Beth Plutchak Consulting LLC

We want great business results but where and how do we start?

The Nielsen Wire has a great blogpost on launching a new product. Their 12 steps to consumer adoption is  based on actual data collected from tracking 600 product launches. Following these steps increases the probability of a successful product launch to 75%. Step One is to develop a distinct proposition that offers true innovation.

Adapting These Steps to non-Consumer Businesses

I talked about Entrepreneurial Focus in an earlier post. My mantra is that Entrepreneurs Focus on Results. The ultimate result is the success of your business, the sale of your product or service. It can be difficult to define the product when the product is not a thing. When I began my consulting business I really missed the bi-weekly paycheck and was willing to take any consulting job that came along. After capturing the low-hanging fruit of working with people who knew my style and my expertise I found it difficult to leverage my experience into consulting jobs in the wider market. I quickly found myself competing on price. Luckily years of sales training kicked in. I knew that leading with price is the response if you are not really sure that you have value to offer. To increase sales and protect my price I needed to lead with value.

Develop a Value Proposition

To get to results focus on step one. Develop a distinct proposition and offer true innovation. A new product must occupy an innovative niche. It must be a product or service that the buyer needs. Service businesses in particular need to understand who their potential customers are and what value they provide those customers. What is unique about the offering? And it can’t be quality, customer service, or timeliness. These are minimum expections that clients have when they pay for a service provider.

My unique value proposition is that I use my cross-industry experience to help companies protect their margins and increase their sales. All of my services are designed to meet this value proposition. It took a great deal of focused work to come up with a value proposition and services that satisfy the distinct proposition of step one above. It meant taking a hard focused look at my unique strengths, talents and business experience. The idea is never enough. It’s all about execution. Execution demands focus.

Which step is your company on? What kind of focus did you need to get there?

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Sometimes it seems like a vicious cycle, we need job growth to increase consumer spending, to convince companies that growth will pay off, so they will add jobs, which will increase consumer spending, to….

Andy Grove the founder of Intel wrote an interesting piece for the Seattle Times recently, We Must Rebuild Structure to Create U. S. Jobs. You might think an icon of the high-tech industry would not be overly concerned about manufacturing off-shoring, but in the end it’s all about the stuff. Intel is a manufacturing company. Common wisdom says that the way to rebuild the U. S. Economic Engine is to promote high-tech start-ups. Many Economic Development Organizations focus on these efforts. The ubiquitous Business Plan Contest is one example. Trying to improve the market of start-up funding is another. This approach overlooks a number of issues.

Grove identifies them as scaling and innovation. His definition of scaling falls directly into work being done by the Edward Lowe Foundation at YourEconomy.org. They have been looking at company growth and job creation from a net perspective by region and have made some interesting findings across regions. It holds pretty true across regions that net growth in establishments and in jobs happens after companies reach a certain size and a certain longevity, which may vary by region. These are the companies that Grove identifies as companies that are scaling, going from prototype to mass production. The concept of scaling applies across industries, not just manufacturing companies. These are also the companies that are least likely to receive help from EDOs who focus on encouraging start-ups or retention and recruitment of large, mature companies. I’ve talked a great deal about innovation in some of my other posts.

When I am out calling on these high growth, second stage or mid-tier companies, I hear one major concern. They need to find more customers. The strategies vary. These are some of the things that these companies are involved in doing.

• Competitor research to identify competitor strengths and weaknesses and create competitive advantages
• Local trend analysis to discover where the potential growth is in their trade area. Surprisingly, this can often be counter the national trends
• GIS mapping to identify like customers outside their traditional trade area

These are the activities that I would like to see EDOs support. The cost of tools and data has come within reach of smaller companies within the last ten years, but they are still difficult for a company with sales under $10 million to access and interpret on their own.

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Graph of the Week

Mark Thoma at Economist’s View has an interesting post on where we are in the recovery and the impact of a jobless recovery on economic growth.  We seem to be caught in a spiral where consumers aren’t spending, so companies aren’t adding workers, so workers have no money to spend. Although there is more variation by region than the national data reflects, it seems pretty clear that we need to solve the jobs problem as Job One, so to speak.

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Part Two in an Ongoing Series on Entrepreneurship

Focus is the Key

I love the big idea. I love analyzing companies to see what makes them tick. You can tell a lot about a company by a simple drive-by. Location choice is very informative. They may be located in a cluster of like businesses. They may have made that choice because they are in an industry that benefits from clusters or they may be there because of local zoning rules. General area demographics and transportation patterns say a lot about both overhead costs and access to markets and suppliers. This is my passion. I’d do this for fun. I do do this for fun. Take a road trip with me someday. I love to take the long way through the industrial park and do snapshot analyses of companies that I might never do business with.

It makes sense to take my skills, my training and my passion and form my own business. And then comes the day to day. Now I have to get out there and start telling my story – over and over and over again, and pretty soon OMG I’m starting to bore me. I am not a detail person. So, what can I do as a sole proprietor to improve my implementation? Remember, ideas are easy it’s implementation that’s hard.

The 99 Percent

1. I recently ran across a company that specializes in helping entrepreneurs make this breakthrough. Scott Belsky the Founder of Bëhance and The 99 Percent took to heart the Thomas Edison quote “Genius is 1% inspiration and 99% perspiration” and built his company on helping entrepreneurs get a handle on the 99% part of this equation. I’ve been having a good time working my way through all of the free tips and videos available on the site, but there is one in particular I want to share with you.  
   

Building the Team You Need

Another thing that helps me to focus on both results and my personal strengths is to build the right collaborations. One of my partners Sue Gleason, uses Myers-Briggs® analysis and other tools to help companies form teams that use the strengths of differing personality types. A break-down Kiersey Sorter personality types is the following, which is provided by Dr. David M. Kiersey:

The Four Temperaments

• As Concrete Cooperators, Guardians speak mostly of their duties and responsibilities, of what they can keep an eye on and take good care of, and they’re careful to obey the laws, follow the rules, and respect the rights of others.
• As Abstract Cooperators, Idealists speak mostly of what they hope for and imagine might be possible for people, and they want to act in good conscience, always trying to reach their goals without compromising their personal code of ethics.
• As Concrete Utilitarians, Artisans speak mostly about what they see right in front of them, about what they can get their hands on, and they will do whatever works, whatever gives them a quick, effective payoff, even if they have to bend the rules.
• As Abstract Utilitarians, Rationals speak mostly of what new problems intrigue them and what new solutions they envision, and always pragmatic, they act as efficiently as possible to achieve their objectives, ignoring arbitrary rules and conventions if need be.

I am a rational and need to surround myself with collaborators who have the characteristics that I don’t have. That way I can concentrate on building on my strengths and let my collaborative partners bring their strengths to the table.

I have also been using some of the time management tips available at The 99 Percent, to break my tasks into small parts and stick with them. It is hard not to be distracted by the shiny and to accept small changes as a way to the big changes I see ahead.

What strategies do you use to keep yourself from being distracted and moving to your goal?

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Attitude Toward Risk

For years I’ve heard that Wisconsin has a lower level of entrepreneurship than other states because Wisconsinites are more risk averse. While it may be true that we prefer to keep things cozy and familiar, I’m afraid that analysis only measures first year start-ups against start-ups in other states, and does not measure net business creation (businesses that opened minus businesses that closed) or long-term growth. When you look at net business creation and longevity Wisconsin does not fare nearly as badly.

From the outside it may look like a full time job is more secure than investing your time and assets in a venture that you may control but where the paycheck is uncertain. However these days, it seems no one’s paycheck is secure. In a knowledge economy it may make more sense to take what I know and profit from it myself. But, how do I know I will be around after that fateful first five years in which most new businesses fail?

I’ve come across some information recently that helps me answer that question, both for myself and for my customers. Successful entrepreneurs may not be any less risk averse than the rest of the population, after all. They may simply be better at measuring risk. We all take measured risks every day. We get into our cars and go to work or take the kids to school. We know that people die in car accidents every day, but we determine that our chance of reaching our destination is acceptably high. Entrepreneurship requires the ability to look at both the upside and the downside of business risk and measure the likelihood of getting where you want to go, so to speak.

Attitude Toward Failure and Business Plans

But, how do Entrepreneurs get the information they need to make this determination? One thing that entrepreneurs are better at than non-entrepreneurs is the ability to view failure as a learning experience. Failure is not the end result of an experiment in business, but rather a stepping stone that helps you avoid making the same mistakes in the future.

Another thing that successful Entrepreneurs excel at is planning. According to Scott Shane author of The Illusions of Entrepreneurship and researcher at the Kaufmann Foundation data shows that chances of success are greater if you write a business plan, yet few entrepreneurs do. In a New York Times article Shane speculates about the reasons that more people don’t start with a business plan.

Measured Risk and Information 

I’d like to add an additional reason – they really don’t have access to useful information. Ten years ago I had two customers come into the bank in the same week. Both of them wanted to borrow money to open a new retail business. Both of them had extensive work experience in the type of business they wanted to open. One wanted to open a restaurant and the other a retail store. I asked for a business plan from both of them and both of them got it done, because the bank made them.  

The prospective restaurateur built his projections based on his knowledge of restaurant turns and restaurant finances. He knew how many meals he would need to serve and how quickly based on the square footage of the location he had in mind. He could make the numbers work on paper, but he really had no idea if there were enough customers that would choose to eat there and generate the turns he needed. All he could do was assure me he would get the word out and get the customers to come.

The retailer was opening a franchise store. Her franchisor supplied her with demographic and traffic pattern data. She chose the location of her store based on comparative demographic data. She also had worked long enough in the business to know how many sales per square foot she would need in any period of time to be successful and she had comparative data to support that she could get those customers in the door.

We never made a start-up loan to the first customer. At the end of the first year in business when the second customer’s note came up for renewal her projections differed from her actual financials by all of a dollar.

I would argue that appetite for risk is not a key characteristic for an entrepreneur, but access to information that helps to measure risk is. What do you think?

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It’s not just product.

I was a geek before there was a word for geeks. I got my high school letter in forensics, not the cool kind of forensics made popular by the CSI TV shows, but the kind that trained you for public speaking. I was president of the Latin Club. While other girls were trying out for the cheerleading squad I was translating the love letters of Abelard and Heloise. The odd girl with glasses. That was me. In the summer of 1962 I took a trip to the Museum of Science and Industry in Chicago and was mesmerized (does anybody but geeks even say mesmerized? just wondering) by the AT&T exhibit of the future phone where you could actually see the speaker on the other end. I was in love with computers when they were all as big as houses, although I never did get the hang of punch cards. I was a geek.

One of my early jobs in banking was to take part in a feasibility study for a regional bank that determined what kind of desktop computers to put in front of the loan documentation clerks. Up until then loan docs were produced on typewriters and there was one desktop computer for the whole department. We came up with two recommendations – IBM or NCR. These were the workhorses of business computing. The banking industry was heavily reliant on IBM mainframe processors and NCR provided the machines that read bank processed payment and credit card slips. We would never have considered a MacIntosh.

Although Apple is certainly innovative in product design, it’s real brilliance was that it sold cool to geeks. The geeks who bought Apple products were tech savvy, they were early adopters, they were in the know. The geeks bought ipods first and the cool kids followed them. Brilliant. The much promoted (by Apple) rivalry between Apple and PCs is built on an emotional appeal. What you pay a premium for when you buy Apple is the cool. Rebels, creative types, risk takers are the early adopters. What a way to protect a margin.

When I am out talking to companies and ask them “What do you do that is unique?” I often hear about customer service and quality. These are the attributes that customers expect at a minimum. I want companies to think about the things that they do that really differentiate them. Sometimes it can be hard to verbalize those things because they are so endemic to the owner’s vision and the company culture. Take a minute to think about it. What do you do that is unique to your business?

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Economic Gardening Key Concepts

Innovation is one of the key concepts behind the technical assistance associated with Economic Gardening Programs. Here’s a neat little picture to explain why innovation is so important to small businesses.  

Let’s look at Volume Versus Price one quadrant at a time

• High Volume High Prices – Wouldn’t we all just love to be here? Nobody stays here long because every competitor goes here and drives prices down.
• Low Prices Low Volume – No one can survive here for long.
• High Volume Low Prices – Small businesses can’t survive here for long, either. At some point their prices will be undercut by someone who is better capitalized and can take losses as they convert sales.
• Lower Volume with Higher Prices is the only quadrant that offers long-term stability to small business.

Conventional wisdom is that companies need to cut prices when their competitors do to maintain their sales. The more difficult strategy is to add value that you can charge a premium for.

My local grocery store did an expansion a couple of years ago, when the Super Walmart opened down the highway in Baraboo. Instead of dropping grocery prices they expanded their specialty selections and carried more higher margin items. The area is known for meats and cheeses. They carry a number of local specialty cheeses which have been branded as Opahle’s. They’ve expanded their authentic Mexican foods (we have a growing Mexican population) and their organic foods. They offer items in sizes that appeal to empty nesters that make up a large portion of their demographic, and best of all if there is something they carry you want more of or something you wish they would carry, they will get it in for you. Corporate chain stores just can’t do that.

What does your company do that differentiates you from your competition? Are you able to get the demographic information you need to make these kinds of business decisions?

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My alma mater has a nice interview with me up on their blog.

Meet: Beth Plutchak, ’84

Beth Plutchak

Ever since coming across the idea of “opportunity cost” in one of my introductory economics classes I have been obsessed with looking at the opportunity cost of whatever choice I have made (my Dad simply called this second-guessing yourself). Anyway, early in my banking career, when I was doing loan documentation, there was a lot of downtime between projects. This was at the beginning of the EU while they were still discussing the technicalities surrounding moving to the Euro. I came up with what I thought would have been a great research project if I had gone on to get a Phd in economics.

If you remember, one of Jane Jacobs’ theories surrounded the importance of currency as a feedback mechanism essential to allow cities/regions to become net exporters rather than net importers. The idea was to compare the economic vitality of the Eurozone countries that adopted the Euro and to see if not having local currencies did have a dampening effect on the national economies. The later break-up of the Soviet Union offered the opposing data-set:  nations that were using one currency, now using separate currencies.

I never did a detailed study, but for many years I have been using the apparent success of the Eurozone, compared to the former Soviet nations to assert that Jane Jacobs’ was wrong regarding currency as a feedback mechanism. My husband called me yesterday from a business trip, to tell me Jane Jacobs has been proven right. The debt status of Spain, Portugal and Greece have been downgraded and the Euro is in trouble. Probably, has more to do with the international economic situation, though – just saying.

A direct feedback mechanism that tells us precisely when economic policies or economic development programs are successful would be a fine thing. I’ve been fascinated by Jane Jacobs because of her reliance on her own observations without being tainted in the canon of classical economics. I was never exposed to her in an economics class, of course. I first became aware of her in a biology class I had to take to meet my breadth requirements. Unfortunately, something as useful and simple as direct feedback doesn’t exist. Some of the analysis coming out of the new study of Complexity Economics may give us some useful tools, however.

I’ve recently been following a number of online conversations on what makes a growth-oriented entrepreneur different. The consensus seems to be that the serial entrepreneur who rapidly grows one business after another just is a different kind of an animal. S/he appears to have a drive that is difficult to consciously duplicate. In my mind, s/he also has a way of seeing the world in terms of connections. In quantum physics it is more and more understood that it is not aggregations of the smallest bits of matter that count, it is how they interact.  It’s not the things themselves that matter, it is the relationships between the things. Growth-oriented entrepreneurs are relational thinkers.

I recently attended a presentation by Brian Wiegand cofounder of Alice.com. This is his fourth internet business. The other three were successfully sold and are still operating in one form or another. His new business identifies a market failure in the delivery of certain commodity priced, consumer staples. He identified an opportunity in that many of the brand name items were being forced off store shelves by store brands. He looked at the reasons online groceries continue to fail and came up with a different model to monetize his idea. He used a combination of “long-tail” theory and conventional business model theory to figure out where the weaknesses were in existing models. What he didn’t do was decide to go into the online grocery store business and begin his research with the end model in mind.

Although the site may look like a typical online shopping site the business model is quite different. One of the things that stood out for me in listening to him was that he thought in the big picture arena of how the particular goods that he was interested in are produced, distributed, and delivered to consumers. What he did not do was focus on the specifics of the current models surrounding brick and mortar and online shopping. It was this big picture thinking that allowed him to identify the market clearance failure he hopes to exploit.

I don’t know whether you can train yourself to think that way or not. I tend to think on the macro level and it is the macro questions that fascinate me. Here are a couple of examples of big picture ways to think about some familiar businesses. I hang out with a lot of people in the publishing industry. Writers in particular seem to believe that a “knowledge-based” economy will be an economy that is post-the production of stuff. However, the biggest example of a successful knowledge based business is Wal-Mart. They were early adopters of specialized supply chain and point-of-sale software, which is one  the main things that led to their success. Amazon is not just a company with an internet front-end; they warehouse and distribute books and other goods.

 There are steps common across industries that get goods from production to consumers. Producers-> Processors        ->Distributors->Sales Outlets. Some of these four might be collapsed, but this chain follows across industry. Examples – the pork industry – Producers (hog farmers)-> Processors/Distributors (meat processing plants) -> Sales Outlets (grocery store).  The publishing industry  -> Producers (writers) -> Processors (publishing houses) -> Distributors (book distributors) -> Sales Outlets (book stores).  In the recent past pork processors have created shortages and controlled the prices farmers are paid and grocery stores can charge by exercising the advantage of their position in this chain. Amazon’s biggest success has been in collapsing distribution and the sales outlet to the consumer and controlling both. What market clearance failures and opportunities can be identified by taking the big picture view of your industry?