Let’s face it: Bureaucracy has lost much of its effectiveness. The entire system needs a dramatic overhaul. Many aspects of bureaucracy actually cause reduced organizational effectiveness. Hierarchy, which implies power based on position, limits the impact of new research and expertise in decision-making. Even Max Weber, one of the original advocates of bureaucracy, understood that it could be threatened when focusing on “the rules” overshadows the actual goals. This happens constantly, which means the system is broken. When things aren’t getting accomplished because we’re stuck following ineffective procedures, it’s time to change the process. We’ve all experienced this. How many times have you found yourself unable to complete (what should be) a simple task because of a flawed system? Ever find yourself passed around from person to person and no one seems to have an answer for you?
We find this model works better for us!
Bureaucracy also lacks the vision and flexibility to deal with innovation and the increased pace of change in our environments. In short, bureaucracy, rather than performance, becomes the goal. My worst nightmare regarding bureaucracy is the phrase, “We’ve always done it that way.” It’s a refusal to consider alternatives and, thus, a recipe for failure.
Even more perplexing is the fact that we continue to ignore some proven models of success. Open systems and collaboration, in my opinion, are like winning the trifecta at the horse track. They have been around for a long time, but are just now becoming the norm for success. They reject bureaucracy, authority, hierarchy, and closed decision-making processes. They encourage participation, diversity, new rules, and to some extent, chaos.
It should come as no surprise that open systems are superior and continuing to do things “the way we’ve always done it” is a dead-end. But, society as well as businesses fail to recognize that old paradigms and structures are failing:
Large corporate structures (print publications, big banks, and brick and mortar retailers) are all gradual losers, or even worse. Even Jamie Dimon of Chase recognizes that banks have allowed Fin-Tech startups to threaten their future growth.
Companies and society continue to do what they have done in the past, often with poor results. Despite massive economic and political efforts, issues like income inequality, healthcare, and infrastructure investment will continue to hold our economy back.
How do you move away from bureaucracy and toward open communication?
Innovation and Discipline
Innovation and discipline can coexist. It requires improving autonomy at all levels as you simultaneously increase discipline. For example, Google, among other big corporations, are developing artificial intelligence (AI) programs to write and develop artistic works like music and art. They argue that this technology will greatly enhance an artist’s ability to create. Others disagree, saying that it will just replace artists.
My own experience in the knitting industry showed me that automation greatly enhances an artist’s potential and reduces mundane tasks. (At one time, mechanics had to spend hours making chain links to design a new sweater.) I believe that similar improvements are evident in areas like digital photography and inventory management.
Focus and Diversification
Some businesses try to randomly pursue diverse options by simply throwing s**t at the wall and seeing what sticks. Others complete so much research and planning that, in the process, aspects like goals, probabilities, and outcomes are overshadowed or forgotten. Business owners need to identify priorities and focus. From there, test and adopt or change as opportunities or issues arise. It’s important to remember that many plans are based on wrong assumptions or are poorly executed and, therefore, do not succeed or are unable to adjust to change.
For example, I was working with a client who was trying to execute over 15 different educational programs and was stressed out, over budget, and not managing effectively. We simply cut out the least effective programs, which saved money and, as a result, were able to allot additional attention and resources to the more effective ones. Focusing your strategy can be accomplished with a few simple efforts:
Measure, Estimate, Prioritize, and Adapt.
Follow the 80-20 rule.
Make mistakes and learn from them.
Be open to change and feedback.
Experience and Expertise
In his book “Outliers,” Malcolm Gladwell became famous for stating that, “10,000 hours of practice are required to become a world-class expert.” I am not sure it is 10,000 hours, but my experience indicates that experience and expertise are probably the most important factors in achieving success. That doesn’t mean you need expertise in everything, but it does mean you need at least a hook in the field you are pursuing. And if you know you are lacking expertise in a critical area, I suggest hiring someone to help.
For example, right-brain creatives typically don’t like financial analysis so it’s usually a good idea for them to hire an accountant. In the last couple of weeks, I have had clients with seemingly great ideas and passion who overestimated their gross margins by 10-20%. They simply didn’t do the detailed financial work and didn’t understand that those numbers could make a huge difference between profit and loss.
This argument is not intended to ignore the importance of passion, commitment, innovation, testing, and even mistake making. I’m just saying that both individuals and organizations need to realistically assess the risk of failure and the reward of success. Expertise and experience are critical for accurately evaluating opportunities and new innovations.
Risk and Evaluation
Are all of the aspects of a decision understood? Do you know the probability of reward, the amount of the reward, and the value of the reward? For example, what are the goals of your efforts? My clients are usually small businesses who need to make a profit and earn a living. Thus, they frequently pursue less risk.
In contrast, venture capital firms are frequently pursuing growth and worry whether the enterprise will be large enough to generate large returns. Therefore, they expect a certain amount of loss as well as some lost investments in order to generate large growth and profits in other areas. Where does your business stand? And how much can you afford to risk?
Analytics and Intuition
The increased use of analytics over intuition has been significant in improving the understanding and results of decision-making. While there are no quick and simple resolutions, there are a few simple rules to improve the decision process using both analytics and intuition.
‘Outcomes…normally we just measure the height of the files.’
Analytics is simply the increased use of research, models, probability, risk, numbers, and analysis to improve decision-making. In some cases, it has proved to be a valuable tool to understand and improve decisions or simply validate prior intuition—particularly where there is plenty of stability and historical data. For example, I have helped several of my clients improve their businesses by focusing on the 20 percent of customers or products, which we know, statistically, accounts for 80 percent of their sales.
Forget Fear.
Few sports teams, sales calls, or competitions achieve more than a 50 percent success rate. Rather than dwell on and sulk over losses, analyze your mistakes and research how to improve. Additionally, cultivate a business culture that values feedback, encourages communication, and supports collaboration. Open and honest communication on all levels is the only way to move past mistakes in a productive manner.
Empower Employees.
Giving your staff and management teams the freedom to make decisions and take (reasonable) risks can result in improved productivity. When you hire and train talented and trustworthy people, you can rest assured that they will do their jobs to the best of their ability and, ideally, add value to your business. When employees feel trusted and are given the autonomy to take chances, they’re more likely to think outside the box and offer alternative solutions. This authority in decision-making also means that employees will make mistakes at times and it’s important to remember, once again, that without failure, there is no success.
Look Beyond Your Circle.
It’s imperative to have external resources for obtaining information and receiving feedback. You need people who will tell you the truth without sugarcoating it. Make sure you have a reliable network that understands your business needs.
In general, I recommend more consideration of the process of decision-making. How good is our information, what are the consequences of mistakes and how much risk can we afford? I believe with the exception of issues like safety we can afford more risk and openness. We generally are overly concerned with the consequences of mistakes rather than the potential of risk.
And finally, let go of bureaucracy. Yes, it can be scary to transition to something new, but familiarity doesn’t equal success. In fact, sticking with something just because it’s comfortable usually isn’t beneficial. And, shockingly enough, sticking with something that doesn’t work (i.e. bureaucracy) also doesn’t work. It’s broken and it’s not worth fixing. It’s time to replace it.
Dr. Bert Shlensky is the president of www.startupconnection.net. He and his team of experts focus on helping businesses develop integrated customer-focused marketing programs that are key to business startup success. Dr. Shlensky’s most recent book is entitled, “Passion and Reality and Small Business Success.” You can reach Dr. Shlensky at: 914-632-6977 or email him at: bshlensky@startupconnection.net
“I’m not playing anymore!” A phrase most often yelled by a child (or an adult) who isn’t winning. We all know these people: they aren’t happy unless they’re in first place, they own ALL the Monopoly properties, and the other team is crying. We’re taught not to be sore losers, but we often forget to acknowledge the negative effects of being a poor winner—especially when it comes to the cut-throat world of economics where everyone is striving to create the best decisions at any cost. Learn why beating your competition isn’t everything.
However, we need to stop focusing on crushing the
competition and concentrate, instead, on creating more win-win scenarios. When
developing the best business strategies for your company, you might think it’s
imperative to get rid of any and all opposition, but competition makes us
better. When an athlete has a strong opponent to go up against, you better
believe they’re going to train harder and longer and, ultimately, get stronger.
With the right mindset, we can learn things from competitors and they will push
us to excel.
How can you
adopt a “Win-Win” mindset in order to generate better results overall?
Understand
That Sharing Does Not Equal Losing.
The tendency is to think that it’s always a zero-sum
game, meaning that there can be only one winner and everyone else must,
therefore, be a loser. But, this outlook makes it impossible to create
sustainable business models. Rather than looking to create win-lose situations,
it’s much more beneficial to find ways to “grow the pie,” as they say.
Costco is a great example of this: They provide a
package deal, which doesn’t add to their bottom line, but still provides the
consumer with benefits that enhance their shopping experience. Other examples
include dinner or airline packages, which include add-ons that make customers
feel like they’re getting more for their dollar, but simultaneously don’t
actually raise the business’ production cost. They key here, however, is to
make sure that your free offerings are desirable. The goal is to increase value
for everyone.
Rethink
“Compromise.”
Too many people, falsely, assume that a compromise
means they’ve lost or that they’re being forced to forfeit something. In
actuality, compromising usually makes you stronger. By listening to the needs
and understanding the goals of your partners (both personal and business), you
build and strengthen the relationship.
When you are willing to consider another party’s
interests, they will, in turn, be more open to catering to your own. In
particular, you might discuss things like price, service, quality, and
reliability. Different transactions hold varying expectations (i.e. to someone
stuck in the rain, availability is more important than price or even the quality
of an umbrella while quality is a crucial factor to someone purchasing a car). Finding where to give and take will help
create an improved outcome for all. In the end, communication is essential to
producing win-win outcomes.
Recognize That
Success Does Not Equal the Failure of Others.
How many profitable barbershops, Italian restaurants,
and grocery stores exist in your neighborhood? Enough said.
Be Open to a
New End Goal.
We often go into situations with a precise vision and
set expectations, but this limits potential. If we’re able to keep an open mind
and test different ideas (i.e. pricing, delivery time, production style, etc.),
we might discover a scenario which strays from our original idea, but
ultimately achieves better results for all parties involved. This requires open
communication between suppliers, colleagues, customers, and even competition.
It also means being open to feedback. Look, listen,
and analyze. Face it: you don’t always know what’s best and the insights of
others may be the missing link to improved productivity and the key to creating
the best business model for your company.
Accept That
Failure Is Part Of Success.
It’s
often said that if you aren’t making mistakes, you aren’t trying hard enough. It’s
safe to say that the experiences of these innovators illustrate this point:
Thomas Edison, one of the greatest inventors of all time, had 10,000 failed trials with his light bulb.
Stephen Spielberg, famed movie director, went solo after being rejected three times from the University of California.
Bill Gates and Mark Zuckerberg, both college-dropouts, went on to… well, you already know.
So: Try. Fail. Learn. Improve. Losing is where we
grow. Too often, winning provides a sense of false security. Accept that
there’s always going to be someone striving to do what you do better than you
do it. And then keep pushing yourself to be your own very best.
Once we accept that success isn’t built on the failure
of others, we open ourselves to a multitude of opportunities. Consider
different perspectives, encourage innovation, and accept the inevitability of
mistakes. You might be surprised at how beneficial it is (and how good it
feels) to win and watch others win simultaneously.
Ah, the good
old 80-20 Rule… The saying “Rules were meant to be broken,” certainly applies
here. It’s one of those things that can seem like a positive or a negative
depending how you look at it. Similar to the, “Is the glass half empty or half
full?” question, your view of The 80-20 Rule is all about perspective and
making sure yours is aligned with the goals of your business.
Perhaps it’s
frustrating that 80 percent of your efforts account for only 20 percent of your
bottom line. But, it’s also pretty cool that just 20 percent of your customers
and products produce 80 percent of your profits.
It’s all about balance. And, as you find that equilibrium, you need to know when to reconsider The 80-20 Rule:
1.When More Selection is Required
There are times when one size does not fit all. You may provide the best
gosh darn spicy mustard the world has ever tasted, but sometimes a spicy
mustard isn’t the right mustard choice. There are circumstances when a classic
yellow mustard is preferable. Or maybe there’s a recipe that calls for a Dijon
mustard…
The point being: There are complexities that require consideration and adjustment on your end. That might manifest in a variance in investment strategies, production process, or product offering. Small tweaks to your 20 percent can result in a major boost in profit.
2.When The Present Does Not Reflect The Future
While a company’s best product and most loyal customers will consistently
account for a higher percentage of sales and profits, there are instances when
those factors are not reliable in the long run. Sales may drop as necessity
decreases and/or newer products/services become available. Competition is
always a factor and, during a time when technology constantly and rapidly
changes, your current best seller may not always be in high demand.
If you only focus on what’s doing well now, you’re bound to experience adversity in the future. If you rely to heavily on one thing, you inhibit potential growth. There is a simple need to develop and test new products to advance and survive.
3.When Expansion Creates Opportunity
Opportunities to expand your market will arise and the investment may not
be a part of your current 80 percent. These instances are worth serious
consideration—especially when the investment is minor. You may open up the door
to a broader 20 percent. For example, babies’ diapers are still the major
market segment, but adult diapers are the fastest growing segment. Expanding
your offering (this may include accessories, convenience items, or new market
segments) can draw in a wider customer base and that is never a bad thing.
One last
thing to consider: Diversity Requires Variation
Many markets
rely on analysis, which is based around the assumption of a bell curve where
the bulk of a population is around a center number and then distributed evenly
around that number. For example, the average U.S. adult male is about 5 foot 9
inches and 75% are between 5 feet 4 inches and 6 feet. However, if you start
segmenting by age, race, ethnicity, and country of origin the distribution
becomes much more complex. The average Danish man is almost 6 feet tall while
the average male from India is 5 feet 5 inches. In both cases using an average
of 5 foot 9 inches would miss much of the population.
Therefore,
it is beneficial to dissect your target consumer and consider multiple
offerings based on the possible variations that exist within that group.
In the end, The 80-20 Rule is still a reliable
tool in most cases, especially when trying to eliminate excess product or hone
in on top buyers. However, as always, exceptions to rules always seem to be
where the fun happens—the chance to maximize growth as you reassess opportunities,
trends, and market segmentation.
We’d love to hear about your
experience improving business performance by adding or reducing offerings.
Have questions? Call (at 914-632-6977) or email us for a FREE analysis and discussion regarding your offerings. We’d love to help you design a personalized solution.
A customized approach that caters to each of his clients’ specific needs is what sets Dr. Bert Shlensky apart. With a PhD from the Sloan School of Management at M.I.T., he focuses on implementing individualized strategies that have helped countless businesses increase sales and profit. He knows what works and has the experience and expertise to help you take the steps necessary to achieve your business goals. Visit StartupConnection.net today!
Creating a business plan is a lot like forecasting the weather… those who are in charge of predicting a storm get blamed if they are not 100% accurate. The same logic applies to business planning in terms of timing, expediency, and execution. This can lead many business owners to abandon ship, rather than seeing it as an opportunity to change course. Always remember, business planning is a process.
Carl Schram, former head of the Kauffman Foundation for Entrepreneurship, recently wrote Burn the Business Plan, which echoes a similar strategy for a streamlining the planning process. Reis and Schram are mostly right to criticize excessively lengthy business plans. At Startup Connection, we argue that business plans are necessary, but that they need to flexible and dynamic (and meant primarily for yourself, not others.) As the saying goes, “If you don’t know where you are going, any road will get you there.” Making plans for others (especially venture capital firms) and following specific rules almost guarantees the process will not be useful to you. In addition, venture capital firms account for a very small segment of business financing, especially in the beginning. A business plan is not just a document to be stored on a shelf; it should establish parameters and be developed, tested, and be continuously revised. Even with a “perfect” business plan, there will be failures along the way. In particular, failing and learning from failure are critical components of the ongoing planning process. Business planning is a process.
Some Planning Suggestions
There is no cookie-cutter approach to writing a business plan. Get your ideas on paper before stressing about the organization of information. Don’t stifle yourself. Write it in your own words, as simply and concisely as possible.
Focus on your passion. A successful business plan should express why you think your business is a good idea and why you will succeed. If you need to dress it up in a suit and tie to show to investors, do that later. A business plan should be YOUR vision.
Common Parts of a Business Plan
Every business plan is different because every business is different. However, there are some common elements to consider, such as:
Mission statement
Goals
A description of products and services
Ideal customer
Analysis of the industry and your competitors
Marketing and sales tactics
Operational plans
Manufacturing and delivery logistics
Resources necessary (this includes labor, equipment, and facilities)
Financial budget
Also, focus on the components that are most important and challenging, rather than worrying about making every section perfect.
Some Further Tips
Don’t be too verbose: A formal business plan must focus on the needs of the audience and the entrepreneur. Business plans must be on point and clear. Typically, plans should be 15-30 pages. If additional details are required, put them in a short appendix.
Think it through: You might have a great idea, but have you carefully mapped out the steps you’ll need to make the business a reality? It’s worth investing your time in the planning phase to ensure you might make money in the long run.
Do your research: Investigate everything you can about your proposed business. Google and Amazon are great and easy tools to understand the market and your competition.
Be realistic about your competition: Is your product or service something people really want or need, or is it just “cool?” Why do you think people will buy your product or service?
Get feedback: Obtain as much feedback as you can from trusted friends, colleagues, nonprofit organizations, and potential investors or lenders. You’ll know when you’re done when you’ve heard the same questions and criticisms again and again. The goal is to have a good answer to almost everything that can be thrown at you.
Completing the business planning process can be challenging, but it should also be interesting, productive, and satisfying. The hardest part is developing a clear picture of the business that makes sense, is appealing to others, and provides a reasonable road map for the future. Another challenging aspect is integrating your products, services, customers, marketing, operations, management, and financial projections seamlessly together. However, these pieces should not dilute your enthusiasm to succeed.
Dr. Bert Shlensky, president of Startup Connection ( www.startupconection.net ) has an MBA and PhD from the Sloan School of Management at MIT. He served as the president of West Point Pepperell’s apparel fabrics business & President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he focuses on working with select start-up companies and small businesses. Call today for a free consultation, so we can use our business plan templates to take your business to the next level.
When you want to stand out, reach out to Bert for the tools that will build your “sticky” brand. My focus is on understanding and analyzing your dilemmas and challenges, so your company becomes profitable faster.
Call (914) 632-6977 or email me at bshlensky@startupconnection.net. Don’t leave without signing up for our useful free eBook!
Feeling stumped or overwhelmed? Contact Bert at (914) 632-6977 or Email to start the process. Thanks!
Creating a business plan is a lot like forecasting the weather… those who are in charge of predicting a storm get blamed if they are not 100% accurate. The same logic applies to business planning in terms of timing, expediency, and execution. This can lead many business owners to abandon ship, rather than seeing it as an opportunity to change course. Always remember, business planning is a process.
Common Parts of a Business Plan