Keeping a Broad Vision

Scene at The Olympia Restaurant (from SNL skit)

 

 

 

 

 

 

 

Patron: I’ll have a grilled cheese.

Gus: No grilled cheese – – Cheeseburger

Gus: What do you want to drink?

Patron: Coke

Gus: No Coke; Pepsi

Probably one of the most difficult concepts for an entrepreneur to get his mind around is maintaining a broad vision. The concept of broad implies a wide ranging view while vision seems to suggest a certain focus. Seems to be an oxymoron – like jumbo shrimp. We encourage entrepreneurs to maintain that open view while continually harping on staying focused and this conundrum can drive the average business owner out of his mind. So let’s explore this a bit further.

Many of us remember the scene above from the famous SNL routine with John Belushi. You had to admire the tenacity of focus; but you were never going to get any form of potato other than chips, no entre other than a cheeseburger and no drink other than Pepsi. Pure focus like this can certainly define who you are but does it limit the customers you want to reach? Let’s consider another scenario. Why did Steinway and Yamaha have such different levels of business success? Some would simply point to a broader vision. While Steinway focused on producing pianos, Yamaha saw itself in the keyboard business. So when electrical instruments came along, electric pianos and organs were a natural extension of a broader vision.

Apple and Starbucks are also often sighted as companies who look beyond the utility of the products they deliver to a much wider view; focusing instead on the user experience to expand the appeal of their products to a much wider audience. In his book Start with Why, Sinek encourages us to continually look at the market through the eyes of our customers to always understand the true why of their purchase behavior. In essence, keeping a broad vision with focus.

I have seen this issue many times particularly with software development companies. They develop a great platform and in an attempt to demonstrate its capability, they build an application. Now that is all well and good until the application (versus the software) becomes the focus. Let me give you a real example. In the 1980’s, (“a long time ago in a galaxy far, far away”) I had a client that had developed voice recognition software. Now I know it is popular today, but trust me in 1980, it was revolutionary. They decided to demonstrate this capability by installing the technology in a phone (remember pre cell phone days.) Being the accountant, I wondered why someone would buy a phone for $350 where they could pick up the receiver, say “home” and have it call home automatically when they could push the button on the phone that said “home” and get the same utility. Apparently, the market saw the same thing, so instead of using the money they raised to improve the technology and license it to others; I watched them go out of business with an inventory of high priced phones nobody wanted. They saw the phone as focus; I saw the software as vision. Put another way, I saw the Olympia as an eating establishment with personality – – not just a cheeseburger factory.

So when it comes to your vision, please work to make sure it is broad enough to create sufficient opportunity and not so focused as to preclude your ability to fully develop your vision.

 

 

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What is an Entrepreneur?

“An entrepreneur knows the difference between an idea and an opportunity” – the late Jeffry A. Timmons – Professor of Entrepreneurship – Babson College

As the phrase goes, truer words have never been spoken and after another weekend of looking at “pitch decks” I wish every entrepreneur (or would-be entrepreneur) would take these words to heart.  For those who are new to the startup game, the concept of being an entrepreneur has been around for quite some time.  I had the honor of serving on the Scholastic audit team many years ago at EY and I remember the then Chairman “Robbie” Robinson asking me if we still worked with incubator accounts because that was what Scholastic was in the 20’s and Robbie was the consummate entrepreneur.

I have read a great deal about entrepreneurship and while it has been practiced forever, it wasn’t until the 70’s and 80’s that people like professor Timmons started to add appropriate content to this emerging field of study.  I heard him lecture on the subject and in addition to it being thought provoking, this quote of his said it all for me.  In fact, I used it so often, I had it as a scrolling screen saver for about 30 years.

So, what is it about this phrase that struck a chord with me?  I think it was the simplistic yet powerful message and I must admit as I go through my decks today, I am struck by how much they contain fantastic ideas but perhaps are not real opportunities.  I think startup entrepreneurs at times overestimate the desire of the customer to seek out a solution to what the entrepreneur perceives as a problem, but which the customer may not.  One such deck I reviewed is a solution that (if all the stars are aligned) can save a major institution up to $300,000 a year – and for this they want to charge $100,000 annually.  Unfortunately, their target user in this case probably operates a budget in the $1 billion range and their perceived “problem” is basically a rounding error.  In essence, this is an idea that has not reached the level of an opportunity.

So, my advice is simple.  Make sure you spend your time truly developing what the problem/market is.  Perhaps, the problem above causes more pain in a $100 million institution and maybe that institution will spend $50,000 to solve it, but don’t overshoot your model hoping that an investor will abandon good old logic and not see that perhaps you are overstating your problem to get the revenue numbers investors like to see.  Keep that concept of a true opportunity in mind (few people pay just for ideas) because if it is not, you will not get funded and your pitch will just add on to that great pile of ideas that every investor has in their junkpile.

Succession Planning – It is a Process

“Who’ll be the next in line?” – lyrics from the song by the same name – The Kinks

Every business that wants to be sustainable at some point in time must confront the task of succession planning.  Larger established businesses have processes in place including depth charts at each position and a human resource group to help navigate the transition and monitor developments.  But, what about the smaller, closely-held family business that has to go through this on their own?  How do they address the question The Kinks threw out there almost 50 years ago?

The short answer is that this a process and I offer for your consideration seven steps I have used over the years to take a business from Current Management (CM) to Successor Management (SM):

  1. Determine how the succession planning process will work including a communication plan
  2. Understand the view of the CM including objectives and timing
  3. Do a financial needs assessment of CM to determine the viability of the business to support those needs
  4. Consider the potential SM including capabilities, ability to supervise former peers and role acceptance by others
  5. Understand the role family members will play in the business including those outside the company as well as future family members
  6. Maintain a process which includes periodic reviews as to the viability of the plan especially after it is in place
  7. Incorporate into this process an appropriate methodology for transferring wealth

The succession planning process is obviously non-recurring by design, so it tends to be inefficient.  Laying out a framework in advance and establishing early on the goals and objectives of those who are leaving the business to others is paramount to having a plan work.  We see too many situations where the gating factor is wealth management and steps to minimize estate and related taxes which at times ignores who will continue to run the business.  Future shareholders are not necessarily the future managers of the business.  In fact, the process may result in management realizing that it has to bring in a professional manager to assume the leadership role.  A quick case study will help to make this point.

We were asked to consult in a family business where there were four sons and the father wanted to retire.  Considerable time had been spent trying to determine which of the four sons would take over.  The issue was exacerbated by the fact that each of the sons was a strong personality and had solid characteristics that were relevant to the business at hand.  However, they were also young, strong willed and liked to work independently.  After performing an assessment, all agreed that while each of the sons could contribute in some way, none was prepared to assume the leadership role.  The solution was to bring in an industry veteran to help guide the business and to navigate the transition.  Within five years, it became clear that one of the sons was the most qualified to lead and today, six years after that, he is having a successful stint as the CEO.

So, keep in mind, it is a process and the transitions that are the most successful usually have at their “root” the concept that objective assessment of capabilities trumps family stature.  While some espouse that the key focus in a transition is to make sure that the oldest sibling is prepared to make it as the next leader, our experience has led us to believe that those who are the most qualified become the most effective in a succession plan.