Monday, January 12, 2009

Grow the business.

Within a year of its founding in 1982, Compaq Computer posted revenues of $111 million. In 1995, six years after its founding, Telegroup Inc., (now part of Primus) posted revenues of $129 million - nowhere near Compaq’s record, but in many ways a more spectacular performance. While Compaq's growth was executed by a start-up team of seasoned executives who followed a detailed plan and spent a lot of investment capital in the process, Telegroup's growth wasn't planned at all. "My intention was to do this business to support my family while I decided what to do with the rest of my life," according to Telegroup’s founder, Fred Gratzon. Besides starting without any sort of plan, Gratzon was also dead broke at the time. Gratzon was an accidental entrepreneur. Down and out after losing his job, he parlayed a way to make a toll call on the cheap into one of the largest long-distance telephone companies in the world. But it might never have existed if Gratzon hadn't tapped into package deals offered by AT&T as a way of reducing his own telephone bills.

Iomega hasn’t produced a significant hit since it introduced the Zip Drive in 1995. This is usually the kiss of death for a technology company - things just move too fast for hot products to stay hot for very long. In 1995, hard discs rarely stored as much as one gigabyte of data. Today, a typical $100 hard drive can store several terrabytes. People no longer pass data on large products back and forth either - they just send the data by email. The Zip has devolved into a solution to a problem that no longer exists.

Despite its fame as an innovator, 3M hasn’t come up with another Post-it. Most unique selling points prove to be anything but, as they’re rapidly imitated by competitors. In a fast moving world, even blockbuster products have less and less time to reap the rewards. By regularly introducing new products, you give the consumer a reason to buy. You need to convince them that, “If the product you currently have is more than two years old, you’re really missing something.”

Be the first to create new products that put your existing products out of business. Develop new products fast, get to market first, that’s how you win. A McKinsey study showed that products that got to market on time and 50% over budget eventually earned only 4% less than those that were on time and on budget. Products that got to market six months late and on budget earned 33% less than those that were on time and on budget. A Stanford University study of 78 product development projects in 36 companies in Asia, Europe, and the United States, found that in negotiating a highly uncertain path through shifting markets and technologies, the key is to build on intuition and to include flexible options.

A fast product development cycle:
- Allows a company to reinforce its new brand positioning more frequently.
- Ensures the company is first to deliver new products and features through more rapid innovation.
- Reduces the impact when competitors copy the company’s innovations.
- Integrates consumer feedback into the product more frequently.
- Improves reaction time to competitive actions.
- Supports competitive advantage and price premiums.

If success arrives too big or too early, then you've got to have the passion and commitment to go beyond success - to build a durable, lasting enterprise. The best entrepreneurs don't focus on success; instead, they focus on building a company that can be a leader in the global economy. They know success will follow. If you focus on success, you won't get there. If you focus on contribution and customer value, then you can win.

To many entrepreneurs, the greatest satisfaction, owning a business, which often includes working closely with customers and employees, inevitably diminishes as the business grows and the owner’s role changes. Jack Ferner, a former dean at Wake Forest University says, “Many entrepreneurs would rather limit their company’s growth than give up those satisfactions. My experience has been that for every one who has dreams of grandeur and size and billions of dollars, there are probably five that prefer to remain small.” The other perspective is pointed out by John Thorne from Carnegie Mellon University: “I think there’s an argument in many industries that if you don’t grow, you can’t hold on to good people, you’re not going to stay in touch with the technology or the marketing trends, and you sort of slowly die.”

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