March 2007 Archives

Sometimes the choice of what business to put up depends on what resources you h ave in the first place. For many entrepreneurs, this translates to location. After all, getting a perfe ct location for your ultimate business idea is next to impossible. So why not g o the other way and first look for an available location... and THEN think of t he perfect business to put up on it? Quite a few successful net cafe owners, for instance, have found themselves run ning a thriving business simply because they stumbled upon an available busines s space that so happened to be situated near a school. And of course, what smal l business is more "in" these days when it comes to having a student clientelle than a net cafe? One of our very first interviewees for SME Insight, John Decen a of Hotshots Flame-grilled Burgers, found himself in a simila r situation early on when he and his partners found themselves with an opportun ity to make use of an empty lot in Pearl Drive, Pasig City, just across the Uni versity for Asia and the Pacific. With quite a lot of real estate at his dispos al, he first envisioned having a number of stalls that would sell anything and everything. At this point, the idea of coming up with a huge burger chain was not in his mi nd. What he really wanted was a lot of different tiangge-type operations there. But as it would turn out, much of their time ended up concentrated on perfecti ng a burger recipe, so by the time the lot was already made available, they had no choice but to put up their burger stand and concentrate on this first. And ta-daah, the rest is history. The point however is that the burger business was not really the intended outco me. The intended outcome was a bit more obtuse, but nevertheless a result of th e opportunity that was made available (i.e. the large land). Fortunately, they managed to make a darn good burger and it took off. While thinking of what kind of business you want to put up and finding ways to make it happen is the romantic ideal of what entrepreneurship is all about, man y pragmatically-minded entrepreneurs tend to think in terms of seeing opportuni ties and making the most out of them. In other words, have resources and the bu siness idea will follow. And of course, this includes the angle of location, lo cation, location. You can read about John Decena and the Hotshots story in the September-Octo ber 2006 issue of SME Insight.

If you're running an organization, sooner or later you'll be asking yourself ju st what exactly is your business good at? Are you good at marketing? Sales? Manufacturing? Purchasing? Financial administ ration? If your business is good in some functions but downright pitiful in others, the n it's time to consider outsourcing. Outsourcing is the natural tail end of the SWOT Analysis process (strengths, we aknesses, opportunities, threats). You first identify what your firm's core com petences are, as well as your core weaknesses. Next, you strengthen your strengths, reinvesting in them and nurturing them to make them even better. Are your finance guys real wizards? Then perhaps you mig ht end up earning more from putting your funds in investments versus reinvestin g in your own business. Translation: perhaps your core strength is telling you to transform your business into a financial management firm that offers investm ent advice to the public! Third, let go of your weaknesses. Ouch. Admittedly this is the most painful par t of the equation, especially if it hits company pride: Your sales force is lac kluster? Then perhaps it's time to let go of your entire sales division and out source it. Outsourcing is typically associated with manufacturing, especially as China, wi th its low-cost operations, gobbles up the world's manufacturing activities. An d of course at present outsourcing is also associated with data- and voice-orie nted services. But the fact is that you can outsource everything that doesn't d o too well in your enterprise. Financial people not that good? Find a professional finance firm. Marketing guys don't know what they're doing? Find a professional marketing com pany. Management itself needs improvement? You can even find management firms for hir e. The battlecry here is "Focus on your strengths; outsource the rest." Imagine an extreme example where a company run by engineers creates great ideas , but actually fumbles in just about everything else--finance, sales, manufactu ring, and even management. Can such a pathetic-sounding company survive? Answer: yes. And if you follow our above principle, what they should do is to s trip ALL management functions away from their organization and just leave behin d what they do best, which is research and development. Result? You now have a pure R&D firm, which is a valid business organization. Let other people take ca re of everything else. This is the business model behind Dolby Labs, for instan ce, which does not manufacture its own products but only licenses its technolog ies to the more competent manufacturers. The hard part about outsourcing is informing the organization that you will be weeding out its bits and pieces. But it's bound to be for the better. After all , why reinvent the wheel? If someone else can do it better than you can, then l et them do it for you!

There are two schools of thought regarding the idea of being a "nice" manager. One school says that nice guys finish last, and that their bei ng nice people end up leading to an organization that doesn't accomplish anythi ng, or in having people that don't do what they're supposed to be doing in the first place. The other school says that nice guys finish first, and that ni ce guys lead to productive organizations that thrive on respect, equality and h armony. Obviously these are two opposing schools of thought. Perhaps this can then help shed light on the issue. Being nice can be a liability if a manager is being nice just so in order to be liked. Perhaps the manager's primary goal in life is to have people liking him or her, and this becomes a liability because the manager ends up prioritizing likeability over getting things done. This kind of management style leads to aimless, wishy-washy organizations that dream big but end up get ting nowhere. Leadership eventually disintegrates because of loss of direction and efficiency. But being ruthless can also be a liability, especially if the manager becomes a single-minded boor who no longer shows respect for his or her people. This kind of management style leads to organizations where people fear the boss but talk behind his or her back. These managers think they are respec ted because of the fear that they conjure, but all the while their people are a ctually making fun of them. So the irony is that there actually isn't any real respect after all. Leadership eventually disintegrates because of loss of organ izational trust and initiative. So what's the ideal mix? Ideally, a manager is firm yet respected. The ideal ma nager neither terrorizes nor stays lax. In other words, you can be nice and lov ed and yet get things done. Skillfully implemented, you can actually get your p eople to do what they're supposed to do in spite of your being nice to them. Confusing? Kind of. But then that's why management is very much an art as it is a science! In the end, this is all about the leadership angle of management. Effective lea ders know what they want, treat their people as peers, and manage to motivate t hem not out of fear, but out of an ability to generate enthusiasm for their vis ions. This requires a lot of confidence and trust: it takes confidence to know that you can get what you want out of people withou t your having to bully them, and it takes trust to have faith that your people will in fact do what they're supposed to do. This is why Tom Peters once famously said that great leaders are part-salespeop le and part-cheerleaders. They have to first be able to sell their ideas to the ir teams. And then, once the team mobilizes, they have to be able to cheer them on. You certainly can't cheer them on if you're a grumpy person. At the same time, you can't mobilize them if you're too nice. Nice guys, tough guys. That's a balancing act for you.

What does it take to start your own company from scratch? Try nerves of steel and a willingness to take risks. These two things are at t he core of every entrepreneur. For the working masses, the comforts of the office and the regular paycheck may numb us into submission, and file down our willingness to take risks so much t hat we no longer see entrepreneurship as a viable option for our professional l ife. I myself have experienced the comforts of being an employee, having been one for the past ten years; my entire professional life can be decribed as a sl ow crawl towards bigger and better things, professionally speaking. For the lo ngest time, the goal was to find the best job and work that job till I retired. But then something happened along the way â I met a few entrepreneurs. It might have seemed like a minor thing â I would be assigned to interview one person, and I would go to the interview â but the effect that it has had on me has been nothing short of profound. Talking to people like Joanna Duarte and Marta Matute have really forced me to rethink my career plans; setting up my ow n business is now a viable option that I am now in the process of seeing throug h to reality. Why the sudden change in direction? Well, let's just say I have seen the light . It's tough to be an entrepreneur, no doubt, but hit on that one good idea an d the rewards may be phenomenal. Of course, it often takes nerves of steel to run your own business, but, as many successful entrepreneurs will tell you, cou rage brings its own rewards. I've also realized that starting a business is not all hit or miss â if you hav e a good idea, taking the risk and gettig up the courage to start something is only one part of the process. The other aspects of running a successful busine ss are more related to the âhowsâ?? of execution, so they can be learned; there are best practices in every industry you can gain insight from, so developing efficient processes are achievable even for a start-up. Maybe a lot of you have considered starting your own business at one point in y our lives; my advice is to consider it some more. Better yet, go forth and set -up â even on a small scale. Sometimes what stops us is not the infeasibility of an idea, but things like not knowing where to start, or perceiving the path of the entrepreneur as difficult and unrewarding. Nothing could be further fro m the truth. You can actually make a decent life for yourself as an entreprene ur, all it takes is a little courage and tenacity, along with a willingness to take calculated risks. Give it a shot one time, and you may discover that it's the career path you've always wanted.

Back in my MBA days, one of my favorite subjects was operations management. Thi s is because I've always been fascinated with ways for improving efficiency. An d one of the concepts that was brought up was the Japanese idea of Poka Yoke. Poka Yoke stands for mistake proofing. Or idiot-proofing, for the more sardonic . Coined by Shigeo Shingo in the 1960s, during Japan's retooling years, the ide a was that in a factory setting, so many things can go wrong in the act of join ing one part with another. For instance, a panel might be put on backwards, or the wrong part may end up in an assembly. Shingo decided, why not idiot-proof the assembly process by making the part s come together in only one, and only one, way? So Poka Yoke is a design p hilosophy as much as an operations strategy, because it involves a rethinking o f how components are designed. Henceforth, parts will fit if and only if they a re on the right places. No longer will a worker with a hangover end up putting together a car with the rear bumper on where the front bumper should be. We don't really have too many large-scale manufacturing operations in the count ry (most fall under the category of light industries). But even here, Poka Yoke can be invaluable. Little things such as the design of bag straps, or of furni ture parts, or of tool assemblies. And if anybody can manage to apply Poka Yoke to a service environment, then tha t will be mindblowing.

I had John Lu Koa of The French Baker as the speaker in my strategy class this morning. We talked about his being the CEO, and of hi s firm's origins and strategies. He carries his company's positioning statement in his Treo smartphone (and it's a long positioning statement!). John Lu told my students about how, once upon a time, the Ayala group did not w ant his brand in Glorietta mall because The French Baker was so heavil y associated with the SM malls. They asked him to make a new brand instead (a d eal that many companies with an SM presence have reluctantly accepted), but Joh n Lu refused. John Lu had the last laugh though -- the Landmark mall, which is directly attac hed to Glorietta, embraced him, and now his "forbidden" brand is situated at th e very entrance of the Glorietta mall. :) He talked in detail about environmental scanning, which includes his frequent t rips abroad to check out the latest baking technologies, as well as of assessin g the market, his suppliers, and his people. He's especially proud of the very strong bonds that he has with his suppliers. He claims to already know what wil l happen in the next ten years, technology-wise, and is basing his plans on the se forecasts. Forecasts which include how malls will become a disincentive for the people in the near future (they would rather stay home than slug it out wit h the crowds). The one problem that he sees looming in the horizon: the imminent entry of flou r from China, which is of really high quality and yet can be at least 30 percen t cheaper than locally milled flour. While he would want to be faithful to loca l suppliers, business is business, and this may end up destroying the local flo ur milling industry. John Lu is currently active with the Go Negosyo entrepreneurship advocacy group . He is also pushing for the election of Ed Angara, who he explained was the un derappreciated thinktank behind so many of our country's economic reforms, dati ng back to the Ramos era.