Start-up (EBO) Strategy

Entrepreneurship (Start-ups) & Emerging Business Opportunities (EBOs)

    You have the drive. You have the passion. You think you have the right product or service. You are making that leap!

¹    Alternatively, no matter what you´ve tried, progress is slow. Things aren´t quite coming together and you are beginning to get frustrated.

If either of the above sounds like you, Bridges may have the answer. Spend some time to take a serious look at our website. Do you see a good fit? Are you ready to do something exciting in your business? Telephone/e-mail for an exploratory appointment, or consider the Power Strategy Audit explained at the lead page of Services. In either case, we look forward to hearing from you!

PART I – Points of Departure 

    Do you have what it takes to be an entrepreneur?  Try the "Entrepreneur´s Test" on the menu at the right.

    Does your corporation have what it takes for intrapreneurship? See "EBO Lessons from Big Blue" on the menu.

    Are you stuck?  Then try beginning with a little encouragement, Inspiration versus Procrastination below. If that doesn´t do it for you, then go to the subpage "Don´t Start This Business!"

Inspiration versus Procrastination

    With a nod to William James,^* procrastination is the assassin who kills inspiration. In this case the assassin is an ugly frog -- and inspiration a nice kettle of boiling water to make your flower tea.** The first three minute video, "212^o - The Extra Degree"  is about the boiling water -- and a little more. The follow-on one-and-a-half minute video, "Eat that frog" is about keeping the assassin at bay. Just drop him into the boiling water?

     Eating frogs is all well and good, but to move from inspiration to income takes more than persistence. It takes systematic persistence, on which we elaborate at "Will marry, can´t dance!" the last of the ventures discussed on the subpage "Don´t Start This Business!" on the menu at the right.

* William James (1842 - 1910), who was trained as a physician, was a professor of psychology and also of philosophy at Harvard. He made a similar statement about the assassin of a (good) attitude.

** Flower tea consists of small hand-made (in China) cones, about the size of, and similar in appearance to, a large Brussels sprout (Rosenkohl). One drops the cone into boiling water and it slowly unfolds into a flower, making for an elegant and unusual tea ceremony. 

The Passion

    What do you absolutely have to have to start a business successfully? Passion! If you are not sure you have that passion, than obtain a recent edition of What Color Is Your Parachute, A Practical Manual for Job-Hunters and Career-Changers, by Nelson Bolles, a classic (over 8 million copies in print), which is annually updated. The official site is www.jobhuntersbible.com. For those on a really, really tight budget, there is a ten-page summary of it (to encourage you to check it out at a library, or better, to buy it) at Business Summaries, www.bizsum.com/ 

    Bolles studied chemical engineering at M.I.T. and transferred to Harvard for a Bachelors in Physics. He then earned a Masters from the General Theological Seminary in New York City and, after being ordained, served several churches. As enjoyable as his book is to read, you are doing yourself a disservice if you do so casually. It merits the intense undivided attention you would give any other classic textbook. (Parachute also appears in German editions, but the U.S. ones are preferable.)

The Idea

    You have the passion. Do you have the idea? To have merit in the marketplace, for an idea to be creative, unusual and pleasing is not enough. It must solve a problem, present an advantage, which customers will value. Therefore generating ideas for a new business often begins with a search for the right problem to solve for the intended customers.

    That in turn is a function of innovation. Two standard approaches for innovation are (1) brainstorming and (2) taking a given, and applying to its elements the four steps of: add, subtract, create, delete. Innovation leads to considering the patent process and deciding its relevance, a proposed future article at "Concept Papers" at "Papers."

The Business Plan

    You have the passion. You have the idea. What next?

    A business plan is the common next step. These range from an outline jotted down on the back of a napkin during a restaurant meeting to the formal submission of a plan with projected financial statements to a business plan competition, such as the Munich Business Plan Wettbwerb, www.mbpw.de Going through the process of a business plan competition forces one to think issues through. It lends intellectual rigor to your concept.

    A highly regarded guide is the Nolo Press book, complete with CD, now (2010) in its 9th edition: How to Write a Business Plan, by Mike Mckeever, in the $25 - $35 range. This book takes you step by step through the process.

Supplemental reading to that is “How to Write a Great Business Plan” by William A. Sahlman in Harvard Business Review, July/Aug. 1997. William Sahlman is a professor at Harvard Business School who, at the time of writing it, had already been involved in over 50 start-ups as an adviser, investor or director. A re-print or pdf download of the 11 page article may be ordered at  https://hbsp.harvard.edu/product/cases.

    One can also order his concise (64 small pages) paperback booklet of the same title, published by Harvard University Press Books, 2008, for about $10.00.The booklet is an expanded version of the magazine article.  William Sahlman points out that investors examine an business plan on the basis of four criteria:

            1) The People (the founding team – and the advisors)

            2) The Opportunity (the market niche – and the competitors)

            3) The Context (the big picture, the regulatory environment,                           demographics)

            4) Risk and Reward (the return on investment - and the exit strategy)

    Two bolded statements in the 1997 article are well worth repeating:

            “Whatever the reason, better-mousetrap businesses have an uncanny way of malfunctioning.”

            “One of the greatest myths about entrepreneurs is that they are risk seekers. All sane people want to avoid risk.” 

    Besides concisely delivering terrific information, the article also demonstrates a refreshing sense of humor. A sidebar gives, for example, a glossary of business plan terms. Three definitions (of 14) are excerpted here:

What They Say. . .                                   and What They Really Mean.

The project is 98% complete. . .               To complete the remaining 2% will                                                                  take as long as it took to create                                                               the 98%, but will cost twice as much.

Customers are clamoring for our product.  We have not asked them to pay for it

                                                              yet. Also, all of our current customers                                                               are relatives.

If you invest on our terms, you will earn    If everything that could ever               a 68% internal rate of return.                   conceivably go right does go right,                                                                   you might get your money back.

 .                 

The Other Prerequisites

    You have the passion, the idea, have started writing a business plan. What else do you need? A better place to work? Education?  The energy and drive of youth, or the wisdom of experience?

    Passion is a must, and so is a reasonable place to work. If you don´t have a good place, go to www.workatjelly.com. Either an existing network can solve that problem for you, or you can consider starting a jelly site yourself.

    The other prerequisite is persistence. You should be relentless. An example of the right attitude is given in German, "der glückliche Unternehmer," as an Appendix to the subpage "Entrepreneur´s Test."

    Education is not a must. You can always hire educated people to work for you. Bill Gates, who dropped out of Harvard his freshman year to found Microsoft, is just one of a number of "drop-out" billionaires with myriad PhDs working for them. However education does not hurt either. There are also PhDs who have founded billion dollar companies. The best entrepreneurially oriented formal education is in the U.S. (at the risk of academic chauvinism,* as  the author was mostly educated there). To read more about entrepreneurial education, see that subpage.

    Age is also irrelevant. Two examples are given in: “Entrepreneurs, Young & Old.” They treat an independent contractor in Germany, and the founder of the Kentucky Fried Chicken franchise. The former started in sales at the age of six. The latter launched his franchise at the age of 65 with his first Social Security check of $105.

* Chauvinism, excessive patriotism -- up to war-mongering -- entered the English language from the French word that was derived from Nicolas Chauvin. He was a lengendary soldier devoted to Napoleon.

Part II – What Makes for Success?

    An interesting PIMS study of the Strategic Planning Institute¹ was conducted about 117 start-up ventures in North America, Europe and Australia in the 1980s. These ventures were manufacturers of both industrial and consumer products and had both standard and new technology. They were entering:

            • both stagnant and dynamic markets

            • both fragmented and concentrated markets

    The distinction between "winning" and "losing" start-ups was determined on the basis of the market share achieved by the fourth year of operations. Successful operations tended to turn the corner to a positive return on investment (ROI) in year five. Below is a summary of the findings of this study. More likely to succeed were start-ups with:

    1) a goal of achieving a high share of a rapidly growing market

    2) and the production capacity to support that goal.

    To comment on these two points:

    1) Marketing: Achieving high market share is a critical driver to profitability. The more important the product is, in terms of its share of the customer's disposable income, the harder it is to gain market share. Customers are less likely to try a new product or switch suppliers on big ticket items than on relatively minor purchases. The fastest way to achieve significant market share is to sell to key major customers. In other words, carefully aiming a sniper's rifle on a major retailer, such as a Wallmart´s with its huge multiplier effect, is more effective than going after the general public with a shotgun.

    Winners spend heavily and early on marketing. However by year four, their marketing spending has come down to the "normal" level of their competitors.

    2) Production: Having good quality in of itself is not enough, as the quality offered by competitors may also be good. You have to be perceived as significantly better. Quality refers, of course, to the total customer experience including payment terms, timely delivery (no stock-outs) and after sales service. The reward for the perceived "quality gap" of the winners was a chance to charge premium prices while being regarded as providing value.

    The resulting healthy cash flow enabled the winners to spend heavily on developing even better products (R&D). The above points confirm conventional marketing wisdom. The next two points are a little more surprising.

    3) Start-ups were more likely to suceed when faced with tough competition, ideally a dominant, market-leading competitor, a sort of David versus Goliath scenario.

    4) High sales force expenses did not lead to high market share. Specifically, start-ups which spent 3/4 of their marketing budget on the sales force and related expenses and 1/4 on advertising, promotion and other marketing did significantly worse than those which spent less than 1/2 on the sales force.

    From these four points one may make a bullet point "winners check-list."  Winners tend to:

• enter a rapidly growing market (Which regional or customer market segments show the highest growth rates?)
• face strong competition (Is there a dominant competitor and if so why?)           
• have stretch market share objectives (Demanding, but achievable, ones need to be set, by market niche.)
• provide products that do not make up a large percentage of the customer's purchases
• budget heavy marketing expenses for the first two years (Hit the ground running.)
• support the product with outstanding service (Service is key for customer loyalty.)
• charge a premium price (Provide corresponding value.)
• have sufficient production capacity (Potential bottlenecks?)  
• budget heavily for R&D (Innovation needs to be on-going.)