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Enterprise is More than Entrepreneurship

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One of the things that bugs me (especially when I catch myself doing it) is when we use enterprise and entrepreneurship as if they were almost the same thing.

For me, ‘enterprise’ describes a set of behaviours that are defined at the level of the individual. For example, if Richard Branson were to set up another major record label and make a few quid – by his standards that would not be very enterprising. Stuff he has done before – to great success – so where’s the enterprise? However for him to get into space travel, railways, ballooning, cosmetics etc is enterprising because they are new challenges.

So enterprise is a relative concept defined by the individual and where they are starting from. If we want to encourage more ‘enterprise’ especially in areas of deprivation with few enterprising role models we have to be prepared to accept wider definitions of enterprise. We have to acknowledge the concept of introducing people to an enterprise journey that may take years to get close to ‘starting a business’ or that may head in a completely different direction.

So a young person in South Leeds who attends a training course to qualify as a referee is ‘enterprising’. The provision of the referee training course has encouraged enterprise. If we are canny, once we have engaged that individual in their enterprising journey we can then help them to plot the next steps – to help keep them moving forward. Enterprising people are making positive things happen.

By defining enterprise too narrowly as ‘starting a business’ or ‘becoming self employed’ we are often encouraging people to start their enterprise journey at a point that is already a very long way down the tracks. This significantly increases the chances of failure and loss of engagement.

To avoid this trap we need to be very careful in the way we specify, commission, deliver and evaluate the impact of ‘enterprise growth’ projects.

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.

Understanding Your Organisation – Part 1

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Most of the managers that I work with have an incredibly detailed knowledge of the organisations that they work in – or at least of the parts of it that they come into regular contact with. Far fewer have a good understanding of what their own organisation looks like from a more strategic or higher level perspective. This imbalance in perspective can cause too much focus on the here and now and not enough consideration of the medium and longer term. This deceptively simple, yet powerful model can help to restore a bit of balance.

It starts of with a recognition that every organisation does something (operations) for someone (customers). Whether the operation is about providing a service or a product – understanding what you provide to your customers – and their level of satisfaction is clearly important.

Customers and Operations

Just considering these two parts of the organisation can raise a host of powerful questions:

  • Who are our customers?
  • Why do they choose us?
  • What do they love about we do?
  • What do they hate?
  • What do they pay for? What else might they pay for?
  • What do they use? What else might they use?
  • How are our customers changing?
  • How efficient are our operations?
  • How effective are they?
  • Where is there most scope for improvement?
  • Who is responsible for managing operations?
  • Who is responsible for managing customers?
  • How effective is the working relationship between them?

Now let’s add a third component to the organisation that will help us to thrive into the future – a cunning plan – a strategy.

Customers, Operations and Strategy

The strategy loop invests time and money in thinking about what the organisation should be doing today if it is to continue to thrive in the future. In simple terms the operational loop is about earning today’s bottom line. The strategy loop is about ensuring tomorrow’s. In many organisations the strategy loop is almost vanishingly small. Only a few people ever think about it – and acting on it is even rarer! Sometimes ‘strategy’ is done on an annual basis usually tied up with the planning process and budgeting. Often it is done in a top down way – strategy is conceived in the board room or the chief execs office and handed down for implementation. Frequently it does not exist at all!

This strategy loop opens up some further challenging and potentially very valuable questions:

  • What is our strategy?
  • How is it developed?
  • Who is responsible for developing it?
  • How is it communicated?
  • Who is able to shape it?

This gives us a fuller picture of the organisation – but it is still not complete. A final component is required to link strategy and operations together. A component to ensure that operations inform strategy and that strategy is put into practice in operations. This component is management.

Customers, Operations, Strategy and Management

This is just about the simplest complete model of an organisation that I can imagine. A manager who is able to develop well founded knowledge of customers, operations, strategy and management is well placed to succeed.

A management team that is able to ensure balanced development of operations, management and strategy – driven by a thorough understanding of customers and their changing needs should be unstoppable.

  • Is management equally effective at developing both operations and strategy?
  • Does management make sure that what happens (operations) takes full account of strategy?
  • Who is responsible for management in your organisation?
  • How could management be improved?

This simple model of the organisation can provide a powerful catalyst for diagnosis and improvement.

Thinking strategically; flies, bees, pike and shoulder blades

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Most strategy training talks about the importance of developing a strategic plan and then aligning employees with the strategy.   This is an outmoded view of strategy.  I prefer to see strategy as a thinking and doing process – with the focus on achieving success tomorrow – rather than today.  Many managers struggle to find the time to do this strategic thinking and find it even harder to act strategically.

Learning from Mr Pike

The pike is one of the most efficient, lean predating machines in freshwater.  If you put a small pike in an aquarium with a bunch of minnows it will demonstrate its predatory skills with frightening efficiency.  If you separate the pike from the minnows using a sheet of perspex the pike will continue to launch its attacks for a little while.  And then it will just give up.  You can then remove the sheet of perspex and the pike will still believe that it can no longer catch its prey – and will simply starve to death.

Flies and Bees

Imagine putting half a dozen house flies and half a dozen bumble bees in  glass bottle.  The bottle is placed with its base towards a window and the open end towards the middle of the room.  The bees are strategically aligned to fly towards the sunlight.  The presence of the glass is a mystery to them.  They buzz and buzz away at the bottom of the glass driving towards the sunshine – until they too die.  The flies on the other hand are much less ‘strategically aligned’.  They fly in far more random patterns and within a few minutes most of them will have found their way to freedom.

Native Americans and Cracked Shoulder Blades

Some native American tribes used to use shoulder blades to help them plan their hunt.  The night before the hunt would leave they would throw a shoulder blade from a buffalo or deer on the camp fire.  In the morning the bone would have a pattern of cracks caused by the heat of the fire.  The pattern of these cracks – which was essentially random would be used to indicate to the hunting party in which direction they should seek their quarry.  So why would they rely on such a random way of choosing their hunting grounds?  Because without using a randomiser like this they would tend to over work the most productive hunting grounds and threaten the sustainability of the tribe and its environment.

These three stories illustrate something about the nature of strategy and strategic thinking – the perils of over specialisation, the risks of alignment, the problems of holding on to outdated learning and the importance of diversity and randomisation.  I am sure that analysis and planning have their place – but it is thinking and acting strategically that creates real value.

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.