The Road to Entrepreneurship...

If I was to ask you - what is your product, what would you say? Would you tell me about the product or service that your business provides? I would say that my product is my business itself. I would also say that the customers for my product are not the consumers who buy the services or product that my business provides rather they are the other businesses out there that I could sell my business to. This is one of the main reasons why I am so passionate about entrepreneurship and business development. The thought of creating a business that I can sell is so exciting to me.

This approach to entrepreneurship does assume that the business is innovative, efficient, and competes in a lucrative industry. Knowing this, the focus on the business then will be to adopt a Business Format Franchise model that Michael Gerber describes in his book - The E-Myth. This model focuses the entrepreneur to think of building a business as a franchise with the goal of attracting franchisees (your customers) who would want to buy into your business or better yet, buy it from you.

In my previous post - So what if others know about your idea? - I mentioned that part of the reason why we are sometimes afraid to share our ideas is because we think that bigger corporations would steal them. However, one thing I didn’t mention in the post is that there is a tendency for large corporations to buy promising businesses rather than copy the idea and implement it themselves. Just last week, Crain’s Chicago Business reported that IBM bought Chicago-based health care technology firm Initiate Systems. Initiate Systems had successfully implemented solutions for electronic medical records. IBM in an apparent move to serve this lucrative health care technology industry decided to buy rather than build their own solution.

Treating your business as your product can take you a step towards creating a great business that hopefully you can exit from - just like the folks over at Initiate Systems - with enough money and satisfaction to start another one. That is my goal at least!

Last night, I was part of an interesting discussion. A discussion based on innovation within any industry. Clayton Christensen in his book - The Innovator’s Dilemma - introduces two scenarios that can happen when it comes to innovation - innovation through sustaining technologies and innovation through disruptive technologies.

Sustaining Technologies

Innovations through sustaining technologies are innovations that “foster improved product performance.” Such innovations are generally more common since they easier to get funded. There is generally available data to support ideas and the transition to the consumer is generally easier. Consumers are already familiar with the product or service, so they *will* welcome your innovation right off the start. Look at the Apple iPhone - the smartphone industry had been a mature market before the summer of 2007 (The release date of the iPhone). Nokia and Research In Motion (RIM) were on top of the smartphone market with their N-Series and Blackberry smartphones. These smartphones could do email, mobile browsing, and messaging quite well. However, with the launch of the iPhone this industry was shaken up. The iPhone brought along dramatic improvement to performance, and ease of use of smartphones into the market. Since then, Apple has able to steal a significant market-share from the RIM and Nokia and also revive the smartphone industry.

Disruptive Technologies

Innovation by disruptive technologies on the other hand rarely do emerge, but when they do, “they bring to the market, a very different value proposition than that that had been previously available.” Such technological innovations are termed disruptive because upon maturation, they can change the industry. New customer segments emerge, and the current industry leaders lose their reign. Start-ups or mature companies with the start-up fight usually bring about such innovation. A well-documented example of innovation driven by disruptive technology is that of online music sales and distribution. Apple introduced the iTunes music store in early 2001. This store allowed consumers to purchase single songs digitally and play them on their iPod. This was disruptive because until then, the giant record stores like FYE, and Sam Goody sold CDs and consumers did not have the option to buy single songs off album. The maturation of iTunes and other online music stores such as Rhapsody changed the way the music industry distributed music to consumers. As a result, the record stores saw their profits reduced to the point that it took some of them out of business.

So given these two scenarios - which would you go after when thinking of ways to innovatively solve problems in your industry? Are you going to continue improve existing technology to provide more value to customers or introduce a whole new technology that will change the way your industry operates? Either way, I do not think you can go wrong. The fact of the matter is that you are still innovating!

If you have been involved in any kind of business, you should then be familiar with the business planning process. Part of this planning involves understanding the industry that your business is going to be part of. This includes knowing:

• how the US Federal government and other reporting agencies define the industry.
• what stage the industry is in as well as the yearly financials of such an industry.
• who the big players are and even what other variations of this industry are out there.

Fortunately, the US Federal government (specifically, the Office of Management and Budgeting) has jointly developed a coding system with Canada and Mexico that classifies all businesses in North America into standard industries. It is called the North American Industry Classification System (NAICS).

NAICS is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.

The NAICS replaced the older Standard Industrial Classification (SIC) system that contained industry classification for US businesses only and therefore covered a lot less industries.

There are a lot of services out on the web that allow you to search for a NAICS code however I prefer to use the search that is available at the US Census Bureau website. Enter in the keyword(s) of the main activity that your business will perform, say landscaping and this will return that the NAICS code for such an industry - 561730 (Landscaping Services). The reason I like using the US Census Bureau search (besides the fact that it contains official data) is that for each NAICS code that it returns, it also gives a clear description of the industry along with all the other related industries.

Armed with your industry code, you can use it to search through publications, articles, and business directories at your local library or online business databases like BizMiner or Standard & Poor’s NetAdvantage.

I was reading the article - Maneuver Warfare: Can Modern Military Strategy Lead You to Victory by Eric K. Clemons and Jason A. Santamaria - and even though I thought it was an interesting article that was written to show different strategic moves that companies can make, the thought of comparing business competition within an industry to war does not quite sit right with me. In fact, I think that it is very pretentious of us in the business community to make such a comparison. War is something very negative where REAL people kill and get killed, REAL resources destroyed, and overall is just a dark time for any party that is involved.

So I will pose this question to you - is business really like warfare, is it ok to think of a competitor as the enemy and the industry as the battlefield?  This is where I insert my disclaimer - as an entrepreneur I understand the need to build, and grow successful businesses so I am not advocating that competition is not necessary in business. In fact as you will see in my other blog posts, I am all about competition.