“Market Misperceptions”

Nathan Griffith ponders about “markets” at our LockeSmith blog:

We’ve all heard about “the market” doing this to people, doing that to people…But I labor under the impression that most folk don’t have a good conception of the fact that “the market” is shorthand for a much more complicated idea. For example, most people think the market rewards those with money. In fact, the market defines what a good decision is, and then rewards those who make good decisions.

My How Plans Can Change

According to our original business plan, I would probably just now be exiting our health care business. But the exit ended up happening about twelve years earlier than we had thought. As carefully as we plan, the same change that creates the opportunity can lead us in unexpected twists and turns.
A great example of this can be found in the story of Chipotle told by its founder Steve Ells in a recent issue of Time.

After two years, I started to have thoughts about opening my own restaurant–a large-scale place, a “fancy” restaurant. But the economic side of the business was daunting. Knowing that many restaurants fail within a few short years of opening, I wanted some sort of backup, so that’s where the idea for Chipotle came. It wasn’t intended to be my main focus but a cash cow that would help position me to open a full-scale restaurant.

They now have hundreds of restuarants located all across the country. Plans do indeed change….
(Thanks to Sarah Brown for passing this along).

Change in the Music Industry

For years the music industry made its money primarily through the creation of a physical product — first the record and then the CD. But with the evolution of the digital age, the physical nature of music is fast becoming obsolete. Just at vinyl records hold nostalgic value, soon CDs will be a novel relic of a bygone era.
So is this the death of the music industry? Of course not. Music has been written, performed, and enjoyed for centuries. Music is part of culture. In many ways music as a business is thriving more than ever before. It is a period of fundamental change for this industry.
Those who have a vested interest in the current system of packaging and distribution (that is, the CD) are hurting in a big way. Like many large businesses in a rapidly changing environment, they are stuck. They are the proverbial super tanker that can’t change course quickly enough to avert disaster. They are stuck due to their capital and intellectual investments.
So these big companies react to change like we often see in other industries under going fundamental change. Rather than adapt, they attack the change. They try to hold back the forces of change like the little Dutch boy with his finger in the dam trying to hold back the impending flood. How do they respond to the digital age of music? Do they shift their corporate strategy and change their business model to maintain their relevance and competitiveness? No. They sue 14 year old girls for downloading music.
So how will money be made in the new digital era of music? From a post at TechCrunch:

First, other revenue sources can and will be exploited, particularly live music, merchandise and limited edition physical copies of music. The signs are already there – the live music industry is booming this year, and Radiohead is releasing a special edition box set of their new album…simultaneous to the release of their “free” digital album.
Second, artists and labels will stop thinking of digital music as a source of revenue and start thinking about it as a way to market their real products. Users will be encouraged (even paid, as radio stations are today) to download, listen to and share music. Passionate users who download music from the Internet and share it with others will become the most important customers, not targets for ridiculous lawsuits.

Just as in an industry that is undergoing fundamental change, there are opportunities. It just takes open minds, creative thinking, and entrepreneurial nimbleness to find them.
(Thanks to Andy Tabar for passing this link along).

Does the “E” Stand for Entitlement?

The young people now entering the workforce have been called Generation Y. Many of us call them the Entrepreneurial Generation or the “E” Generation due their high rates of business start-up right out of, or even while in school. An article from the Boston Globe argues that the “E” stands for Entitlement just as much as it stands for Entrepreneurial.

They are…the upstarts at the office who put their feet on their desks, voice their opinions frequently and loudly at meetings, and always volunteer — nay, expect — to take charge of the most interesting projects. They are smart, brash, even arrogant, and endowed with a commanding sense of entitlement.

Perhaps their entitled attitudes are part of what is making them so entrepreneurial as seen from this quote from that same article.

“They have been groomed, they’ve been told that they are the best, and they’ve seen people from this same generation make millions of dollars just before them. They think, ‘I want to be the next Google, Amazon, or eBay. After all, these companies were founded by young people. Now it’s my turn.'”

A recent article in the Wall Street Journal examines how employers are changing benefits and perks to meet this new generation of workers.

And family-friendly companies are looking very different today than they did a few years ago. The waning of boomers with their uptight ways, and the rise of the we-want-it-all millennials, are spurring major shifts in employer programs.

Whether they are entrepreneurial, entitled or both, they sure are keeping those of us who teach entrepreneurship busy!
(Thanks to Steve King who writes Small Biz Labs for passing the Globe along).

Pursue the Passion Tour Stops in Nashville

pursue the passion tour.jpg
“Half the American work force is not satisfied with their job, and only a fifth apply a passion towards their career. As this trend trickles to students entering the working world, people continue to pursue a path that leads them further from their true dreams. Pursue the Passion addresses this issue by interviewing people who are propelled by a love for their work.”
Who: 4 recent college graduates are on a 3 month, 14,000 mile cross country journey conducting interviews with people who love their work. Come here about their experiences and tour their RV!
What: Pursue the Passion Tour Nashville Stop
When: Friday October 5, 2007 10 AM
Where: Massey Boardroom, 4th Floor Massey Building, Belmont University

Great Small Businesses

There is a perception that that small businesses pay much less and are as good to their employees as are large corporations. The latest data from the SBA tells us that the low pay is not exactly true — small business pay is up to 90% of that paid by large businesses. And the just released list of top small businesses to work in from the Wall Street Journal and the non-profit Winning Workplaces shows that they are at least as good to their employees.

While each company is very different, we encountered some common themes: These small businesses tend to let employees at all levels make key decisions, and they groom their future leaders from within. They offer generous traditional and untraditional benefits (how about a six-week sabbatical?). And they constantly hunt for new ways to improve the employee experience or engage employees.
And many share a sizable slice of their profits with employees, teaching them to read company financial statements so they grasp how their job is connected to the success of the organization.

These small businesses set a high standard that any small business owner should aspire to achieve. The article offers compelling profiles for each small business on this list. These offer a road map to help entrepreneurs build truly good cultures for their employees.
If you think your business or one that you come in contact with should be on this list, you can nominate them for the 2008 list here.

Focus

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For a long time I had one of those cheesey posters on my office wall meant to inspire. This one said “FOCUS,” and had a picture of a par three golf hole with an island green.
This poster goes back almost fifteen years. I had it on my office wall in our business. I used it as a visual tool to help keep our managers and employees focused on our vision. There were so many opportunities in those days that it was easy for us to get distracted and even over-stimulated by all of the possible directions we could take our business. Many times I would not even say a word, but just point to that silly poster.
I have also found it useful during my last eleven years teaching. So many start-up entrepreneurs we work with suffer from that same affliction — lack of focus — that ends up dooming many start-ups. Why is focus so important? Limited resources is th obvious reason. You can only do so much with the scarce dollars most entrepreneurs have to work with. Spread it too thin and you do nothing very well!
Less obvious is one of the major struggles that all new ventures face. They need to be able to get known in the market and attract customers, or they never can survive. Without focus, entrepreneurs never get above the nose of the competition and fade away due to lack of traction in the market.
Although it has faded and is no longer on the wall, I still have it close by and pull that poster out fairly often. Most of my students and alumni know the importance I place on that one word — focus.
One of my alums, Erin Anderson, sent along a great article that reinforces the importance of focus in entreprneurial ventures. It was recently written by Wil Schroter of Forbes.com and re-published at Report on Business.
Whatever the exact figures, no one would argue that scores of budding new ventures die on the vine. One of the most common killers: lack of focus.

With precious few resources to expend, hewing to a specific, well-defined vision is critical for start-up companies. When entrepreneurs attack too many problems or chase too many opportunities at one time, they often end up with nothing to show for it.
Whatever the exact figures, no one would argue that scores of budding new ventures die on the vine. One of the most common killers: lack of focus.
With precious few resources to expend, hewing to a specific, well-defined vision is critical for start-up companies. When entrepreneurs attack too many problems or chase too many opportunities at one time, they often end up with nothing to show for it.

Innovative Venture Funding Programs

A common question I get asked is, “Are there any grants out there for start-up businesses?”
The assumption is that the government gives out grants for businesses. While there are a few government sponsored grant programs for specific demographic groups or for specific types of businesses (for example, the SBIR program), they are not very common and not accessible to most entrepreneurs. To me, their relative obscurity is a good thing, as it is just one more step toward socialized entrepreneurship — bureaucrats picking winning industries or using entrepreneurship to shape social policy.
We are, however, starting to see some private sources of start-up grant money. Universities are starting to set up grant funds for their student entrepreneurs. We have established a small fund here at Belmont this year. Donors like the thought of being able to help nascent student entrepreneurs as they try to start their businesses in their dorm rooms and in our hatchery program. We are able to offer our student entrepreneurs small grants that are targeted for a specific need they have in their fledgling businesses, such as a small piece of software, printing costs for things such as business cards, etc., etc. The students are not under a contractual obligation to pay us back, but agree “on their honor” to replenish the fund and help to grow it when their business becomes more successful and has the money to do so.
Micro-lending programs are growing in their popularity and success around the globe. These funds (often private) give out similar funding, usually in the form of loans. They are not grants, but are still designed to assist those who would never get a dime from a traditional bank or investor. Most recipients are in poverty and see free enterprise as the best means to gain economic independence.
Now the founders of Facebook are launching their own version of this type of program. From Rueters:

Online social networking phenomenon Facebook Inc said on Monday its backers have created an unusual $10 million fund to dole out grants to start-ups with ideas for innovative Facebook applications.
Facebook is working with its primary venture backers, Accel Capital and The Founders Fund, to create a way for people with new ideas to receive an initial funding grant of $25,000 to $250,000 that does not require the entrepreneur to give up any equity in the business they create, as venture capital does.

They fund projects that contribute to Facebook. These ventures can be for profit or non-profit.
We are also seeing more limited projects like Bang Ventures and their “You be the VC” popping up. And last year I wrote about venture capital firms holding open forums for all comers to present their ideas (I admit, I was a bit cynical about this one until I interviewed a VC running one of these events).
Although not yet widespread, these types of private efforts hold the best hope for the efficient and effective spread of free enterprise at the grassroots level. Let’s keep government out of this important economic function.
(Thanks to Sarita Stewart and Natalie [I Just Got a Promotion] Wozniak for their suggestions toward this post).