smallbusinessing

[smallbusinessing]

The Marketing Basics – Your Guide to Getting some Marketing Done!

I find that many of my entrepreneurial clients are operationally exceptional, driven by passion and a deep interest in what they’re doing – amidst this excitement, marketing can often get a bit lost.

This tends to be because entrepreneurs in these SME’s do one of two things…

They either 1) don’t tell anyone about their product/service because, well, why would they – it’s so good people should just KNOW about it; or 2) they dive head first into launching innovative promotions, throwing a plethora of marketing materials at anyone who will listen, without thinking about any sort of integrated plan.

Unfortunately, neither of the above tend to work in the long term. To give your company’s brand real meaning to customers, you need to unite all of your marketing components to send out a clear message to your target consumers which states emphatically - “THIS IS ME”

My aim here is to give you enough information that, by the end of this blog, you should be able to write out a targeted and coherent marketing plan to help get people to your door (real or digital).  

I plan to cover a lot quite quickly here so we will start with the Marketing Mix (often called the 4Ps) and Integrated Marketing Communications (IMC), followed by Segmentation, Positioning and a little on Marketing options. I will provide a follow up on Digital Marketing and Branding (narrative and identity) in a future blog.

Every Element Should Work Together

Your Marketing Mix is your mixture of Price, Place, Product and Promotion and is often referred to as the 4Ps. These should never be considered in isolation as they need to work together to deliver one solid marketing message. Making sure everything works together is the key principle of Integrated Marketing Communications (IMC).

I’m sure pretty much everyone can think back to a shopping experience where things just didn’t seem to work – perhaps a website which looked like HTML had just been invented when it was constructed, but where the high prices did not match the shabby blurry pictures of the products; or a promotion which seemed to undermine, or at least clash with, the branding of the business. This type of Marketing Mess (as I like to call it) can drive customers away very quickly as they become confused about what it is that you really stand for.

The key learning point here is that you shouldn’t rush to create promotions, product placements or pricing strategies. IMPORTANTLY, before you decide on the specifics of your mix, you must first know who you are trying to tailor your mix for. Thus the first step in planning a marketing strategy is to figure out who your target segment is.

Step 1. Segmentation: The Mix depends on your Target Segment.

How you configure the marketing mix depends on who you want to target with your products or service.

It is likely that you have some person in mind – we could call them your ‘Ideal Customer’.

This ideal customer will have some mix of specific characteristics or traits which you think make them attractive (or make you attractive to them!) – maybe they live in a specific geographic area, maybe they are male/female, maybe they have blonde hair, maybe they like horses, maybe they are parents – some companies will have a very specific ‘ideal customer’ whilst others may have a more generic one. For example, a local corner shop versus an up-market health supplement store specialising in back pain.

Take your ‘ideal customer’ and break them down into key traits and characteristics; Who are they? What makes them so perfect for your product?

The list of characteristics you come up with could be considered your segmentation variables.

Here’s an example:

I have a company which sells pre-made cocktails. In my head my ideal customer is 21, got a good job out of Uni and likes to party, lives in a city and has disposable income. Through a fairly simple analysis I have come up with the following segmentation variables:

·       Age: 21-29

·       Professional occupation

·       Urban and single – living in London

Taking these variables together I have the key elements of my Target Segment. Often these will be demographic, but you don’t need to stick to such variables – you can be creative. The key aim of this process is to come up with characteristics that differentiate your customers from non-customers. This is so that when you create marketing materials which target such characteristics you will be appealing  efficiently to those who are most likely to buy from you.

Below are some other ways you could break down your customers...

Step 2. Align your Mix with your Variables

Once you have your target segment outlined you can go about creatively crafting your marketing mix. If possible, try and get the different elements to also add value to your product/service as well (see my previous blog on value).

Let’s take my previous cocktail example. Given my segmentation variables I would ensure that my pricing is high to reflect the professionalism of my ideal customers. I would also ensure that all promotional activities and product placements occur in urban centres and in mediums which are viewed by people in their 20s (I would basically run to Facebook and advertise like hell there). My product is for graduates so I wouldn’t, for example, stock it in Universities for fear of undermining my brand’s identity.

The things you choose not to do are very important – I warn you against using what I call a ‘shot gun’ approach to marketing. Marketing has a massive tool box of techniques, but you do not need to use everything in that toolbox to be successful. Initially, pick 3 or 4 tools which work together and keep it simple. If you’re getting excited about all the options available to you, plan out some phases to spread out the implementation of all your ideas.

If you’re struggling to know what tools are available, consider the following…

The Positioning Game

Positioning is about using your marketing mix to position your brand in your customers mind.

This is a bit of a game as you will need to ensure that all your moves ultimately reinforce the position you want to take. Positioning will only work if your brand (communicated by your marketing mix) is coherent and different from others’.  Your position in someone’s head will be relative to your competitors positions in that persons head as well.

As such, keep in mind how your integrated marketing strategy not only communicates your brand, but also how it differentiates that brand from others.

You cannot position your brand if you do not know your market environment, so make sure you do some decent market research before you jump into developing your marketing mix! In your market research try and identify the positioning of other brands – are they high end/low end? Are they focusing on price or quality? Hopefully by engaging in this analytical task you will find a snug gap in which to position yourself.

I will write a future blog on market research relating to market position(ing) and brand mapping to help with this.

Measuring Marketing Success

Before you begin you should consider how you plan to measure the success of your marketing efforts. This is often forgotten in SMEs who rush in to market their goods or service – they DO lots of marketing, but they don’t know if it’s hitting the spot.

First, take a moment to write down your marketing goals along with the timeframes in which you want to meet them. Do you want 10 more calls to your business a day? A 20% rise in sales? 100% more likes on Facebook?

Second, once you’ve chosen your goals, make sure they are measurable!! 

If something isn’t working you don’t need to necessarily give up on it immediately, but you will want to analyse the problem and make necessary tweaks. The aim is for incremental improvement, rather than one amazing campaign – keep a long-term vision when planning as brand positioning takes time to establish. 

Key Takeaways

Ultimately marketing is best kept simple to begin with! Start with a clear and coherent marketing mix which is clearly related to your target segment (your ideal customer). Do some research on your options and plan out how they will all work together to help position your brand in your customers mind. This positioning should reflect the uniqueness of your product/service in a way that differentiates it from other brands. In order to do this you will need to do a bit of market research – never a bad thing in my mind.

I will finish below with my top ten tips for ‘Doing the Marketing Basics’

1.       Know who you want to buy your product

2.       Do your market research - Who else wants your customers?

3.       Come up with 5 segmentation variables which help you differentiate between customers and non-customers.

4.       Go through the 4ps and choose your ‘tools’ based on the variables identified

5.       Keep things simple to begin with

6.       Build phases into your implementation plan if you have lots of ideas

7.       Market within your means – You do not need to spend a lot to be effective.

8.       Be efficient with your marketing – Everything should focus on your target segment

9.       Consider how to reach your early adopters initially (see my previous business model canvas blog for more information on this group)

10.   Be specific with your marketing goals and check to make sure your marketing is working for you.

[smallbusinessing]

A Guide to Strategic Thinking

Strategic decision making is vital for SMEs aiming to grow and develop. In this blog I provide an accessible overview of strategy, and pay particular attention to both logical and creative strategic thinking. These two approaches are seemingly paradoxical, but when combined, can help SME’s strategise in both robust and revolutionary ways.

What is Strategy?

Before I offer up a definition, you should know that the meaning behind the term ‘strategy’ is still a matter of deep long-winded academic discussion. That said, put simply, strategy is the means by which a firm matches its internal capabilities with its environment in order to create a competitive advantage. 

Strategic thinking goes beyond just ‘how to do strategy’. Defining new strategies is about identifying and imagining possible futures for a business. When thinking strategically you are trying to understand potential strategic options in order to position your company effectively in an unknown future reality. 

As such, thinking strategically is more than just strategically planning ahead and involves novelty and non-linear thinking. This is where it becomes tricky as it often sits in tension with a fundamental desire for stability and certainty.

The are many ways to approach the study of strategy, and for this blog we are going to look at strategy at the business level of analysis (rather than at higher corporate or network levels). At the business level we will be focusing on the kinds of strategic insights which are useful for an individual or small team when considering the strategy of a single company.

Strategic Thinking and Cognitive Maps.

First things first, how does one think like a strategist?

One idea is that managers need to be thinking in a systematic, logical and reasoned way in order to define strategic problems and provide solutions for those problems. This involves moving through some version of the following process:

Identifying: recognising problems and making sense of those problems – how do they relate to you?

Diagnosing: figuring out the underlying cause of problems and analysing those causes

Conceiving: formulating and imagining possible solutions

Realising: implementing and acting

Nevertheless, strategists must concede that there are barriers to undertaking these processes – there is nearly always limited information and the full complexity of any situation is often impossible to grasp. As such, strategists also need to rely somewhat on their intuition.

Intuition here is not the same as thinking in an ad hoc and random way. A persons intuition is based on their ‘cognitive map’; an unconscious understanding of how the world works which is influenced by experiences as well as education and personality. These cognitive maps steer the senses of a person and focuses their attention onto particular things – they are essentially ingrained interpretive filters which determine issue salience and provide an existing repertoire of problem solving responses.

The Pros and Cons of Cognitive Maps

On the one hand, cognitive maps allow us to simplify a situation and use our intuition to make informed and holistic choices. Although we can’t get all the information about a situation, we can rely on our cognitive abilities to fill in the gaps and provide us with a means to move forwards.

This is very valuable for a strategist in an SME as cognitive maps facilitate speedy decision making. Put another way, quickly following your gut is not an uninformed practice - you are listening to your well-founded intuition!

Unfortunately, every strategist also needs to be aware of a nasty side effect of these maps – Cognitive Rigidity. Cognitive maps can make it difficult for us to see outside of our own paradigm. Instead, we can ignore things or strategies that don’t fit with our world view and can become very rigid in our thinking around problems and solutions.

As such, strategic thinking is about two things which often sit in contradiction to one another…     > LOGIC &     > CREATIVITY

We need logic to help us analyse and distinguish between feasibility and fantasy. When we analyse something logically we employ our cognitive maps to help us fill in the gaps in our understanding.

On the other hand, we also need creativity to help us see past our own cognitive map and see innovative opportunities. 

When a small business is considering its strategic direction, it therefore needs to think both logically and creatively. 

Logically Thinking about Strategy

I’m going draw a lot here from a scholar called Kenneth Andrews (1987) who has written profusely on corporate strategy. His perspective is very rational and logical, and there is certainly a lot of value in what he suggests.

Firstly, all your strategic decisions should show unity, coherence and an internal consistency. In other words, there should be an underlying logic to the pattern of strategic decisions you make. If there isn’t you could go off in all sorts of odd and unnecessary directions. This requires PLANNING!

In order to plan properly you need to explore the 4 components of strategy:

What is the market opportunity?

What are your competences and resources?

What are your personal values and aspirations as an SME?

What are your obligations to society and so stakeholders?

The strategy process is therefore about taking the answers to the above questions and using them to formulate a pattern of purposes and policies (the strategy) which can then be implemented within the organisation. (for example, these decisions may affect the company’s structure, the company’s processes or the company’s leadership).

It is this kind of strategic thinking which involves tools you’ve probably heard of before such as SWOT, PESTLE, Porter’s 5 Forces, Porter’s Diamond. If you haven’t – look them up on google. They’re easy ways to try and build an objective picture of both your organisation and your environment.

Creatively Thinking about Strategy

I’m going to draw from the work of Kenichi Ohmae here as he provides an opposing view to the one above.

From this perspective successful strategy comes from a particular state of mind where insight and drive lead to creative and intuitive decisions. Being creative is therefore a combination of rational analysis of the situation (to give insight) followed by imagination to develop novel solutions.

What do we mean by creativity?

Creativity is the ability to combine, synthesise and reshuffle previously unrelated phenomena in such a way that you get more out of the emergent whole than you put in.

In order to be a creative SME manager you need to work on three conditions for creativity:

There should be an initial charge which requires vision and inner drive – you must want to change things. This is your creative impetus.

Ideally you should have ‘directional antennae’ which helps you to recognise opportunities and select profitable ideas.

Finally you must have the ability to tolerate static and criticism

Creativity is both constructive and destructive. It requires old ways to be broken, and is often high risk. As such, expect critique and hostility. Be ready to listen, but also to push back. 

Breaking Cognitive Maps

We spoke earlier about cognitive maps – well in order to achieve the above conditions, strategic thinkers need to make sure that they question their and their employees’ assumptions about what can and can’t be. Building this type of questioning into the organisational culture and leadership approach can be helpful to ensure that this is done on a consistent basis, and is reinforced over time.

Strategy is often inseparable from culture – if you can engender a culture which is rational in its market analysis, but creative and intuitive in its problem solving, then you have found an ideal balance between logic and creativity.

For example, Apple is well known for being very tightly controlled by Steve Jobs – a ‘competent tyrant’ as one employee put it. However, the company also fostered a contrarian and revolutionary disposition which is needed to generate creative and disruptive strategies. During the 90s and 00s the company was consistently developing ways to break out of normal industry cognitive maps. Apple’s strategic thinking during this time was based on Job’s instinct for design and push for experimentation.

In Sum: Avoiding Cognitive Rigidity

For small firms, it is important to avoid getting stuck in a particular way of thinking – especially if short term success leads to confirmation bias. If you can maintain a level of intellectual flexibility and be open to critique then you can somewhat protect yourself from rigid strategic thinking.

Additionally, providing space in the organisation for current strategies to be challenged and problematised can be beneficial. These can be in the form of meetings, workgroups, online forums, an away day etc.

Finally, if you want creative strategies you need to have (and facilitate) creative people – my advice for every company whether big or small is to spend time and effort choosing the right people for your organisation, after all, you are nothing if not a bunch of people.

For an interesting article on strategic thinking check out this Harvard Business Review article https://hbr.org/2016/12/4-ways-to-improve-your-strategic-thinking-skills

This Harvard article has some suggestions on how to avoid cognitive biases: https://hbr.org/2015/05/outsmart-your-own-biases

[smallbusinessing]

What is the Value of Value?

In everyday business discourse the term value is ubiquitous - yet if I asked you ‘what is value?’ and ‘where does it come from?’ do you think you would have a good answer?

The concept of value is difficult to define, yet the creation of value drives everything a small business does. A business’s existence relies on its propensity to deliver value to its customers, it’s that simple. Nevertheless, it’s not always easy to identify where or how that value is created – Cue this blog! By the end of this article you should be able to locate your value creating activities so that you can focus your energy into the things that matter!

Moreover, by keeping value at the forefront of your mind, you can marry your internal value creating activities and competencies with the needs and wants of the marketplace. This is the heart of a strong strategy.

Defining Value

It is important to note that there are different perspectives which affect how we define Value:

I know that academics like to argue over these things, but I do not intend to pick sides here – instead both approaches are helpful as they both provide interesting insights into how a small business can create value for it’s customers.

The Value Proposition is your Guide

Firstly, if you’re going to try to create value you need to have an idea of what it should ‘look like’. Put another way – what value do you want to provide for your customers? The best way to determine this is to have a clear and well considered value proposition to your customers.  

The value proposition explains how your product or service meets the customers need by solving a problem or improving an experience. It is a customer orientated promise that doesn’t describe the product, but offers a solution. This holds true for both B2C and B2B companies.

Once you understand your value proposition and let it guide your priorities you have achieved a value focused mindset. When you make decisions this mindset should pose questions like ‘which option reinforces and gratifies my value proposition, and which option takes me in a different direction?’.

Without a value proposition your value creation has no direction – making it all too easy to rush into ideas without thinking about the customer, and heading down expensive but ultimately pointless rabbit holes.  

I talk more about value propositions in a previous article on the Business Model Canvas. If you want even more, here’s a useful article for anyone who wants some guidance on writing a value proposition: https://www.forbes.com/sites/michaelskok/2013/06/14/4-steps-to-building-a-compelling-value-proposition/#7c58993f4695 . Also for a site with lots of examples, try here: https://sumo.com/stories/value-proposition-examples

So Where is Value Made?

Any company - large or small – can be divided into two interrelated systems; a Business System, which is essentially how the company conducts its business to create a product/service; and an Organisational System, which is the configuration a company adopts to manage its people (for a future blog).

In an SME, the business and organisational systems tend to merge and distinctions between them blur as relatively few people do many different things. For example, the owner can be the strategist, the product developer and the accountant.

In contexts of such complexity it is useful to map out the different activities being done by different people, and categorise them into each of these systems. This way, you can understand who directly makes value and who supports the making of value.

In this blog I’m going to break down the business system in order to get to the nitty-gritty of how value is made. Of course, a company’s organisational system is important in value creation (you need good people that are well managed), but today our focus is on the business system…

The Business System.

A business system can be split into three components

1.       The resource base (aka, stock of assets)

2.      The Value chain (aka, activity system)

3.       The Value proposition (aka, product offering)

The resource base provides boundaries on what you can and can’t do, but when considering new ways to create value you can choose whether you want to leverage your resources to improve your product offering, or to look to the market for inspiration (or to do a bit of both!).

The value chain includes activities through which value can be added. For example, such activities might include Research and Development, Production, Quality Management, and Marketing and Sales.

We’ve already looked at the value proposition, so lets focus on value creating activities..

The Value Chain

A value chain is an integrated set of value creation processes leading to the supply of a product or service. In other words, it’s the stuff that you do to ensure that your product fulfils your value proposition.

For SME’s the elements of your ‘chain’ might not be so discrete, but it is likely that you will still be doing a number of the following functions..

For ease, it is possible to split the value chain into primary and supportive activities… I’ve also used a pie maker as an example, and given illustrations of how the pie maker uses the activities to add value.

The pie makers value proposition is “providing our busy customers with gourmet comfort food on the go. Just because you’re in a rush, doesn’t mean you can’t eat delicious hearty food”

Primary activities that drive the creation of value include…

Secondary activities which facilitate the creation of value and include…

Technology development: enhancing the flavour of the pies through R&D

Human Resource Management: making sure the best pie baker doesn’t rage quit when the oven breaks

Maintaining the general firm infrastructure.

 The strength of any firm’s competitive advantage will depend on the configuration of this value chain – and the more unique and distinctive it is, the more chance a company has of being advantageously distinct from the competition.

 Another way of Creating Value: The Co-Creation of Value

The co-creation of value is pretty damn popular at the moment, yet it is a used and abused concept which is rarely operationalised fully. Instead, I have witnessed a lot of attempts at co-creation which are, in reality, just your bog-standard relationship marketing techniques repackaged.

If a small business can integrate the co-creation of value properly it can be a very cost effective way to maximise customer value.

What does the co-creation of value involve?

Firstly it requires you to see value not as an attribute of a product, but as something which is created in the interactions between customers and companies. Together, these parties can create mutually beneficial value.

Secondly, it requires a company to ‘let go’ of some control and provide the space for consumers to be increasingly active in the creation of their own value.  

In other words, the value created by Facebook for both itself and its users is co-created by both Facebook and its users. 

For more information on the co-creation of value see the following links.

This is a detailed overview of Co-creation: https://timreview.ca/article/302

Follow this link for some great examples of co-creation: https://www.visioncritical.com/5-examples-how-brands-are-using-co-creation/

Here’s an easy to read managerial Forbes piece on co-creation: https://www.forbes.com/sites/christinecrandell/2016/06/10/customer_cocreation_secret_sauce/#786418ac5b6d

How can you facilitate the Co-Creation of Value?

This is not beyond the capabilities of small firms – in many ways, creating co-creation spaces can be extremely cost effective ways of maximising value for your customers. This is because it doesn’t necessarily involve the creation of masses of content. Rather, you set the stage (and monitor it), and let the customers manage their own value creating activities!

There is one important rule though – you need to facilitate the creation of meaningful value. Providing consumers with a community to chat in does not inherently provide meaningful value. If, however, that community provides the means for customers to share things in a way that enhances a specific type of value outlined in your value proposition - then you have meaningful value.

For example - Our pie maker could create a hashtag for customers to tweet about their pies. However, being able to tweet about a pie does not really help the pie maker deliver on their value proposition and so the value is not what I would call ‘meaningful’. However, if the pie maker had a forum where people could share gourmet pie recipes with the company and each other, then the pie maker is on their way to really adopting co-creation. 

To do co-creation properly you initially need to think about the type of value you are promising in your value proposition… then ask yourself ‘how can our customers be involved in creating this value for themselves?’.

The most common ways to enable co-creation are therefore those that allow consumers to interact meaningfully with each other in a way that is valuable to them, or allow customers to have a real effect on how a product is made/designed or delivered.

In Conclusion…

Based on the discussion above, I have concluded with a list of six questions below that any business owner should ask themselves when considering value in their business…

What is my Value Proposition? What am I promising to deliver?

Based on my Value Proposition, what kinds of value do I want to create?

Which functions of my business create value and which functions facilitate it?

Are all my value adding activities working together to fulfil my value proposition?

Am I creating meaningful value?

Can I use co-creation tools to boost the value I create for my customers?

The answers to these questions should be able to guide you towards developing activities which truly build on your value proposition and, ultimately, satisfy your customers.

[smallbusinessing]

Marketing Myopia: The Hidden Enemy of Business Longevity

I work with SME CEOs on a fairly regular basis and recently a well established and highly regarded entrepreneur said to me “We have a completely new product. There is currently no existing market - we are creating the market!”. 

When I hear something like that the alarm bells in my head start ringing. Why? Consider the following...

“I have created a green inflatable duck shaped phone. This is the first of its kind - no one else makes green inflatable duck shaped phones. I am creating a brand new market with this product. There are no competitors.” 

This is dangerous thinking. 

Firstly, if there are substitutes to your product then there is a market that you are entering even if those substitutes are terrible. 99.999% of the time there are substitutes to your product. Secondly, this type of myopic thinking means that you are blind to opportunities and threats because you’re not being realistic about the business you are in. 

As such, this blog aims to help you answer one of the most important questions you will ever ask yourself: ‘what business am I really in?’

Firstly, as it’s in the title, what is marketing myopia?

The term was coined by Theodore Levitt (a Harvard Business School marketing professor) and can simply be defined as a near-sighted focus on selling products and services, rather than seeing the “big picture” of what consumers really want.

How can this happen?

The resource greedy processes driving small business growth and development can lead even the most astute individual towards an overbearing fixation on the specifics of their product or service. In other words, a common obsession with crafting the technical product is often paired with an unintentional disregard for the needs and mood of consumers (this mindset is called a ‘goods-dominant logic’ where the focus is on the features of the good itself over any other considerations)

As businesses become increasingly focussed inward on what they produce and how they produce it, they start to define their area of business by their product offering; a pencil company is in the pencil business; a train operator is in the rail road industry – and so on…  a green inflatable duck shaped phone company is in the green inflatable duck shaped phone business. 

As a result, the consumer can often get overlooked and even forgotten.

It may come as no surprise to learn then that this way of thinking can be highly destructive when it comes to marketing and business longevity. Ultimately, defining a business by the product it makes places it in a very small world indeed; the pencil company thinks it only competes with other pencil companies; the sandwich shop believes it only competes with other sandwich makers...you may start to see the problem here!

Marketing strategies which are informed by this goods-dominant logic thus tend to focus on the product itself rather than the consumer needs that product meets.

Time to change the myopic mindset…

…even the most mechanical, technical and tangible product provides a service to a consumer by meeting a need. It is this service which should be used to define the business – not the product itself (this new mindset is called a service dominant logic). Seeing a product as a service forces a company to understand the consumer need which the product meets.

The following marketing material should more clearly illustrate the difference between the two approaches...

Service dominant VS Goods dominant...

The first advert is based on the consumers need for a means to express ideas, and ultimately be creative. The second is much more focused on the features of the product itself. 

Another more modern example might be taken from mobile phone advertising. In the following marketing material Apple has taken a goods-dominant focus - putting emphasis on the features of the product rather than the services the phone provides. 

Side note:This is fairly common in technology companies which are trying to attract early adopters because they compete for such consumers on features.

  And just for comparison, here’s a service-dominant logic approach...

So Why Use SDL?

The reason I suggest that every small business owner should take a few minutes to consider SDL is because applying the service dominant logic ultimately challenges any myopic thinking. 

Let’s say you’re an SME in the pie making business. When you market your pies you focus on the features of the pie: the buttery pastry and the 100% real beef filling from cows who live in temples and are massaged by monks. 

When you think of your competitors, you list all the other pie makers who sell pies in your town. When you think of new products, you hire expensive food technicians to find new fillings or new pastry recipes. Perhaps you even find your cows some new temples. 

You are, in all respects, all about the pies. You haven’t once thought about the consumer need you are fulfilling - your marketing is increasingly ineffective and your new recipes attract very little attention...

Lets say instead you took a service dominant logic approach

You realise that your pies are mostly bought by people travelling home late after a long day in the office. They provide a delicious comforting and warming service which cheers people up after a long day and satiates a hunger that they might have been accumulating since the tiny breakfast they ate at 7am. 

Your product features also make the pie seem like a healthy and eco-friendly choice compared to alternatives - your service could therefore be perceived as providing ‘moral eating’.

Now when you focus on this marketing, instead of providing information on the product, you create marketing materials which resonate much more with the interested audience. By focusing on hunger, comfort and warmth. 

You also benefit from the following...

1.       You have a much better understanding of who you are really competing against and can therefore see additional threats you might have previously been blind to. What else do these types of consumers buy to fulfill this need? Maybe you are competing against McDonalds, or a hot coffee? rather than other pie shops. In this case, the moral eating might be something to push harder on.

 2.       With a broader understanding of the business comes a wider set of opportunities. When you consider innovating your product you may move beyond making a new pie flavour – and instead consider other ways to conveniently satiate hunger (sausage rolls would be my suggestion)

 3.       Finally the pie company can become more future orientated by considering how the needs of the consumers may evolve over time.

Perhaps as train travel becomes more popular in the City you bring in meals that can be eaten with two hands - the two-handed public-transport pie. 

And (thankfully) this theory does not only apply to pie shops …

Just to really push the point, Levitt himself provided the example of the US train industry. Levitt argued that railroad lines fell into steep decline because railroad companies thought they were in the train business rather than the transportation business.  If those companies had seen themselves as helping customers get from one place to another, they might have expanded the business into other forms of transportation like cars, trucks, or airplanes. Unfortunately, they let other companies seize those opportunities and steal away their passengers instead.

So, what are the key points?

The best way to avoid marketing myopia is to define a product (or service) by considering the customer need that it services. 

This ultimately requires the application of a ‘service-dominant logic’ when answering the question ‘what business am I really in?’

With this definition in hand, a small business is not only in a much better position to design a marketing campaign, but also has a better understanding of the competitive environment and possible opportunities open to it. 

And If you only take one thing away from this blog, remember that your product is not your business.

[smallbusinessing]

How to put your Business Vision onto Canvas

A lean business model canvas provides any small business owner or entrepreneur with the means to fully comprehend how all the bits of the business puzzle fit perfectly together. 

When pursuing a start up or even when growing a small business it’s easy to get bogged down in the detail and fail to see the bigger picture. In particular, when focusing on the intricacies of a new product or service, it can be common to forget to think about how ‘value creating ideas’ can translate into ‘value capturing businesses’. 

The Business Model Canvas provides a quick and efficient tool to ensure that you’ve thought through how the business idea works right from the beginning. More importantly it gets you thinking about your business in terms of what value it provides, rather than what features it pumps out. This type of logic is incredibly valuable in the long run.

This blog will take you briefly through the stages of creating your business model canvas so that you, and others (think potential investors), can have a visual and clear representation of what it is you actually DO as a business.

 Think this is a waste of time? Sitting back and engaging your analytical mind provides a crucial space for you to consider and question things you may have assumed or taken for granted. Additionally, having your whole business mapped out in front of you provides clarity and is an excellent way to communicate your business as you see it to others

 So, what exactly is a business model?

A business model describes the various functions through which a business creates, delivers and captures value – such functions include your product, your customer segmentation strategy, your marking channels and, importantly, the basis of your competitive advantage. Crucially, it focuses on the relationships between these elements and how they fit together, rather than examining them in isolation.

 How do I create a business model canvas?

Easy. This blog will focus on the Lean Business Model Canvas in particular as this version has much more of a focus on start-ups and forces you to consider how your model differentiates you from others.

 Below is the (kinda) empty canvas… You’ll notice that the boxes on the left tend to reflect internal functions, whereas the boxes on the right are more focused on the market. 

 Step 1.

What is the problem your product addresses? What are the solutions?

This is particularly important If you have marched into business-ownership ‘product first’. You, like many others before you, may be adamant that there is a particular problem ‘out there’ which your business ideas are solving - but have you really ever fully identified it?

When defining the problem you should consider what alternatives or substitutes exist; your competitors are not just other companies doing the same thing as you - you are in competition with anything that solves the problem you have identified. If you are solving the same problem as someone else, what is it that will make the consumer switch to you? (don’t worry though, we answer this in step 2)

The aim here is to define the industry you are in widely enough to allow you to truly see your competitors: if you make scented candles you are not in the ‘scented candle’ industry, you are in the ‘scented home furnishing’ industry. If you define yourself as the former you may fail to see all the other product offerings that address the problems you have identified (in this case, smelly houses).

Once you have your problem, you are then in a better position to define your solution.

 Step 2.

Define your Unique Value Proposition and its Early Adopters

A value proposition is not a list of product features. Instead you should try and consider every product as a service (adopt a service dominant logic). A TV is not merely a SMART HD ready screen; it is a way to deliver entertainment and alleviate boredom (for me anyway) – in this sense, a TV is a service and this is its value proposition to customers (me). You buy the TV because of the service it provides you, not because it is a plastic and glass screen (although of course the features provide the service!).

It is all too easy to get carried away defining any product or service by its features and not by the value it provides consumers. However, if a bundle of features provides no value, it is of no use. Try then to move beyond specifications when filling in your unique value proposition by asking yourself the following 2 questions:

 How does my product/service provide value to a customer?

In comparison to alternatives, why is the value I provide unique or sought after?

Once you have worked your value proposition into something specific, you need to then ask yourself, who would want to receive this value proposition? In particular, new businesses should be thinking about clearly defining who their early adopters are – These are people who are most likely to suffer from the problem(s) you identified earlier, and who are most likely to not be satisfied by the alternative solutions in the market right now. 

Below I have provided an example of one ad which has taken a product feature focus (goods dominant logic) and another which has focused on communicating it’s value proposition (a service dominant logic). Can you tell which one is which?

OR....

Or even this.... http://www.adweek.com/news/advertising-branding/ad-day-lenovo-133524   

Step 3.

Fair competition is overrated! What is your Unfair Advantage?

What is it that you have that others don’t? In other words, ideally there should be something you have that others will find difficult to imitate if you are to have sustained competitive advantage. This could be knowledge and expertise, it could be patents or even just social complexity in the form of hard to copy networks and investors. Whatever shape it comes in, it will be the key thing that you can leverage in order to remain distinct from the competition. 

For small firms it is often the ability to adapt to consumer trends and remain agile and nimble. For start ups it could even be the prospect of first mover advantage and the opportunities to create brand equity as a result. 

Your unfair advantage should be closely linked to your value proposition in order for you to carve out a strong competitive position. If you try to compete on someone else’s terms (compete by trying to replicate their unfair advantage) then you will always be staring at their fat ass from behind.       Instead you must look to compete with a value proposition which is tied to a resource or competence that other’s will find hard to compete on.

  Step 4.

How will you reach your customers and capture value from them?

You now have a clear plan about how to create value – you now need to consider how to capture that value in the form of revenue and, ideally, profit. As such you need to think about the following

 Your path to the customers (aka distribution channels aka marketing channels). Will you reach them via e-commerce or will you reach them via intermediaries? Maybe you can build or shop, or maybe you can go door to door and pester everyone until they buy it.

Your revenue streams. How will you actually make money via these channels? Perhaps your main revenue stream will be online advertising, or perhaps you will sell subscriptions?

 Clearly the two need to work together, and along with every other element of the canvas!

  Step 5.

Know your Cost Structure and define your Key Metrics so you know when you’re winning

These two elements allow you to keep track of how things are going.

In terms of cost structure you need to be aware of what your biggest costs are by knowing what costs are fixed and what costs you can play around with. The ratio of fixed to variable costs is going to affect the flexibility of your cash flow, as well as your break even point.

Finally, how are you going to know whether everything is on track or not? The easiest way is to define key metrics or targets. These don’t need to be complicated; perhaps you want 10 users by June 2017, or you want 4% market share in 4 years? Perhaps you only want 100 views, or maybe you’re ambitious and want to be making $300000 profit in your 6th month. Whatever your target is, make sure it is realistic and measurable – there’s no point in having a target if you can’t see if you’ve reached it!

  So there we have it! Hopefully this has been a helpful guide to getting you thinking about how your business works and how all the different elements fit together. With this canvas you should be in a much better position to make informed decisions and communicate your vision to others.

 You can find more about the lean business model canvas by following this link      https://canvanizer.com/new/lean-canvas

[smallbusinessing]

Innovation and Entrepreneurship: Sources of Innovation for SMEs

What is the difference between a new business owner and an entrepreneur?

A lot of confusion exists around the term ‘entrepreneurship’ in modern business writing. Many observers use the term specifically to refer to new businesses or perhaps to all small businesses. In reality though, even large and well established businesses engage in entrepreneurship.

This is because entrepreneurship doesn’t refer to a firm’s size or age, but to a certain type of activity – and at the heart of that activity is innovation.

Drucker (1985), a prominent and exceptionally famous management scholar, argued a number of decades ago that entrepreneurship requires, or is inherently comprised of, innovation; “the effort to create purposeful, focused change in an enterprises economic or social potential”.

For anyone starting a business or looking to innovate within their small business, the key take-away from Drucker is his seven sources of innovation. Any manager should recognise the potential in all seven sources if she/he is looking to be innovative.

The seven sources of innovation are:

 1.   Unexpected Occurrences

These are unexpected successes or failures which can be an important source of innovation. In order to notice these, an SME owner/manager must be willing to see past their own expectations of what should or should not happen. It is easy to get stuck in a sort of ‘fantasy’ about what the business is and should be, and therefore ignore anything which tries to pull the business in a different direction.

For example, if the service is used in a different way than you expected – maybe some elements fail and the ‘wrong’ customers are attracted – this is an unexpected occurrence which could provide a source of innovation. Perhaps these are the customers you should have been targeting all along? Maybe the elements that failed can be re-worked?

A good real life example is the invention of the microwave. The microwave was invented by accident when a candy bar in Percy Spencer’s pocket melted as he worked on an active radar set (follow link at the end of the post for more info). Instead of moaning about the stains, Spencer and his team allowed curiosity to lead them astray…and eventually towards the microwave.

Essentially in order to benefit from unexpected occurrences you have to abandon rigid cognitive maps (fixed ideas about how the world works – for a later post perhaps) and recognise possibilities and opportunities in the unintended and unexpected, rather than seeing inconveniences and threats.

2.   New Knowledge

This one is fairly straight forward. Advances in scientific and non-scientific knowledge can create new products and markets. Keeping an eye on technological trends, especially if they align with your own skills and competences, can mean that you are in a good position to exploit new knowledge.

3.   Incongruities

Here’s where you need to loosen your grip on reality just a little and see the discrepancy between what everyone assumes something is or should be, and what something actually is or ought to be.

There are a few different types of incongruity. Firstly, some of the clearest incongruities can be seen when demand in an industry is increasing but the economic performance is not (this goes against logic right?). A lack of profitability in such a market suggests an incongruity between economic realities. Perhaps you’ve misunderstood the key driver of profitability in your industry?

Secondly, there can sometimes be a variance between the reality of an industry and the assumptions about it. If management have misconceptions about the reality of an industry, they are likely to come to erroneous assumptions which will underpin misdirected efforts.

Thirdly, and probably the most common, are incongruities between perceived and actual customer values and expectations. It is easy for a manager/owner to assume that what is valuable to them is also valuable to their customer. However, the customer seldom perceives what they are buying in the same way as the producer. This links to innovation source 1 (unexpected occurrences) in many ways, as SMEs should not consider customer behaviour as ‘irrational’ but rather as an indicator that there is an incongruity between their and the customers perceptions of various facets of a product/service.

In order to exploit incongruities, you first need to see them – this is often the hardest bit. Questioning industry and organisational assumptions, reflecting on perceptions and avoiding bias are the key ways to see the reality of the situation.

4.   Demographic Changes

Changes in the population’s size, age, structure, composition, employment and level of education can be a source of innovation. I’m going to assume that you have a decent idea of what this means and spend more time on the more ambiguous sources of innovation…

5.   Process Needs

Innovation based on process needs basically looks for ‘missing links’ in existing processes. Is there something which can be done better? More efficiently? This doesn’t just have to be in your own processes, but in the processes of any external entity too. 

An example of a process innovation can be found in Amazon.com. Amazon are looking at using drones to delivery packages quickly to customers, thus innovating in their logistics processes (this links to ‘new knowledge’ too!)

Often large companies are looking for innovations which improve parts of their manufacturing process or distribution process. They themselves may not have the expertise in that specific technology...but maybe you do?

6.   Industry and Market changes

Changes in industry and market structure is usually a result of changing customer preferences, trends and new societal values/norms. For example, trends in healthy eating led to changes in the fast food industry structure as healthier players entered the market. There may also be disruptive innovations or technologies which upset an industry (such as iTunes and Spotify in the music industry) which fundamentally alter the way an industry works, thereby providing opportunities for nimble new players to enter the market whilst the large incumbent firms are still figuring out how to change.

7.   Changes in meaning and perception

Finally changes in meaning and perception refers to how consumers’ understandings and perceptions of specific products and/or industries changes over time. For example, there has been a clear change in perception by groups of consumers towards craft beer, clearly shown by a quickly emerging craft beer industry in places such as the UK, USA (especially west coast) and NZ. Beer is no longer just a mass-manufactured alcoholic beverage to motor through at your local on a Friday night, but is instead perceived – in its craftiest form – as a form of brewing ‘art’ made with love by small teams of beer fanatics.

From a slightly different angle, research by the Open University has found significant changes in Government perceptions of street markets in the UK. Local and national Government institutions are starting to recognise street markets as places which benefit community cohesion, health, economic innovation and the environment. As such, there have been calls for increased investment and better management of community markets – this might provide an innovation opportunity for small community businesses.

 The Key Message

The key takeaway here is that an entrepreneur isn’t just someone who owns a small or new business – they are someone who is constantly scanning internal and external sources of innovation in order to ensure that they have a sustainable competitive advantage in the long-term.

The potential for innovation at any given time might lie in more than one area so methodically analysing these seven sources of innovation is a smart idea. Nevertheless, there will be some sources which are more relevant than others for your business – so make sure to keep an eye on them.

 Further reading

Microwave: http://www.todayifoundout.com/index.php/2011/08/the-microwave-oven-was-invented-by-accident-by-a-man-who-was-orphaned-and-never-finished-grammar-school/)

 Incongruities http://www.processexcellencenetwork.com/innovation/columns/failure-and-the-seven-sources-of-innovation

 Street markets http://www.open.ac.uk/research/main/impact/reports/changing-perceptions-of-street-markets

[smallbusinessing]

Writing a Business Plan

Writing a Business Plan

Business plans are important documents for start-up companies. They not only detail to external stakeholders exactly what your company does and how it expects to do what it does, but they also force the entrepreneur/manager to think concisely about the company objectives and strategic development. In essence, the aim is to build a clear outline of your business model, which appears realistic and comprehensive.

For those wishing to gain finance from external sources, the business plan can be an invaluable tool. It shows potential investors that you have thought extensively about what the business may offer, how it will operate and where it fits in the market. More importantly, it should give these investors a general sense of the profitability of the business through the inclusions of clear financial estimates. Investors are much more likely to give you money if they believe not only in your product/service, but that there is a place in the market for you, and that your business model is workable and potentially profitable.  

General Structure

There are a number of near-compulsory elements which need to be considered when writing a business plan for a start-up company. There are also additional elements which are heavily dependent on the type of business. Due to this variability, this section will detail the more generic elements of a business plan, before suggesting extra areas which may be important depending on the product/service being provided.

Generic Elements of Business Plans

 Executive Summary

The executive summary is basically an introductory summary of the business plan. It should detail concisely the product or service offered by the company. It should also give a brief surmise of the aims and objectives of the firm, the market gap which is being attended to, the location and plans for expansion, and a brief overview of the initial financing. Of course, there is room for manoeuvre and each summary will be different.

The important thing is to consider this section as an overview of the entire business model, so that any investor viewing the business plan may have a clear idea of the business idea and strategy before he or she has read on. With this in mind, it needs to sound optimistic and catchy, representing the idea as novel and viable and a perfect candidate for their investment!

 Mission Statement

You want to keep this short and punchy. It is a clear indication of the morals and values you hope to pursue, and companies often craft theirs to resonate with the general values of their potential market. To get a good idea of what creating a mission statement entails, it is worth researching those of well established firms. They are often heavily promoted by firms, both to consumers and to their employees, because they focus attention on what is important to the company.

They may be as inventive or informative as you wish. This choice will depend on the ‘personality’ of the firm, and the importance it places on certain aspects of its service or product delivery.  As an example, it may be worth looking at the differences between Mission Statements from Hi-Tech firms and more morally geared organisations such as The Body Shop

 Objectives

There is no single way by which to state the objectives of the business. In the past, I have written business plans which break up the objectives into 3 or 5 year chunks. Such time frames show forward thinking, and give space for consideration of business expansion which highlights to investors a sense of where you are intending to head, and the ambition you hold and will use to drive the business forward.

The detail within this time frame is solely up to the author.  If the objectives are set up in table or bullet point form, many objectives, even as small as ‘poster creation’, can be documented. Each point should ideally include a more specific time frame. You may also wish to grade it on importance if you wish. I have also included a ‘status’ column in the past so as to include tasks which have already been completed.

Objectives to consider:

·       Office set up dates [inc. IT systems, office furniture, stationary items]

·       Marketing and PR activities [open days, advertising events etc]

·       Recruitment drives

·       Training

·       Website Launch

·       Expansion

 Management Team

It is likely that the management team will hold valuable knowledge from previous experience, and it will be this knowledge and skill which you should aim to convey in this section. Someone reading this business plan looking to invest will want to know the human resources which the firm holds. Personality and charisma are also important elements of any entrepreneur, and so it is recommended that a business plan details the motivations and values held by each member of the management team.

The roles and responsibilities of these individuals within the new organisation will need to be defined so that an organisational structure can be developed.  This may be put more clearly into a table form or flow chart, showing the structure by which the company runs, and will be expected to run in the future.

 Product or Service

Here is where you are free to delve into as much detail as you wish about your product or service.

A strong focus on the Unique Selling Point (USP) of the product, which will often be a key innovation or differentiating feature, will be required here.

Some key questions to consider asking in this section include:

·       What is your product/service?

·       How does it work?

·       Who is it for?

·       Where will it be sold?

·       How is the product/service delivered?

Understandably, it is difficult to give clear guidance on exactly what should be included in this section as it varies so much with company type. You need to be sensible about including the aspects of your product/service which will be important to those you wish to influence with your business plan. Avoid unnecessary detail as it will clog up the plan and slow it down.

 Operations

The key questions you are hoping to answer here is how your business intends to run, and what processes/operations will be required ‘back-stage’ to facilitate its 3-5 year starting period.

An overview of the production process is integral to those hoping to understand how the business is intending to work. For example, if the company is producing a product, how will it be created? What will be out-sourced and what will be produced in-house? Same goes for service deliverance; how will it operate?

Such discussions will include an analysis of the infrastructure needed, and how this will be set-up. Key components here may be

·       What kind of ‘space’ do you require to conduct your business? What kind of fixed assets will you need to operate?

·       What does your value chain look like? What are the different processes and inputs which need to be considered at the different stages?

·       Who are your suppliers? What does your supply chain look like?

·       What is your lead time? How long does it take to do your processes?

·       How many people do you need? What technology do you require?

Of course not all elements will be relevant to all businesses, and it is up to you to decide what you give priority to.

Human Resources and Policy

Operations may also include aspects such as how Human Resources will be handled.  Regulations and Policies considered could be included here. For example, a business plan for a childrens crèche service may include a list of policies and regulations regarding safety and staff recruitment. Product construction businesses may include policies to ensure employee safety in the work place etc.

Future Recruitment may also be approached in this section as it indicates how the firm expects to operate in the coming years. There are likely to be positions which will need to be filled as the company grows, and these may be detailed here.  

Some key points to consider for this section:

·       Production Capabilities/Service Delivery

·       Human Resource Management

·       Regulations and Policies

·       Health and Safety

·       Recruitment

·       Insurance

·       Premises

The Market and Market Strategy

This section aims to detail how you wish to reach your market. A simple way to prepare this section is to lay it out by referring to the 4 P’s [also referred to as the Marketing Mix] : Product, Price, Placement and Promotion. You should have detailed the first P by now, but the latter 3 can be expanded here.

·       Price: What price are you going to set your product/service at, and why? [you may want to look at ‘pricing strategies’ such as Penetration Pricing or Price Skimming for ideas]

·       Placement: Where are you going to sell? Are you hoping to reach your market, for example, through e-commerce, via certain distribution channels or through more direct selling techniques such as door to door?

·       Promotion: In what way will you communicate your product to your market? [Promotion strategies may include Mass communication, more specific individual level communication or the development of a brand or corporate identity etc]

 Additional Analysis

To add additional bulk to you business plan, it is advised that you compile either a SWOT (Strengths, Weaknesses, Opportunities and Threats) or a PEST (Political, Economical, Social and Technological) analysis. These are tools which can be used to pick apart the market in order to understand where the ‘gaps’ lie. That is, where is there space for your company and the product or service it offers?

The SWOT analysis dissects the strengths and weaknesses of the company, and the opportunities and threats in the market. In essence, the first two elements (SW) are internal to the company and detail the areas in which the company is likely to excel and where its Unique Selling Point (USP) is, and also what it accepts as its current weak areas. The latter dimensions are external (OT) and are there to ‘look out’ to determine the degree of saturation in the market: Is there an opportunity to increase market share in a certain area? Is there a market need which has not been met yet? Conversely, are there other companies who threaten to release competing products?  

The PEST analysis looks more broadly at the socio-economical context of the company. How will this environment effect the new companies operations? For example, if technological advancements are going to positively help your company, this is the place to give details. For a business plan – I would recommend completing the SWOT analysis first, and then doing a PEST if it is of particular relevance.

Financial Statements

 You may want to include forecasted profit and loss, balance sheet and cash flow statements for the first 3 or 5 years. You will generally want to show an understanding of the costs (and even cash flow) associated with the venture, and to indicate the expected profitability over the 3 or 5 year period.

You may also want to offer best case and worst case scenario forecasts.

And there you have it - your first step towards SmallBusinessing effectively...