are two sides to the argument and the first argument (BEE and EE as having a negative impact) has more effect in the short term where as the second argument (the positive effect of BEE and EE) will more likely play out in the longer term.

Policy
There is no coherent policy for enterprise development and industry creation in SA. There are no real clusters of excellence in SA and where there is an attempt to develop such clusters, the incentives and opportunities are focused on big business (e.g. Coega amd the Motor Industry Development)

Funding
Venture Capital
There is no venture capital industry in South Africa to support and finance the development of new, high growth businesses. Government is trying to develop mechanisms to fund new businesses but government is less efficient than a market driven venture capital sector.
Entrepreneurial businesses in the USA and Israel are funded largely by a very vibrant and active venture capital industry. This has a major impact on high growth businesses with global appeal and these are the types of businesses that impact a countries competitiveness.

Education and Skills
There is a major concern that skilled people are leaving this country in droves. Some students argue that this is more of a “brain exchange” rather than a “brain drain” as South Africa is attracting skilled professionals from north of our boarders in Africa (Zimbabwe; Nigeria; Kenya)

There is view that many sectors of South African society are brough up with the cultural mindset of “go to school, get some tertiary education, get a job”. Children are brought up to believe that the ultimate is to have a job rather than create jobs. This is particularly pertinent in the Black and Afrikaner communities in SA and could be influencing people’s entrepreneurial orientation.

There are many people in the country who want to start businesses but just don’t have the business skill to do so effectively. There needs to be a major skills development drive in the area of basic businesses skills if entrepreneurial activity is to be increased.

The Power of Ideas

I recently watched an interview with Bono, the lead singer of U2. During the interview he said that one of the ways of being remarkable is to conceive and sell ideas. He described compelling ideas as “currency” and said that “there is nothing as powerful as an idea whose time has come”. Great businesses have compelling ideas at their core.
Apple computers = beautiful design.
Discovery Health = reward healthy lifestyle.
Kulula.com = anyone can fly.
Nokia = reliable simplicity.

TIME magazine’s “Manager of the 20th Century”, was a master at defining and selling ideas. In my opinion the key to his leadership success was that he chose and stuck to a few big ideas in his 20 year reign as CEO of General Electric. Some of Jacks big ideas included:
‘Be one or two in your market or get out’;
‘Act as a boundaryless organisation’;
‘Drive high quality and super efficiency through six sigma’;
‘Create value through services’ and
‘Streamline operations using e-business’.
When he got stuck on an idea he was like a bulldog. He would sell, push, describe, measure and reinforce that idea at every possible opportunity. Most of his ideas lasted for at least 3 years, creating a clear set of priorities for the tens of thousands of people employed by GE at the time.

Great IDEAS are:
· Simple
· Understandable
· Translate into action

Questions to consider:
Are you selling a clearly defined idea from within your business?
Is your idea simple?
Do you have a story, analogy or metaphor around your idea?
Can your idea translate into action?
Do you stick with an idea for long enough for it to take effect and permeate the hearts and minds of your clients and employees?

Entrepreneurs who are successful over the long term are the ones who embrace, expose and give life to an idea whose time has come.

If you wish to get a deeper insight into making an idea stick – this is a BRILLIANT book (my best book of 2007 thus far).

Visit the books website:
http://www.madetostick.com/

Made to Stick related articles:
» Read the Time Magazine article.
» Read the U.S. News & World Report article.
» See the authors on The Today Show.
» Listen to the Morning Edition interview.