We can get so obsessed with strategy, our great idea, and finance, etc. that we ignore parameters which can be critical to our success. One of the biggest mistakes I see startup owners make is failing to consider parameters as their North Star.
“If you don’t know where you are going, any road will get you there.” – Lewis Carroll, Cheshire Cat
Over and over, entrepreneurs come to me without a clue about what they’re aiming for. Short term vs long term, profits vs growth, risk and efficiency vs innovation all need to be considered in executing strategies.
One of the most important goals is the changing consideration of effectiveness. MacKenzie Scott and Melinda Gates illustrated this beautifully with their approach to charity and wealth.
They’re spending more instead of building big war chests.
They’re donating to small, more community-based charities rather than established institutions and providing seed money as well as operational funds.
They’re using more subjective funding criteria, requiring less proposal work and demanding less extensive reviews to encourage new organizations and facilitate innovation.
They are funding more women’s and poverty groups.
Their goal was to approach charity more effectively. Their rationale was that funding hunger, health, poverty and social justice with innovative contributions would provide more benefits than the opera or large universities. The result was a complete shift in charitable donations.
Measurement: Just Do It: Measurement is one of the most important parameters. At its simplest, it’s looking at where you vs. where you want to be.
Measurement for the sake of measurement. however, gets you nowhere. Ask yourself (and answer honestly!):
What am I measuring?
What metrics am I using?
What is the purpose of the measurement?
Here’s the thing every successful business owner knows but no one ever tells you: measurements of sales, profits, service, and customer satisfaction are vastly underrated.
Measurement also needs to consider qualitative metrics like speed, motivation, innovation, employee satisfaction, and quality. I recommend using qualitative questions like “How am I doing?” as well as more traditional qualitative measurement tools (remember: these tools run the risk of measuring the wrong information or letting bias inform results).
Embracing change, finding alternatives, being flexible, and innovation are the keys to success. AI, climate change, income inequality, and women’s rights are key factors affecting parameters and strategies. For example, we cannot ignore that baby boomers are aging and whites are less than 50% of new births.
As startup owners, this means the traditional revenue generation approaches may not be working as well as they used to. New markets and demographics need increased attention.
The advantages of AI – in terms of efficiency and speed – are yours for the taking if you take the time to familiarize yourself with the new technology.
Take the time to examine your processes for developing solutions and assessing progress. Many organizations continue to use authority, hierarchy, etc to govern decision making. However, the world – and business – has evolved to recognize commitment, success, teamwork, logistics, collaboration, and coordination as critical parameters in most successful organizations. Invest time in looking at how you come up with solutions, determine what progress has been made, and coordinate across teams.
Tips for Understanding Parameters
Consider Both Social and Analytics Issues: The realities and changes in parameters like population, the economy, political environment, and social values should be regularly assessed. Variables are changing faster and more frequently than ever. The more you understand these parameters, the easier it is to keep up as they change and evolve.
Commit to Action: Nike said it best, “Just Do It.” Refusing to make a decision is a decision in and of itself. Knowing what’s right and failing to act on that knowledge is one of the biggest mistakes startup owners make. Do your research, make your measurements, check in with your gut, then act.
Move Beyond Cause and Effect: Cause and effect is the go-to answer for “why” something happened. One of the oldest questions on cause and effect is the proverbial chicken and egg issue. However, most relationships involve a variety of factors. Dig deeper to identify all the factors involved in an outcome.
Embrace Risk and Trust Your Intuition: Analytics can produce quantifiable data that paints a black and white picture of your reality. Faced with the chance to take a big risk? Check in with your gut — and then trust that feeling. We all know the names of the billionaires who chased dreams others said were insane. The people who think outside the box are the ones who create real change in our society.
Avoid the Pitfalls of Bias: The biggest problem with parameters is the management of bias. Most bias, especially in small businesses, is simply human. Your assumptions, analysis, and data can all unknowingly affect assumptions — ignoring this fact is foolish.
Improve Your Prediction Capabilities: One of the crucial aspects of parameters is risk and outcomes, which are greatly affected by probability and information. Predicting results where significant and consistent historical data is available is fairly simple. Predicting results for new programs with little or inconsistent data requires developing educated estimates.
In summary, understand the importance of parameters in your decision processes. The assumptions, results, effort and process can be greatly aided.
Contact us for a FREE evaluation and get an alternative perspective on your business. We’d love to help you identify the ways to adapt to current trends. No one has time for BS – so we’ll cut straight to the chase and answer any questions you have.
Dr. Bert Shlensky, President of StartupConnection, has an MBA and Ph.D from the Sloan School of Management at M.I.T. He has helped more than 2,000 clients benefit from his business acumen. He now focuses on working with select startups and small businesses.
How
do you view the world? Have you ever stepped back and asked yourself if your
outlook is correct? You might be wondering, “How can you measure that?” Well,
you can’t because we all have a particular way of viewing the world, which is
based off of genetics, personal experience, economic status,
political/religious preference, education, and a slew of other factors. But,
you can assess whether your perspective
is effectively contributing to achieving your goals.
We’ve
all been told that when one approach is repeatedly not working, it’s time to
try something else. The same goes for perspectives. Sometimes, problem solving
is as simple as looking at things in a different way. After countless attempts,
a goal may seem unachievable—and that is when it’s time to flip your outlook.
As
business owners, it’s been ingrained in our brains that planning, budgeting,
and expertise are key to success. However, a recent shift in perspective led me
to the conclusion that they actually aren’t that important as we were once
taught to believe. Let me give you an example:
Last
month, I received and invested in four new issues and profited from all four.
One even doubled in a day. They were from different industries, but all related
to technology in some way. The most interesting aspect was that they all lost
significant money, but the losses are mostly growing. This made me take note of
the fact that many new businesses seem more focused on sales growth and
potential rather than targeting profitability. Amazon is a perfect example of
this, as it was viewed for many years as the poster child for growth and losses.
Now, companies like Uber and Wayfair are trying to emulate that model.
This
trend clearly illustrates how traditional methods of planning and forecasting
businesses are dramatically changing in nature and diversity. We’re used to the
notion that traditional small businesses need to show profitability in order to
pay bills and find investors. But, the reality for many new businesses (such as
apps, sharing sites, and innovative technologies) is the requirement to prove
their concept’s worth through larger scale, bigger investments, and exponential
growth/losses over several years. Additionally, forecasts of these larger
entities are generally meaningless and inaccurate because of the risk and
uncertainty.
With
all of that in mind, it’s easy to see how, when it comes to setting goals,
venture capitalist firms strive for potential 100 million-plus entities while
the small entrepreneur is often pleased with a million-dollar entity that makes
10% profit. Each person’s perspective is informed by their circumstances,
needs, and perceived capabilities. Some entrepreneurs are just out of college,
living at home, and may have a somewhat unrealistic view of life. Others are seasoned
venture capitalists or investors (think Shark Tank judge) looking for the next
billion-dollar deal. And then there are business owners in their 30’s or 40’s
with extensive expertise and experience who need to make a living quickly. With
very distinct backgrounds and needs, each of these individuals will come up
with a unique plan of action to achieve their goals and a strategy for
assessing risk, competition, market size and growth, resources, experience, and
expertise.
Circumstance
informs goal setting and perspective makes or breaks whether those goals are
achieved. Consider the following:
The Kaufmann Foundation, a group that promotes business growth, estimates there are about 400,000 new startups every year and that 90% of them will fail before their fifth year.
There are an estimated 131 startup companies that have achieved over $1 billion of valuation in the last few years.
Thus,
in roughly five years, the odds are about 1 in 15,000 that a company will reach
$1 billion in valuation, and 1 in 10 (mostly small companies) will survive five
years. There are, of course, significant variations in these outcomes. For
example, small companies often get bought or sold and many large companies
succeed, but have less than $1 billion valuations.
Also
noteworthy is the fact that most of the billion-dollar companies achieved
exponential growth, but also lost money over several years. For example, Uber,
though a leader in startups, lost over $5 billion in the last quarter.
Compounding the issue is that early investors were paid $4 billion in that
quarter which further complicates the situation. Similarly, nearly every new
large startup shows a dramatic increase in sales, but even more dramatic losses.
The
takeaway, perhaps, is that, with this knowledge, goal setting might benefit from
a shift in perspective. Rather than implementing a strategy that targets outcome,
an approach that focuses on immediate results may be more beneficial. The point
is: the times are changing and what once worked won’t work forever.
Things
to keep in mind:
Know your goals, resources, and risk. In particular, really understand your market analysis, competition, and how and why your company is different. Why should customers care? If you can’t answer this question, shift your perspective and look at your company through the eyes of a customer or a competitor.
For small business owners, it’s crucial to consider proper planning, adequate research, business excellence, and well-executed programs. Ensuring profit is critical to being in the 10% that succeed. It’s also important to recognize when any of these areas are failing. For instance, if you’re having problems with planning, consider a different outlook. You may be looking at the issue with blinders on. As previously stated, problems are often solved by simply stepping outside of your traditional way of thinking and assessing the situation from a different perspective.
If you require exponential growth to ultimately succeed, you still need to understand metrics. No matter the size of your business, know the risk and uncertainty, develop the resources, assess the ultimate market, and ensure there is at least a potentially profitable metric down the road. Is cash flow relevant and when?
A plan of action for an unrealistic goal will look impossible while a plan of action for an achievable goal may seem daunting, but doable. Dr. Bert Shlensky, president of www.startupconnection.net, offers experience and skills and a team devoted to developing and executing winning strategies for businesses of all kinds. This combination has been the key to client success. His book, “Passion and Reality for Small Business Success,” is available at www.startupconnection.net.
Many marketing guides start with developing strategy – understanding your focus and defining your brand. I argue that execution and excellence are more important than developing vague brand and marketing strategies. As Walt Disney said:
“Do what you do so well that they will want to see it again and bring their friends.”
While this quote may seem obvious, it has a number of implications that are frequently ignored. For example, when I talk to marketers, they frequently discuss the latest hot trend – targeting, SEO, social media, videos, paid search, etc. However, how we execute these strategies for our situation may be more important than the specific program. In addition, many marketers downplay measuring the results of marketing efforts. Now, digital marketing allows you to develop, test, measure and adapt. You can now test various programs and strategies before making expensive commitments. Paid search is an example where key words, offers, and links, are frequently the keys to success. Thus, testing various alternatives can dramatically help focus a program. However, many advocates will recommend spending thousands of dollars a month with little clue of what will work. Similarly, many marketing programs get enamored with technology while ignoring basic execution concepts. For example, I recently read some exciting marketing plans from a client that included videos, links, and many other details. However, they were so focused on technology that they forgot simple things like phone numbers, e-mail addresses, and how they would help their customers.
Here are some tips related to execution in your marketing programs:
Goals – What are your long-term volume and image expectations? Are you building sales just for today, or are you seeking long term customers? What are your organizational and financial resources? Who is your target market? What is your competitive positioning? The answers to these questions can change during the marketing strategy process, and they will affect your program as you begin to execute in the real world.
The Internet – It’s fast, centralized, and cost-effective. Traditional print media and many retailers are dying compared to Internet retailers like Amazon (who represent between 35-45% of internet consumer sales, and are growing at about 20% per year.)
Pricing, Stock, Forecasting, and Value – Now with the ability to reach customers in remarkable ways, you must consider all of these as part of your plan.
Product Expectations and Customer Service – You’re a brand. People expect a certain kind of quality based on your target demographic, so keep that aligned with your goals.
Develop, Test, Measure, Adapt – This is the scientific method for a Lean Startup Strategy, and thanks to the Internet you can do all of this really quickly. One of the key recommendations of Eric Ries in The Lean Startup is to “test, measure, and pivot until you get it right.”
Customer Retention – Satisfied customers are the best, most cost-effective way to grow a business.
Traditional Advertising – While firms generally are spending less money on traditional media, it can still be an important component of good marketing (especially if your products and services lend themselves to such media).
Distribution – How are you selling your products or services? Trends in distribution are changing rapidly, and your process needs to be in sync with the times. For example, automation and customer service are replacing the direct salesperson. Money can be saved by eliminating traditional channels and substituting direct shipping and the Internet
Integration – The key to an excellent marketing plan is to employ all of the tools you consider relevant and affordable, and to develop a targeted plan with clear action steps and benchmarks. First and foremost, the plan must fit your goals and your budget. It is then critical to measure the results and adjust to maximize your goals and profit.
Risk and Openness – I encourage you to consider more risk in our changing environment, and I also suggest changing the business culture to encourage more risk-taking. I often say, “If you aren’t making mistakes, you aren’t trying hard enough.” Mistakes mean you and your business are growing. Consistently exploring alternatives and evaluating your decisions will help you figure out what’s working.
Measurement – A number of general guidelines should be followed when making goals and measuring them. First, make goal-setting a process and communicate these goals to those involved. Second, be certain to understand the different needs in different situations. Third, be sure to use clear and simple measurement tools. Fourth, be sure to use the process for improvement (rather than simply as a tool for criticism). Focus on the mediums that work the most; not based on trends, but on what has the best outcomes.
Dr. Bert Shlensky has an MBA and PhD from the Sloan School of Management at MIT. He is the President of the New York-based consulting firm The Startup Connection, where he uses his 30 years of high-level business experience to guide his clients towards maximum sales and profit. For a free consultation, please visit www.startupconnection.net.
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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.
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Feeling stumped or overwhelmed? Contact Bert at (914) 632-6977 or Email to start the process. Thanks!
Many marketing guides start with developing strategy – understanding your focus and defining your brand. I argue that execution and excellence are more important than developing vague brand and marketing strategies. As Walt Disney said:
Here are some tips related to execution in your marketing programs: