VISUAL PERIPHERALS: MAKING CONNECTIONS

THE 5 SECRETS OF ENTREPRENEURIAL SUCCESS, by Fred Smith

1) Have a compelling business idea, one that is differentiated & sustainable;

2) Be a zealot - have passion for your idea;

3) Have a conservative business plan;

4) Believe in people & work effectively with them;

5) Learn everything about your business; change & grow as your business grows;

A SUMMARY OF THOUGHTS: INNOVATION & ENTREPRENEURSHIP VI

[continued from the Last Post.]

The Changing Values and Characteristics Strategy has a different focus to that of the other strategies.

Whereas the other strategies attempt to satisfy existing customers by creating new products or services, the Changing Values and Characteristics Strategy attempts to find new customers for existing products or services.

Drucker provides four ways of exploiting the Changing Values and Characteristics strategy:

· creating utility from an existing product

· pricing the product differently

· adapting the product to the customer’s social and economic reality, and

· delivering what represents true value to the customer.

An example of creating utility from an existing product is Rowland Hills’s re-engineering of the British postal system with the introduction of fixed postal rates and the creation of the postage stamp, in 1836.

By changing variable postal rates to fixed sums, evidenced by the use of a postage stamp, Hill made it possible for consumers of postal services to serve their own purposes: namely, sending a letter quickly and easily.

Previously, postage depended on the distance the package or letter had to travel; and the consumer was required to visit a postal center where the rate was calculated.

Standard postage rates improved the utility of the postal services through the use of collection boxes, and by substantially discounting the price of mail.

Classic examples of pricing the product differently are provided by the The Gillette Safety Razor and the introduction of the copier by the Haloid Company, later Xerox.

In both cases, the product, as razor or as copier, was sold at a steep discount. The supplies, razor blades in the case of the razor, or the paper copy itself in the case of the copier, were priced to make a profit.

Adapting the product to the customer’s social and economic reality usually means providing a system whose heart is the product and then selling the entire system.

Examples would be:

• General Electric’s packaging of GE consulting expertise with replacement turbine blades for its steam turbine products. GE’s competitors adopted the same practice but by then GE had market dominance.

• The financing that Cyrus McCormick provided to American farmers who purchased his harvesting machines.

Banks considered farmers a poor risk in the 1840’s; farmers, under-capitalized and with cyclic cash flows that depended on crop harvests, could not afford to purchase outright a McCormick reaper despite the obvious advantages of the machine.

McCormick provided farmers with an installment plan that spread payments over several years; the payments were due only when the farmers had cash, at harvest time.

Delivering value to the customer means using the product to deliver to the customer, values well beyond the retail value of the product itself.

An example would be a lubrication company that sells a special lubricant, indispensable to the machinery, as part of a maintenance programme for heavy equipment.

The company essentially sells the maintenance program, providing in-built peace of mind. This is because the lubricants ensure the continued operation of the heavy equipment, thereby minimizing down time.

[Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]

A SUMMARY OF THOUGHTS: INNOVATION & ENTREPRENEURSHIP V

[continued from the Last Post.]

(3) The Ecological Niche Strategy aims at controlling a market and comes in three flavors:

· The Toll-Gate Strategy

· The Specialty Skill Strategy, and

· The Specialty Market Strategy.

The Toll-Gate Strategy aims at market control through providing an indispensable product or service, based on patented or otherwise protected intellectual property; this enables the existence of some essential product or service.

The problem with the toll-gate strategy is that market conditions may render the product superfluous through substitution of either the product itself or the products or processes the toll-gate product complements or enables.

The growth toll-gate product is also dependent on the products or services the toll-gate product enables.

The example that Drucker provides is an enzyme developed by a company called Alcon, which is used during cataract surgery to dissolve a ligament. Sales of the enzyme depend on the number of cataract operations performed.

The Specialty Skill Strategy within the Ecological Niche depends on developing a high degree of competence in a formidable field so that entry barriers into the market are high enough to keep out competitors.

The difference between the toll-gate strategy and the specialty skill strategy is that the specialty skill is not necessarily based on protected intellectual property. It just isn’t economically feasible for a competitor to enter the market.

The specialty skill strategy usually requires the innovator to be first into the market, so that it can establish sufficient market penetration and branding before any competitor can step in, thereby dominating the market.

Like the toll-gate strategy, the specialty skill will live or die on the products or services it enables.

The Specialty Market Strategy of the Ecological Niche depends on the innovator spotting a market that is being ignored by other businesses.

The death of the specialty market is when it becomes a mass market. An example is the modern perfume market, first created by the French perfumery Coty after World War I, and originally targeted at the upper middle class sector; today, it has become a mass market with perfumes being sold at grocery stores.

[To be continued in the Next Post. Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]

A SUMMARY OF THOUGHTS: INNOVATION & ENTREPRENEURSHIP IV

[continued from the Last Post.]

(2) The next strategy, “Hit Them Where They Ain’t”, is a case of the follower of a market leader successfully exploiting the market leader’s innovation, to the detriment of the original innovator.

This strategy hits home as one of the major weaknesses of the “Fastest with the Mostest” strategy: the most innovative product without a market is a cost center, not a profit center.

Drucker cites as examples:

• IBM was a market follower within the Personal Computer market. The IBM PC was neither the first nor the most innovative, but the market that IBM pursued was the business market; meanwhile, Apple sought to dominate the educational market. IBM established itself with enduring prominence.

• The Hattori Company in Japan took a Swiss innovation, the quartz watch, and created a market winner with the Seiko brand. This was enabled by the Swiss shelving their new idea after demonstrating its feasibility.

• Sony, not in consumer electronics at the time, purchased a license for transistor technology from Bell Labs. Starting with cheap portable radios, she became a major player in the home electronics market.

Drucker lists five “fairly common bad habits that enable newcomers to use entrepreneurial judo and to catapult themselves into a leadership position in an industry.” These five habits, allowing competitors to use the “Hit Them Where They Ain’t” strategy, are:

• The Not Invented Here (NIH) syndrome (the arrogance that leads a business or profession to believe that something new cannot be any good unless they themselves thought of it).

• The tendency to “cream” a market by staying in the high profit zone, with a concomitant tendency to keep costs high. This led to US automobile manufacturers permitting entry by Japanese auto makers into the low end of the auto market in the 1970’s, thereby providing the vital foothold the Japanese needed to become competitive throughout all segments of the US automobile market.

• Believing that quality is something a supplier puts into a product rather than understanding that quality is something that the consumer gets out of the product.

• The belief that the consumer will pay a premium price thereby keeping prices high, which in turn lures competitors into the market if the market entry barriers are sufficiently low.

• Maximizing rather than optimizing, a habit that contributed to the destruction of Burgmaster.

[To be continued in the Next Post. Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]

A SUMMARY OF THOUGHTS: INNOVATION & ENTREPRENEURSHIP III

[continued from the Last Post.]

The entrepreneurial strategies that Drucker identifies are:

• “Fastest with the Mostest”;

• “Hit Them Where They Ain’t”;

• Ecological Niches; and

• Changing Values and Characteristics;

Each of these strategies has advantages and disadvantages; they may also be combined to form hybrid strategies. Some of them are riskier than others. Market structures such as demographics, and economic conditions within the market, will certainly influence the potential for success with a particular strategy.

(1) As examples of “Fastest with the Mostest,” Drucker cites:

• the growth of the pharmaceutical company Hoffmann-LaRoche, from its beginnings as a small chemical firm in the 1920’s, and

• the decision at DuPont to grow its plastics industry after the discovery of Nylon.

This strategy is also one of the riskiest because it appears so much like a gamble; insufficient resources may cause the strategy to fail.

Nylon was a commercial success, according to Drucker, because the negative impact of World War II on the Japanese silk industry protected the fledgling plastic fibre industry; it could thus become cost competitive by the time the silk industry rebuilt itself in the late 1940’s.

DuPont was able to follow up a technology innovation with the process innovations necessary to reduce costs, and thereby to keep the market built during the absence of silk from Japan.

[To be continued in the Next Post. Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]

A SUMMARY OF THOUGHTS: INNOVATION & ENTREPRENEURSHIP II

[continued from the Last Post.]

In the practice of entrepreneurship, Drucker embeds the innovating agency within an organization and tries to answer the question: “what kind of organization encourages and exploits innovation?”

Drucker looks at three types of organizations:

• the established private sector business;

• the established public sector service institution; and

• the new start up business;

The established private sector business, despite the prevailing idea of innovation only happening in new ventures, is the major wellspring of innovation.

The reasons for an established company spewing out innovation are:

• the established company usually has the financial resources as well as

• the knowledge base to innovate.

Unfortunately, established companies have a track record of not exploiting innovation; this situation is taken advantage of by disenfranchised employees opting to start their own enterprise around the spurned innovation.

Several organizations started by entrepreneurial founders have languished once the founders have left their companies; the innovative drive emerged solely from the efforts of those founders rather than from the existence of an organization-wide entrepreneurial culture.

Large established companies such as 3M and Procter & Gamble have built entrepreneurial management into their organizations. In both cases, innovation is expected and encouraged throughout the organization.

Both companies have established processes that encourage innovation and provide methods for employees to fund innovative efforts.

In an interesting sidebar, Drucker warns:

ACTION:

A non-innovative company, acquiring an innovative one, in the hope that the newly acquired company will inject it with a strong dose of innovation.

RESULT:

Usually results in failure of the objective, as well as the destruction of the acquired company.

EXAMPLE:

The acquisition of Burgmaster machine tools by Houdaille Industries in 1964 followed by a slow decline of Burgmaster until the liquidation of the its assets in 1986, as described in 'When the Machine Stopped: A Cautionary Tale from Industrial America' by Max Holland (1989).

[to be continued in the Next Post. Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]

A SUMMARY OF THOUGHTS: INNOVATION & ENTREPRENEURSHIP

According to management guru Peter Drucker, writing in his now classic, 'Innovation & Entrepreneurship: [Published in the mid-80's, this is the first book to present innovation & entrepreneurship as a purposeful and systematic discipline.]

• innovation & entrepreneurship are not limited to high technology industries.

Most innovation & entrepreneurship happens in low technology industries just as most job creation also comes from low technology industries.

• entrepreneurship is doing something differently so as to better use resources & expand markets for the product &/or service.

Ray Kroc took a hamburger stand in a single city and turned it into an international business, McDonalds, by applying innovation to his products, services, & marketing.

Ray Kroc was an entrepreneur. Someone else running that hamburger stand without Kroc’s entrepreneur spirit may have had a thriving hamburger business but it wouldn’t have been McDonalds & that person wouldn’t have been an entrepreneur, just another hamburger stand owner.

• entrepreneurship & innovation are not inborn characteristics. They are behaviors that most anyone who is willing to apply themselves can learn.

• innovation is “a bright idea” and maintains that dependable innovative ideas come from systematic exploration of the seven sources of innovative opportunity as follows:

- The Unexpected - composed of three areas of unexpected events: unexpected success, unexpected failure, unexpected outside event;

- Incongruities - a discrepancy or dissonance between what is and what ought to be or is assumed to be which is composed of four areas: economic realities of an industry (marketplace), other realities of an industry (optimization of local, non-essential areas rather than system optimization), customer expectations versus the industry perception of customer expectations, internal incongruity with a process;

- Process Need - a weak or missing link in a process that makes the process cheaper, easier, or possible (technologically possible or economically possible);

- Industry and Market Structures - changes in industry or market such as new competitors, new customers, more differentiated products, new manufacturing or marketing processes, new substitute or complementary products or services;

- Demographics - changes in population structure such as size, age structure, cultural composition, employment, education, & income;

- Changes in Perception - a change in the way that facts are perceived such as “the glass is half full” versus “the glass is half empty”;

- New Knowledge - the discovery of new knowledge which can be exploited such as a new technology or materials;

• entrepreneurs innovate.

Innovation is the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth.

Innovation, indeed, creates a resource. There is no such thing as a resource until man finds a use for something in nature & then endows it with economic value. Until then, every plant is a weed and every mineral just another rock.

• The Do’s:

- Purposeful, systematic innovation begins with the analysis of the opportunities;

- Innovation is both conceptual & perceptual, analysis must be followed by testing of the analysis against reality;

- An innovation must be simple and focused because everything new runs into trouble;

- Effective innovations start small providing incremental changes which provide leverage for larger change;

- Effective innovations aim at leadership in a market or industry;

• The Don’ts:

- Don’t try to be clever;

- Don’t try to do too many things at once;

- Don’t try to innovate for the future even if the innovation lead time is long;

• The Conditions:

- Innovation is hard, focused, purposeful work requiring knowledge, experience, & ingenuity;

- Innovators must build on their strengths because of the risks of innovation & the costs of allocating knowledge & performance capacity to the innovative effort;

- Innovation affects the economy & society, requiring a change in the behavior of customers, so it has be close to the market, focused on the market, & market driven;

[To be continued in the Next Post. Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]

A LESSON IN ENTREPRENEURSHIP... & IMPROVISATIONAL CREATIVITY

[continued from the Last Post.]

Entrepreneurial Characteristics

The general characteristics of an entrepreneur are:

• Willing, perhaps eager, to live with the fear of failure.

• Stimulated by a feeling of elation and aliveness when confronting risk.

• Able to perceive risk as common sense, as he or she has weighed the pros and cons of the issues in question.

• Impelled by the certainty of success, an entrepreneur is happy to accept the occasional, or repeated failure; this is considered the price of eventual success, “failing forward to success” as stated by Mary Kay Ash.

• Failure = Learning, and moving on

• Not primarily motivated by money, since the pursuit of money per se would create an unwillingness to take the (calculated) financial risks from which real wealth flows.

• Work = Fun in accomplishing worthwhile aims

• Devoted to business, often at the expense of their personal lives. No job is too menial for them, and laserlike focus on the goal is their raison d’être.

• Passionate belief in a quest for the best. Negativism in/from others = Positivism, and optimism, within themselves. They are driven by confidence in their resolve to attain their objectives. Ignorance is an asset, and thus, they succeed because they don’t know what can’t be done.

• Constantly on the lookout for products and services that that might satisfy genuine needs in the marketspace.

• Churn problems into opportunities with the idea of turning them into profit.

• Persist in checking out the competition, in order to determine what they might be doing right, or wrong.

• Expect frequent rejection when they seek funding, as they have a different mentality to bankers and investors

• For really new products, an entrepreneur tends to go with his or her instincts, and creates a market by educating the consumer, as follows:

- Creating buy-in for the product by demonstrating how it solves a problem or delivers a benefit.
- Repositioning the product in the consumers’ minds by illustrating its uniqueness, and superiority over competing products.

- Flipping a perceived liability into an asset.

• They invest in advertising, promotions, and publicity (via good press relations, for example) to create and amplify market awareness of their presence. The objective is to build sales and establish a strong brand image; that is, to attract customers.

Add your own contributions:

•

Some Notable Entrepreneurs:

- Richard Branson, Virgin empire
- Bill Gates, Microsoft
- David G. Neeleman, JetBlue Airways
- P. Diddy, Bad Boy Entertainment
- Ben Cohen, Ben & Jerry’s
- Steve Jobs, Apple and Pixar
- Henry Ford, Ford Motor Company
- Walt Disney

These entrepreneurs exhibit the following common characteristics:

- They crave thrill, excitement and speed;
- They are highly creative problem solvers;
- They are impulsive;
- They are ambitious and industrious;
- They have tons of energy;
- They love being the hero in emergencies;

NOTE:

It is NOT my intention to portray entrepreneurs as being of a certain fixed ‘tupe’. History has enough evidence of entrepreneurs coming in all flavours. The above are just the common characteristics of the category of entrepreneurs given as examples.

[Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]

A LESSON IN ENTREPRENEURSHIP... & IMPROVISATIONAL CREATIVITY

Successful entrepreneurship is characterised by persistent dogged determination.

This is how entrepreneurs surmount recurring obstacles through their improvisational creativity.

Jay Van Andel, cofounder of Amway, featured in a set of experiences that typify the entrepreneurial persona. Just after the end of the Second World War, Van Andel and two friends opted to ride the airplane craze and launch an enterprise.

This is their story:

For a down payment of $700, they purchased a two-seat Piper Cub in Detroit. Not knowing anything about flying, they hired a pilot to fly their new acquisition from Detroit to Grand Rapids.

As they state: “The next difficulty was making enough money to pay off and fly the airplane we just bought.”

So they opened a flying service, naming it Wolverine Air Service. They still didn’t know how to fly, and thus hired two veteran pilots, whilst they did what was necessary on the ground: their mainstay was flying instruction, but they also offered passenger rides, group transportation, and sales and rentals of airplanes.

They recall: “We were counting on being able to use the new Grand River Air Park in Comstock Park, which was under construction when we started.

When the airport project ran out of money, we attached pontoons to the bottom of our airplane and used the Grand River for our airstrip.

This was a lesson to us in improvisation, and we learned a few more like it during our air service days…[We] employed the services of an old chicken coop for an office…”

On a trip to Florida to deliver a plane, they hit on the idea of opening a drive-in restaurant, similar to ones they’d seen elsewhere.

With $300 to invest, they opened the “Riverside Drive-Inn Restaurant” on May 20, 1947. It was the first of its kind in the area. Their knowledge of running a restaurant was no better than what it was forflying an airplane, but they pressed on.

Their story continues:

“[We] built a diminutive wooden structure there at the air park, laying the foundation and nailing the clapboards ourselves. It took several months to get electricity hooked up properly, so we bought a generator. We also had no water for some time, so every evening we would fill up jugs at the nearest place that had plumbing and carry them to the restaurant.”

They kept the restaurant open from 5 P.M. until midnight. Like all good entrepreneurs, they functioned on overdrive. They kept conjuring up ways to provide additional services to their customers at the air park.

At one point, they started offering canoe rides down the Grand River, and fishing excursions on that lake. Within two years in this business, they were operating a flight school, charter service, repair service, an aircraft and gasoline sales organization, as well as the boat rental and charter business, not to mention the restaurant!

During these years, they gained business wisdom the hard way: the primary lesson was to persist with their persistence in spite of an unending series of unexpected problems.

As they conclude: “When the air park didn’t open on time, when the electricity and water weren’t hooked up for our restaurant on time, when several of our airplane engines were destroyed after we used the wrong lubricating oil, when hail and wind seriously damaged several of our airplanes, we didn’t give up.

Winter snows forced us to put skis on all the airplanes, but it seemed that as soon as the skis were on, the snow would melt, and as soon as we removed them, the snow would fly.

But the first year, we flew two million passenger miles and earned $50,000."

Entrepreneurial Improvisations:

• No landing strip? They used the river.

• No office? The chicken coop would suffice.

• No electricity? Locate a generator.

• No water? Haul it in.

• Ground covered with snow? Put skis on the plane.

Adapted from Source: Joseph H. Boyett & Jimmie T. Boyett

[to be continued in the Next Post. Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]

A VERY INSPIRING STORY ABOUT ONE MAN'S PERILOUS JOURNEY TO CONCEPTUALISE & BUILD ASIA'S BEST INTERNATIONAL CASINO RESORT!

Imagine you are enjoying the cool breeze while sipping tea with your good friends on a 1,500m mountain-top facility, which is some four to five hours drive away from where you are living.

Next, imagine there is a similar mountain, even higher at 1,800m, located about 58km away from where you are living.

Now, picture yourself as a hard-working contractor, but you are now in your 50s, with some money from your previous building projects.

Next, think about conceptualising & building a beautiful holiday resort on the mountain-top.

Experts from the Public Works Department confirms in writing that it would take 15 years just to build the access road to the mountain-top, because the mountain is surrounded with dense virgin jungle & inaccessible rugged terrain.

One more thing: you have got to go back to the sixties, where construction machinery & equipment were not what they are built today. Worst still, you speak no English.

Can you do it?

In reality, many Malaysian entrepreneurs could only see total madness & extreme foolery in undertaking such a risky endeavour, but one simple man, already in his 50s, eventually took on the arduous initiative of executing his dream project during the mid-sixties.

Cheating death six times along the way, & functioning as project manager, engineer, financial controller, labourer & trouble shooter, all rolled into one, he almost single-handedly built the access road to the mountain-top facility (on Gunung Ulu Kali, Genting Sempah) in less than four years, with all his own money, & without any financial aid from the Malaysian Government, except for their nod of official approval.

The first phase of the project with the hotel was eventually completed in the early seventies.

Today, the mountain-top facility is Genting Highlands Resort, Asia's Best International Casino Resort.

The man who took on the almost insurmountable challenge during the mid-sixties was the late Tan Sri Lim Goh Tong, founder of the diversified Genting Group, which today has a combined market capitalisation of US$14 billion as of 30th September 2008.

For me, his acumen was beautifully exemplified in his acute power of observation as well as his keen nose for smelling good opportunities. These are often the critical attributes of successful creators or entrepreneurs.

This book, 'My Story: An Autobiography', by Tan Sri Lim Goh Tong, founder of the Genting Group, Malaysia, has captured Tan Sri's humble journey, starting with only US$175 in his pocket while coming to Malaysia as a young man from Anxi, China.

Written in the form of an autobiography, in a straight-forward, succinct & yet refreshingly original way, this book has documented:

- his early struggles during the Japanese occupation;

- his early business ventures during the post-war years;

- his friendships & relationships with people he cared about;

- his successful attainment & brilliant execution of government building & construction contracts;

- his perilous endeavour in building the Genting Highlands from scratch;

- his responsiveness, decisiveness & ingenuity in problem solving, at both strategic & tactical level, over the years;

- all the way to his diversifying of the group into other businesses during the later years, e.g. Star Cruises; - until his final handing over of the controlling reins to his second son, Kok Thay, in late 2002;

In a nut shell, this book offers many valuable entrepreneurship lessons, not so much from the 'high-tech/IQ' perspectives, which one would normally find in other books, but a lot from the 'high-touch/EQ' perspectives, which are more akin to Chinese entrepreneurs.

There is an ostensibly clear emphasis on building 'guanxi' (relationship), which is typical of most if not all Chinese entrepreneurs.

In fact, another useful entrepreneurial trait from Tan Sri is what the Chinese calls 'dan da xin xi', be bold but cautious. In fact, his pragmatism & steadiness were often seen by his peers as liabilities.

Another powerful trait is the power of conviction. Tan Sri said it best:

"When I make a decision & believe strongly that it is the right one, I will go head on with it, no matter what odds I am up against . . . Once a decision is made with sound reasoning, the rest is hard work, determination & perseverance to see it through to fruition."

You just got to read this book to get to know all about the author's entrepreneurship insights from the university of hard knocks.

Nevertheless, for the benefit of readers, I definitely like to pull out one last one from his book, which said it all, truly reflecting his power of vision:

"The Genting project basically fitted my idea of an ideal business: no one was interested in it, which meant no competition".

As Tun Dr Mahathir, former Malaysian Prime Minister, has confirmed in his Foreword:

"Tan Sri's struggle can be considered part & parcel of Malaysia's (economic) development experience." I fully concur.

Tan Sri's story is a very inspiring one for all of us: beginning with nothing to his name, turning adversities into opportunities, maximising his brain-power, taking calculated risks & confronting naysayers & skeptics through sheer audacity, tenacity, perseverance & more importantly, simplicity & humility.

I salute you, Tan Sri!

[This book was released in 2004 to coincide with the 40th birthday anniversary of the Genting Group. This book is still available in local bookstores. Otherwise, try Amazon.]