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When the Business Idea Just Will Not Work…

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Pet Rocks

I am currently putting together a professional development programme for people who provide a range of ‘enterprise support services’.

I am trying to establish the challenges that they face and where professional or service development support might help. One of the commonest problems reported is that of helping the client to recognise when their business idea is just ‘not viable’.

The implication of this is that as ‘professionals’ we know whether a business idea can or cannot be made to work. We understand the financial dynamics of the business and the marketplace and we can foretell the future – absolutely. The challenge is how to get the client to recognise what we already know to be true.

  • Do we just tell them that we know the business won’t work?
  • Or do we carefully lead them to the same, ‘obviously right’, conclusion.
  • Or do we recognise that our beliefs could be wrong and focus on helping the client to develop their own business idea free of any negative bias from us?

My guess is that there are many, many very successful businesses that would never of started trading had their adviser not carefully and skillfully pursued this third option.

For example there is this company that sells tumbleweed (‘I would just like to talk to you about an idea that I have for a business. You see all these weeds that are blowing across the prairie? I reckon I can sell them mail order over the Internet….’). Any takers for the first Dandelion Emporium or Himalayan Balsam Wholesaler?

  • Then, closer to home there is this company that makes haute couture for ferrets.
  • Then there are doggles (goggles for dogs),
  • And a guy who will sell you a ‘pixel‘ on the Internet for a dollar (don’t laugh, he has sold them all and made his million!).
  • Or this company who make plastic ‘wishbones’ so there are no more fights over who gets the wishbone (does anyone still do that?)
  • Or this company who sell plastic balls to go on the end of your car aerial and make them look pretty!
  • Or the pet rock company that started in 1975 and swept the planet!

The big lesson for me has to be that it is impossible for us to ‘know’ whether a business idea is viable or not.

Some real stinkers have made millions and even more really great ideas have bombed. Learning to recognise and set aside our own prejudices and beliefs so that we can help the entrepreneur to explore and develop their business idea and manage there own exposure to financial and psychological risk must be an important professional development goal for many of us.

There is a link here to my earlier post on barriers to enterprise. ‘Adviser negativity’ surely has to be added to the list!

Let me know your favourite ‘business ideas that should never of worked’ so we can grow the collection.

Support for Entrepreneurs

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There really is no shortage of support for people who want to have a go at starting their own business.   Just take a look at this website that offers 99 free sources of on-line support for would be entrepreneurs.  And while the web is packed full of advice and guidance the real world marketplace is pretty crowded too with advisers, mentors, coaches and trainers all queuing up to offer advice and support.

But how much of this stuff is really useful?  For most entrepreneurs the barriers are not intellectual or technical (although often these are presented as excuses for not making things happen ) they are really about self confidence, self belief and a strong conviction that a better reality can really be brought into life.

So a couple of words of advice on choosing and using people and resources to help you with your entrepreneurial dreams:

Make sure that they really are interested in helping you do what is best for you – including walking away from entrepreneurship as it is certainly not right for everybody.

Make sure that they are not under the influence of external goals and targets to encourage people into entrepreneurship.  If they are employed by a project that has to encourage entrepreneurship to get funding then make sure that they put your best interests before the outputs of the project.

And finally:

Believe nothing, no matter where you read it, or who said it, no matter if I have said it, unless it agrees with your own reason and your own common sense.
Buddha

But what if I am employed to encourage people into enterprise and entrepreneurship?

Always practice from a client centred (rather than a policy centred) perspective.  ie make sure that you use your knowledge and skills to help your client to do what is best for them given a range of options available to them – entrepreneurship, intrapreneurship, employment, work experience, skills training etc.

It is almost certain that in fact the project that you work on is designed to develop an ‘enterprise culture’ and the best way to do this is to help entrepreneurs to go into entrepreneurship having fully considered all other options.  Sure a number will decide that there are other ways to achieve what matters most to them – and many of the people you work with will put their enterprise dream ‘on hold’.  Once you start helping people to make really informed decisions based on their own self interest and an objective analysis of the pros and cons of enterprise not only will the start-up rates improve but so too will the survival rates for small business.  And this is the metric that really matters in building an enterprise culture.

Great Quote from Fromm

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Man’s main task in life is to give birth to himself, to become what he potentially is. The most important product of his effort is his own personality.

Erich Fromm (1900 – 1980) Psychoanalyst
If we can look past the masculine language I think this quote from Erich Fromm is wonderful.   I think everyone should have a flirt with enteprise nad entrepreneurship to sdee if it provides them with a vehicle for becoming what he/she potentially is.  However I am also sure that for many the flirtation will end up with rejection – and rightly so.
My concern is that for those providing services to support ‘entrepreneurial flirtation’ the cost of rejections is high as those paying for services what to see flirtation come to fruition in business start-ups and success. People walking away from entrepreneurship – even if it is the right thing for them to do – will seldom be rewarded by the funders.

Is Enterprise Being Too Narrowly Defined?

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The Local Enterprise Growth Initiative has provided a welcome injection of cash to stimulate enterprise in some of the most deprived areas of England.

However I am worried that ‘enterprise’ is being too narrowly interpreted as ‘entrepreneurship’ and ‘starting businesses’.

The origins of the word ‘enterprise’ come from the 15th century when it was used to describe someone with a ‘readiness to undertake challenges’ or with a ‘spirit of daring’.

Only relatively recently has it become synonymous with business.

I think this matters because the ‘enterprise’ journey needs to start at a place that is right for them. The challenges that they undertake must be ones that they are equipped to tackle. For some, the challenge of starting their own business and earning a livelihood through their own skill and passion is appropriate.

For many more it is probably a long way down the road.

I am worried that some current enterprise interventions will encourage people to start their own businesses – regardless of whether this is the right challenge for them at this stage. The problem is exacerbated because service providers feel under pressure to get people to ‘start-up’ business as this is what their success is measured by.

This might mean that we have a number of businesses started by people who do not have the skills, passion, life expereince and emotional resilience to really make them work. They will find the whole experience unrewarding and may end up with extremely negative feelings towards ‘enterprise’ as a result. We may actually end with less enterprising communities as word of their experience spreads.

Surely there are a wider range of challenges that can be offered and facilitated in the name of developing more enterprising communities than just starting businesses?

Building a Better Business?

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Most start-ups have, probably quite rightly, an almost myopic concern with their own operation and its customer base. 

‘What are we going to do?’ and

‘Will enough customers pay for it?’ are questions that obsess the would be entrepreneur.   

‘Will we have fun doing it? is a question that is taken much less seriously – but is just as critical.

The first of these questions is, without doubt, one over which we can exert absolute control – and therefore is worth much consideration, conversation and exploration.  If you rush this piece of thinking you can expect to have plenty of time to repent later – and not neccesarily at leisure.

The second of these questions we can really know very little about – until the product or service is out there – and our operation is up and running.  [Market research is notoriously inaccurate – not least because customers lie (‘of course if there was a gym closer to my home I would use it more…’) and are often blissfully unaware of their real wants and needs (Sky and Sony both spent vast fortunes on expensive market research for subscription television and the Walkman.  In both cases the research came back with a resounding NO!  In both cases it took visionary and powerful leadership to create markets for products and services that customers could not ‘see’ becoming a part of their lives.)].  This does not mean that we should not worry about understanding the marketplace.  But for most entrepreneurs investing much more heavily in understanding the customers response to your product and service in practice – rather than in theory allows the operational changes to be made that lead to success.   This is counter to much of the business development orthodoxy which pretends that it is possible – through the bsuiness planning and market research processes to provie a business idea in theory before you tkae the risk of putting it into practice.  The orthodoxy is seductive – but wrong.

The third question is also difficult to answer.  The fantasy of entrepreneurship is often very different from the reality.  I remember working with a young entrepreneur who thought he could wash cars for a living.  The financials could be made to stack up if he managed to wash 12 cars each day.  Five and a half days a week. 46 weeks a year.  On top of this he also had to do the marketing and book-keeping.  Three weeks into the new business and 140 shiny cars later this guy had fallen out of love with his idea – BIG TIME! 

‘Will I have fun doing it’ is a massively important question and one that rarely gets the attention it deserves.  However until you are up to your elbows in sponges, buckets, chamois leather, book-keeping and marketing leaflets you can never really know.  It is sensible then to also think about ‘If I don’t love it – how will I get out of it in one piece?  This leads to early consideration of an exit strategy from the business.

In many start up businesses then the thinking about the business looks, in essence, like this:

Operations and Customers

Thinking is around ‘How can I finance the operation’ and ‘Will the customer buy it?’  Understanding the Operations Loop is vital.  Providing things for customers that we believe they want and will pay for.  In return getting their money – and if we are wise a whole bunch of other information on how our product and service could be made even more attractive to them.  Designing this operational loop to get as much as we can from the customer in terms of both cash and intelligence is a vital component of successful entrepreneurship.  Most businesses do this really badly.  Talk with your customers – don’t leave them satisfaction surveys to fill in!

Most standard business planning processes can make some contribution to thinking through the operational loop of the business.  However they NEVER give enough consideration to the importance of having FUN!  And they can also horribly accelerate the process of thinking.  As long as we can get the numbers to work…  Entrepreneurship is about much more than numbers.  It is about livelihoods, ambition, aspiration, skill, passion and commitment.  In the process of business planning these are what we really need to developing.  They will determine our future more than a theoretical cash flow!  [I believe that the business plan has become a simple tool of policy for much publicly funded business support.  Business plans have become synonymous with ticks in boxes for funders.  Many of them are very poorly developed and end up in businesses starting and failing pretty soon afterwards.] 

This provides some ‘food for thought’ in supporting entrepreneurs to develop well formed thinking about their busines idea.  But it is not enough.  If we are smart the operational loop will deliver an excellent product or service, wonderful marketing and sales and first class financial management and controls.  And what is more the operational loop will be self correcting.  Feedback from customers and intelligent discussion within the operational team (this will not just happen – people will need to be given time and space to do it and may need to be trained as well) will ensure that prices remain fair and profitable while product and service quality reflects customers changing requirements.  But there is another set of questions that has to be developed that seldom get the air-time that they require in the hustle and bustle of ‘operations’.

These are questions about:

  • Should we grow the business?  Can we? How?
  • Is the operational team performing as well as we would expect?  What can we do to help them improve efficiency and effectiveness?
  • How is our marketplace changing – and how do we need to change to ensure that we stay in the game?  Customer preferences, technology, regulations can all shift to leave a businesses in trouble.
  • How can we develop the business so that it provides us with more of what we want and less of what we don’t?
  • How can we reduce the harmful aspects of what we do and increase the positive impacts that we have on our community?

These are essentially questions of ‘Strategy’.  They are questions that require us to work on the business rather than in the business.  A second loop is needed that will require more time and energy to develop.  Once we start thinking about strategy our business looks more like this:

Customers, Operations and Strategy

A good way to think about this is that the operations loop takes care of todays’ (triple)  bottom line.  The strategy loop is about doing the right things today to look after ‘tomorrow’s’ bottom line.

The operational and strategy loop overlap.  Much of the data that will drive strategy should come from customers via the operations loop.  However other data will have to come from the wider business and social environment.  This ‘environmental awareness’ is vital to effective strategy.   Being able to make the transition from operational to strategic practice is, in my book, the mark of the real entrepreneur.  They are able to stand back from the business and work on it.  The crafts-person, the artisan, falls so in love their operation that they find it very difficult to stand back and develop it strategically.   They spend all of their time and energy working ‘in’ the business and not enough working ‘on’ it.

When we are thinking through the development of a business idea it is rare to plan in the time and expertise to ensure that both operational and strategic loops are well resourced.  And even when we do – still this is not enough.  We need to think about a fourth component of business.  A component that will ensure that strategy gets reflected in action and that experience at the front-line informs  strategy.  This is the function of Management.  It serves to integrate the strategic and the operational components and ensures that information from both  is used to drive the effective development of the business both operationally and strategically.

So now our enterprise is starting to look more like this:

Customers, Operations, Strategy and Management

I have used this model for many years to help a wide range of enterprises in the private, public and third sectors to think about their own development and the functions that need to be strengthened to ensure continued success. [The model presented here is a simple, private sector, for profit model.  Slight variations help to illustrate the very different enterpise dynamic in the public and third sectors – but they will have to wait for another day.] 

I am increasingly now using it with entrepreneurs to help them think through much more broadly the nature of the work that has to be done if they are to establish an enterprise that will successfully make it through the early years with success designed in from the start.

I think that a serious consideration of this model has real implications for the way we provide support to would be entrepreneurs.  It forces consideration very early on about the necessity of a team based start-up and of the changing role of the founder as different components of the model demand attention over time.

The model has been heavily influenced by the work of Bob Garrett on the development of effective company directors.

Your comments, thoughts and especially suggestions on how the model could be improved would be very welcome.