Strategic Partnership

Strategic Partnership Principle – The Truth about Competitive Analysis

Manager entrepreneurs use their causal reasoning skills to conduct a competitive analysis to help them define a unique niche for their business. This is demonstrated by the blue ocean strategy postulated by W. Chan Kim and Renée Mauborgne. In contrast, founder entrepreneurs use their effectual reasoning skills to build strategic partnerships with customers.

Founder entrepreneurs do not start with a pre-determined target market or niche in mind nor do they conduct a competitive analysis to see who else is offering similar solutions since they are not sure of their ultimate solution yet. Instead, they target a single customer and conduct a dive deep analysis on their very specific needs. This analysis helps them understand and then design a custom solution to meet that customer’s specific needs with a “one size fits one” solution. They pick the brain of their single target customer and do not focus on their competitors. They strive to develop a product or service that is so well aligned with the customer’s desires that it dislodges any incumbents that are operated by manager entrepreneurs with a “one size fits many” solution. Once the solution is established, the founder entrepreneur looks for ways to re-purpose the solution for other potential customers.

By engaging the customer in designing the solution, founder entrepreneurs invite their clients to be strategic partners as opposed to simply someone to sell to.

When I started Horizon Interactive, an infrastructure business, my first customer was Digital Equipment Corporation. As a former employee, I worked with their divisions to design our deliverables and processes based on their specific needs. Rather than performing any upfront competitive analysis, we engaged the client directly to help us design our service offering. We even educated the client to possibilities they were not aware were of based on our technical domain experience using the three T’s of challenging sales.

Having the client participate in the design was more effective than speculating on what a potential customer might want, building it, and then trying to sell it to them. Furthermore, our customer has ownership in the solution since they helped design it and were much less likely to switch to competitors in the future.

Moreover, founder entrepreneurs often secure development funds before even committing resources to a solution by having a strategic partnership with their client. In this way, the founder entrepreneur has a low level of capital outlay when developing their offering.

One of my business mentors, Ron Muns, used the strategic partnership principle very effectively when he started his company Bendata. With the personal desktop computer just making inroads into businesses, companies needed a way to track the location of all their computer related assets since they were no longer all located in a central computer lab. Ron developed a strategic partnership with three clients to develop a software application to track all their computer related assets across their businesses. Each strategic partner contributed technical specifications for the application and provided a portion of the capital needed to develop the the first product.

In the end, Muns owned the rights to the underlining software while the strategic partners got their application for a fraction of the cost of doing it alone. The software Bendata initially developed morphed several times as he added new features to the application for new customers and to achieve a better Product Market Fit (PMF). Ultimately, the product went on to become the wildly successful GoldMine Customer Relationship Management (CRM) application and spun off several other successful businesses, including the Help Desk Institute, along the way.

As a variant of the strategic partnership principle, some founder entrepreneurs leave their employer and develop a business based on their extensive industry knowledge and relationship with their former employer’s vendors and customers. This was the case with Sam Walton who parted ways with his former employer, Ben Franklin Five and Dime, and created Walmart. Another example is Arthur Blank and Bernie Marcus who left their former employer, Handy Dan Home Improvement Center, and started Home Depot.

All too often conventional business advice discourages founder entrepreneurs from practicing the strategic partnership principle of making the customer part of the design process, fearing that exposing them to a less than perfect product will diminish their brand. Instead, they advise new businesses to identify the most profitable customer segment, perform a detailed market and competitive analysis, and define and build a unique product where there is limited competition before ever getting any real customer feedback.

Is your product or service based on defining a unique product for an untapped customer segment through the use of a competitive analysis or is it based on working directly with a customer and getting them to not only bring real world requirements to your design, but getting them to perhaps even pay for some or all of it’s development as well?


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Note: this post originally appeared January 20, 2017 at www.SteveBizBlog.com.

 

Business Opportunity

The Opportunity Discovery Canvas

Problems are often opportunities in disguise and entrepreneurs are the problem solvers who have the ability to identify problems and find solutions.

With funding provided by the Kauffman Foundation, Entrepreneurial Learning Initiative, LLC has developed a tool called the Opportunity Discovery Canvas. The tool was designed to help entrepreneurs that have identified a problem to work through a basic framework to evaluate the feasibility of their solution. Using a series of questions that make up the Opportunity Discovery Canvas, entrepreneurs can examine the problem in detail, propose a solution, and connect with the customer to help them determine if their idea is worth building a business around.

The Problem

  • Describe the problem you want to solve.
  • How did you encounter this problem or unmet need?
  • Do other people have this problem?
  • Why is this problem worth solving?
  • Describe the type of people who have this problem.
  • Describe the people who most likely have this problem.
  • What is their age, gender, areas of interest, profession, etc?
  • Which of these potential “customers” can you most easily connect with?
  • How are they currently solving the problem?
  • Describe other solutions that are currently available.
  • Why are the current solutions inadequate?
  • How important is this problem?

The Solution

  • Describe your proposed solution.
  • What is the single most important feature of your solution?
  • What is the most effective way to demonstrate your idea?
  • How will you know if others are interested in your solution?
  • How will your solution be different?
  • How is your idea better than existing solutions?
  • Describe the key differences.
  • How will you know if others value this improvement?
  • Will people pay for your solution?
  • Will people be willing to pay for your solution?
  • How often will they need your solution?
  • How will you know that your solution is valuable to others?

The Connection

  • How will potential customers know about your solution?
  • How can you find people who would be interested in your solution?
  • What methods of communication will you use to reach them?
  • What messages do you intend to convey?
  • How will potential customers purchase your solution?
  • How can you make it easy for your customers to purchase your solution?
  • How are they currently accessing other solutions?
  • How will your customers know they can rely on you?
  • How will you communicate this message explicitly?
  • Why is this problem worth solving?

How can you use the Opportunity Discovery Canvas to refine your business idea?

You can view and download the Opportunity Discovery Canvas at: http://www.ibrcenter.org/pageimages/p63952-Ice_House_Opportunity_Discovery_Canvas.pdf

Note: this post originally appeared at www.stevebizblog.com.

 

Keeping Promises to Your Customer: Marketing Strategies that Work

How to tell your company’s story to inspire trust, remain agile to customer needs

In Seth Godin’s recent blog, he says: “My take for the last 15 years is that marketing is merely storytelling and promise making/keeping, and in fact, everything the organization does is at some level, marketing.”

I couldn’t agree more. But how can a new company or an existing company ensure that they’re telling the right stories and making promises they can keep? Using The Center for Business Modeling Business Planning Framework will help. And the best thing about it is that it is an iterative process: If your story doesn’t gel or your promises start to feel flimsy, using the framework will help you adjust.

Agility is Critical

A post by Margaret Rouse writing on techtarget.com provides an excellent definition of business agility. She outlines the ways that a company can keep changing by “assessing priorities and progress frequently”—not just at the end of a project. Her post mostly discusses agility in the context of project management, however, isn’t your business plan the most important and impactful project you undertake?

Using the Framework has helped me crystallize my stories and ensure my promises are kept to my clients in three major ways:

I Can Do Anything Better Than You

1) Brand integrity- I used to tell the story: “I can do anything you need in PR and marketing” and it’s just not true. I don’t have certain skills but then again, one of my strongest attributes is being clear-eyed about that. If one of my clients gives me a project that’s not in my wheel house and hiring a contractor to fill in the gaps is cost-effective for both the client and my company—it’s full steam ahead. However, I need to be very careful when doing so—most of the skills I need help with come with a pretty hefty price tag. Working with my client to find a more effective partner brings them more value in the long run—and makes me more of a business consultant in their eyes. That’s the new story for me—“I will do what I’m best at and if it’s not my strength, I will make sure I hook you up with quality people.” My product and services roadmap (based on the CBM Framework) was adjusted accordingly.

What No One Wants to Hear About Business Ownership

2) Keep your promises to yourself- As a marketing and PR professional for many years, I spent a lot of late-night hours catching up on work because I made sure to make the evening football and soccer games when my kids were in school. When I opened my own company, I tried to opt out of business trips (when possible) that included a lot of travel, paid awesomely — but would upset my work/life balance.

Sometimes, I just had to leave and do my job—and that involved breaking promises to my loved ones rather than to my employer or client. Today, I walk a fine line with keeping client promises and promises to myself about how present I will be for my grown daughter and my youngest son. I believe that any business plan that ignores an entrepreneur’s personal life will fail in the long run—so when using the Framework, I make sure to adjust my plan to the impact on my personal life. I might lose some revenue, but I gain energy and commitment for the projects I choose to take on—because I know that they are congruent to my values. No one asks for their checkbook balance on their death bed.

What’s the Story?

3) Telling a valuable story- The CBM Framework shows you how to tell your company’s story and also to remain agile enough to change your story when the customer is not responding. This is where content marketing metrics come in—how are you reaching your customers and what are you telling them to ultimately turn them into “paying customers”? Your marketing strategies are always evolving based on their needs and your business goals.

Keeping promises. Telling compelling stories. These are the two core activities of any business, anywhere. I love feeling confident that I’m doing them well. Let CBM’s Framework make you confident, as well.

Three Ways to Disrupt Your Business Model

Technology is no longer the key disruptor:
Your Business Model is—So it “better be good”

David Skok is one of my favorite business writers because he tends to change the way I think about my business. He helps bring new ideas to entrepreneurs like me, who barely have time to do our jobs — let alone keep up with the latest in business model innovation. I know when I visit a Skok blog or SlideShare, I’m not wasting my time.

Take this recent statement from David in a SlideShare titled, “Business Model Innovation: The New Trigger for Great Start Ups”: “Unlike in the past where technology innovation was the primary driver of startup innovation,  in the last ten years it has frequently been innovation in new business models that has caused the disruption to create the opening for new companies.”

The 79+ page Slide Share brought me to some great conclusions about where my company might be headed. David uses awesome examples to show how the “business model as innovator” concept works in practice. Here are some of the most valuable insights:

1. Watch your CAC (cost to acquire a customer) – According to Skok, start-ups using the new model—spending money to get customers to your website and then monetizing the site with offers, etc—doesn’t take into account how much money it will cost to acquire not only a visitor– but a real customer. By monetizing a portion of the customer base and using free software to acquire customers cheaply, startups can keep their CAC more manageable—and make more money.

I learned this lesson the hard way. I loved attending the big, fancy conferences when I first started my company. I thought I would network with the big money clients—then, once they met me, of course they would hire me—voila! That $2,500 conference fee paid for itself.

When I finally broke down the average number of clients I obtained from attending twice a year, every year for three years, I came up with five clients that yielded about the same amount of money as I spent on the conferences. I deicided to cut down attendance to once every two years and spend my new business money on people who were already in my network.

I still go because I love to learn about my discipline. I just don’t spend as much in acquiring customers there. And even though $5,000 a year doesn’t seem like a lot to you, it was a lot of money to me back then. Today, I’d rather spend it on something that yields client contracts on a regular basis.

 2. Keep Track of Buying Behavior – Skok says that outbound marketing annoys your customers and is increasingly not working. Today, buyers use Google search, reviews, free trials, blogs and other content sources to learn about the offerings they need. The key point Skok makes resonates with start-ups in particular—you need “inbound marketing thought processes.”

 I see so much content “thrown at the wall until something sticks” by start-up companies. They “know” they need to be certain places online but they don’t pay thoughtful attention to what they want out there; who needs to be saying it (I love customer testimonials as a buyer and as a business); and where they need to be (to build a social following) basically, how to “educate and entertain.”  Spend a lot of time on this part. It’s worth it.

 3. Be a “New World” Business – The older business model had us charging for everything, even demos. Demos and trials are still widely used. But to move into the “new world” of innovative business models, you have to figure out how to simply give it away. For free. And only monetize a fraction of your customer base to make money.

Granted, your customer base has to be pretty big for most of us to afford the mortgage, the car, and our kids’ tuition with this model. But if you are watching your CAC carefully; writing and posting targeted content in accordance with how your buyers really behave (and not how you wish they would); and figuring out how to give it away while monetizing enough to feed your family and please your investors—Skok says you can get there.

Use the Center for Business Modeling SWOT tool to figure out your strengths, weaknesses, opportunities and threats in these three areas. And then get to work disrupting your market.

How to Find Your Total Addressable Market

Businesses love talking about total addressable market because it’s exciting for them to see the available opportunity for their product or service. So exciting, in fact, that they often clammer to craft specific campaigns or shift messaging around new potential markets. However, if this is done hastily or without thorough research, it can turn into a waste of time and resources.

Determine Your Ideal Customer Profile

To find your total addressable market, you first need to determine your ideal customer profile, then find look-a-likes that accurately fit the mold.

Determining which data are relevant to your total addressable market is a challenge. With so much data available on both current and prospective customers, it’s hard to distinguish the signal from the noise.

The traditional way of figuring out significant information was to look at the accessible firmographic data. Firmographic data includes basic information such as industry, location, size, and revenue. While this is useful to include in your analysis, this type of data is only the tip of the iceberg. Additional business signals that are harder to obtain, such as web savvy or social presence, may actually be better predictors of success.

Let’s pretend for a moment that you are a point of sale (POS) system looking to sell your product. Perhaps you target restaurants, because they fit your ideal customer profile. You may have performed well with them in the past, so you continue searching for other look-a-likes in the same industry. But what happens when you throw a new industry in for comparison?

addressable market

On the surface, with solely the firmographic data taken into account, the mechanic appears to have a lower success rate than the restaurants. This is where most marketers end their targeting exercise and launch campaigns targeted solely at restaurants. But look at how the success rates change when you add additional business signals:

addressable market

With the additional signals taken into account, the business in a new and unexpected industry has a significantly higher likelihood of success than a formerly considered look-a-like.

This example reveals that before you deeming a category unfit, make sure you are looking at the best possible predictors of success. This advanced segmentation uncovered a more effective go to market strategy than the original idea to sell to restaurants.

In this case, social media presence was more indicative of success than industry. 

The restaurant segment performed well because restaurants are more likely to be socially savvy than other small business industries. This new perspective with additional business signals revealed almost as high of a success with mechanics that were on Facebook as with restaurants on Facebook.

Discover the Size of the Market Opportunity

Once an ideal customer profile is solidified, the next step is to figure out how large the market opportunity is that fits the description.

Understanding your total addressable market will help you answer 4 key questions:

  • How long will my sales pipeline remain satisfied?
  • What is the real size of the market?
  • How many prospects can I expect?
  • What is the potential revenue for a particular quarter or year?

You can think of your total addressable market as the sum of your ideal buyer profile look-a-likes.

Let’s look at two scenarios to help understand how valuable it is to understand total addressable market for a product or service.

In this first scenario below, you have a segment that has a very high success rate compared to your typical conversion rate. Here is a highly targeted segment with an impressive success rate of 85.7%:
addressable marketsegmentation

It is clear that this segment will perform well. However, the addressable market opportunity – as shown in the number of new and open records – is small. This segment should still be used, but it will soon need expansion to provide a full sales pipeline and fuel sufficient business growth.

Below is another scenario for comparison with one signal removed to widen the net of potential businesses.

segmentationsegmentation

In the second scenario, you have a segment that converts at a lower success rate, but with a much larger market opportunity available to target – as shown in the number of new and open records. Even though the success rate is lower in this scenario, it still has a high success rate at 67.7% – and is well worth targeting. The sheer volume of the potential in the new and open records make up for the slightly lower success rate.

The results from the second scenario are more helpful in determining the size and scope of the total addressable market because it is scalable. Continue this analysis process with additional high performing segments that have ample market opportunity to effectively visualize your total addressable market.

Conclusion

Estimating the size of your market used to be a struggle that involved informed guesswork and complex calculations. Now, there are tools available to businesses that automate the total addressable market discovery and execution process. Taking advantage of these tools gives marketing and sales teams confidence that they are focusing on the right market segments and opportunities. Marketing organizations in particular need to be more strategic in their analysis because their efforts span a large scale that requires significant resources. Gaining a realistic understanding of your ideal customer profile and your total addressable market will help your entire organization become more targeted and effective.

The images in this post are of the Radius product. If you would like to learn more about Radius, click here.

To view the original post, click here.

strategic-business-plan

Strategic Planning Basics – Part 2

Strategic Business Planning

By failing to prepare, you are preparing to fail.

Benjamin Franklin

Let’s plan! Planning is an art and science so you need to convert your ideas into an actionable plan.

The conceptual planning or the art of planning is where experience and knowledge of your environment are combined to develop solutions, objectives and assumptions. Understanding the competitive environment, the capabilities of your team and maintaining relationships with customers and partners will help you plan to achieve your goals.

The science of planning involves using measurements and analysis. How long does it take to build your product? How long does shipping take? What are your organization’s procedures and policies? This data will provide you with limitations and help you build your schedule based on measured performance.

I will focus on a blend of conceptual and detailed planning. The following are my steps for strategic planning:

  • Define your goals

    This is the first and the most important step. What are you trying to accomplish? What is your company’s goal? Clearly define your goals. If your goal has been assigned to you or to your department, ensure that you completely understand the goal.

  • Analyze the environment

    What will it take to accomplish your goals? What are your barriers to success–both internal and external to your organization? Who are the stakeholders? Who will you collaborate with? Determine the interdependencies that you will rely on to accomplish the goal.What resources might be required? Have you done a SWOT analysis? If so, how will you react to threats and opportunities? Maximize your strengths and minimize your weaknesses? Finally, uncover all of the assumptions about your environment that your planning is based on and make sure they’re valid.

  • Develop objectives

    What are your long-term objectives? What are your short-term objectives? Do you have milestones? Deliverables? What resources are required? As you develop your objectives, create small executable steps, so progress can be easily measured and those executing the objectives are not overwhelmed by the enormity of the task.

  • Create road maps, general strategies

    This is where the plan comes together; here we create the map or schedule to be followed.How do we accomplish our objectives? Who accomplishes them? When will they be complete? What are the risks associated with the schedule? Explain the strategy here.

  • Execute the plan

    Finally, time to execute! You’ve gone through all of that effort to create the plan– now use it. The planning process should have prepared you and your team to meet your goals.

  • Review, fix the plan if broken

    What worked in the plan? What objectives were not met? Planning is both a continuous and a cyclical activity of the operations process. Regular reviews of your plan should be established and assessments of the plan accomplished.

During the planning process, be careful not to forecast events too far into the future. Too much detail or using too formal of a planning method will delay the plan and complicate the process—and itwon’t improve the end results since planning can never exactly predict future results. The most important aspect about the planning process is what you learn about yourself while you’re planning. Planning helps anticipate future action and will help you adapt to changes.

Strategic Planning Basics – Part 1

Strategic Business Planning

A goal without a plan is just a wish.

Antoine de Saint-Exupery
How do I achieve my goals? Where will we be in a year? If my sales goal is two million dollars, how do I reach that number? How do I allocate resources? Planning is the answer.

As a consultant, I have visited struggling organizations only to find that they struggled because they had no direction and absolutely no plan. I have seen other organizations that have forgotten the basics of a plan. A goal and a plan to achieve the goal are a must!

I also spent some time in the military where developing a plan for an operation might take weeks or months. Despite all of this planning, “No battle plan survives contact with the enemy,” as Prussian Army Field Marshal Helmuth von Moltkof said in the 1800s. The plan changes with the first contact with the enemy because the plan is based upon assumptions and expectations on how the enemy will react to the action. Planning is about the journey not necessarily the battle. The planning journey prepares the army, by allowing the army to anticipate hurdles, allocate resources and reduce risk.

Most for-profit organizations do not have months or weeks to devote to planning, especially if the plan only survives the first contact with the “customers.” That’s okay but the planning process is essential because it allows you to determine obstacles you will encounter; pinpoint the help you’ll need from other departments; set a timeline; and, most importantly, define the goal. A plan should not be blindly followed nor should it be put on a shelf when complete: Planning is a continuous process, so the plan should be altered and updated based on feedback and assessments.

The US Army Field Manual 5.0 defines planning as follows:

Planning is the art and science of understanding a situation, envisioning a desired future and laying out effective ways of bringing that future about. Planning is both conceptual and detailed. Conceptual planning includes developing an understanding of the operational environment, framing the problem, defining a desired end state, and developing an operational approach to achieve the desired end state. In contrast, detailed planning translates the broad concept into a complete and practical plan. Detailed planning generally corresponds to the science of operations and detailed planning works out the scheduling, coordination or technical issues involved with moving, sustaining, administering, and directing forces.

The military planning process is scalable, from the soldier in the field using his or her planning skills all the way up to headquarters and its large planning department. At your business, someone should be responsible for championing the plan and senior leadership should support the planning process. To develop the plan, time will need to be set aside for the plan.

Remember the fundamentals of a plan:

  • Define a goal
  • Planning is a continuous process
  • Plans are time-sensitive
  • Keep plans simple
  • Keep them flexible
  • Be bold!