How valuable is engineered serendipity to your business? On my way back from a meeting in the Watershed I thought I’d stick my head into UWE’s new business incubator facility in Bush House. Only opened just before Christmas they already have a good selection of tenants including the usual scattering of graduate start-ups (such as Carolyn Newton from Whale Bags, a business plan competition winner).
I also bumped into Chris, Dave, and Toby from Evans & Finch. I’d spoke to Dave & Chris last year at OpenCoffee before they’d settled so it’s great to see them finding their feet so quickly. For one thing the holding page they had back in November is now funky showcase of their work.
Chris, Toby and I threw a couple ideas around for some funding they’re thinking about applying for. They had a very strong feature set (not unusual for a software / tech company) and a pretty compelling description of the benefits, which is nice to see. The challenge we were kicking around was how to bring that to bare upon the funding call.
We took a step back from the application itself and looked at the funders as clients. This lead to some great new directions for the proposal. We’ll find out how they get on in a couple of weeks.
So how does that help jbsh? Well in the short term it doesn’t. It does build the relationship with Chris, Dave & Toby (especially if they land the funding 🙂 ) which may lead to some consultancy in the future. More likely, they’ll bump into someone that needs some business planning support and think of me.
Serendipity works like that, so long as the opportunity cost doesn’t outweigh the benefit its always a good investment.
I was in town, I could have gone straight home and sorted a couple emails or helped Chris & Dave and lay the opportunity. I think helping out Chris & Dave was a better use of my time and the emails will get answered in due course.
In my last post I talked about business process modeling and how it could help understand the activities in a business prior to cost cutting for survival. In this post I’m going to riff on the concept of delighting your customers so they come back.
The hygiene factor in delighting your customers is not pissing them off in the first place. How easy is to buy your product & service? Does your product & service do what your customers want (when was the last time you asked)? How you handle complaints / faults / genuine cock-ups?
The easy sell
It may sound obvious but there’s a good reason why Amazon went to all that hassle over their ‘One Click‘ purchasing system. If folks give up half-way through a transaction not only have you lost a sale, you’ve now got a dissatisfied individual that will quite happily tell everyone how poor your service is.
Some companies actually make it fun to buy their products. Moo have this absolutely nailed. Not only do they get you to do a lot of the (perceived) hard work in designing your business/greeting card/post card/etc, but its a fun and engaging process. Innocent Drinks have a delightful approach to their products that makes choosing which smoothie to buy more fun than just a straight choice between ingredients lists.
Even if you’re in the B2B market, a human somewhere will make the decision to buy your product & service so at least make it a painless decision. Think about their pain points; at this stage in the econoclapse no one wants to sign off a large order over 3 years, perhaps you can get a rolling contract with stage payments. That’ll help both your cash flow positions. Know what the sign-off limit is for your primary contact and sneak under that for each stage payment.
Does exactly what is says on the tin
The simplest form of customer feedback is your sales. If people are prepared to hand over cash then whatever you’re doing has real value to them. If you’re giving the stuff away then it’s a time investment that acts as a proxy for cash (people returning to your app/game/etc and using it over an extended time period).
Our tagline is “advancement through integrating knowledge” which is what we do, work with clients to advance their business / organisation / research through bringing together our own multidisciplinary knowledge base and integrating with the client’s knowledge base to solve whatever problem was chosen. But if that was all we did we’d be competing with every other consultancy that ‘works closely with their clients in unique partnership, blah blah blah”.
We integrate through networking and engaging in the local, regional, national and international communities we’re a part of. We share knowledge through this blog and by publishing research papers. We support the advancement of others through OpenCoffee, offering advice and reviewing journal papers, and generally trying to connect interesting people.
What low-cost but high perceived added-value can you provide to differentiate from everyone else?
Oops, mea culpa
We all make mistakes. Some are large, some small, some public some private (though you should assume everything is public these days). How we deal with these will for many define the character and long term relationship between a client and your business. With all the social media tools at our disposal, there’s no excuse for not knowing if someone’s complaining about a poor experience. Google & twitter searches with RSS feeds for your company / product names will quickly highlight opportunities to directly engage with dissatisfied people.
Carsonified recently had a promotion where they gave away some very cool journals as part of FOWA; they proved so popular they were offered for sale. There was a mix up with the orders (it happens) but rather than brush it under the carpet or get all legal, Ryan sorted it quickly, humbly and openly on Twitter.
The internet is full of people reporting poor perceived customer service and business practice, not being part of those conversations is often seen as an admission of guilt. Are you monitoring your brand online? Are you part of the conversation?
Going Above & Beyond
Delighting the customer isn’t about huge extravagant gestures (especially not in this economic climate). Mostly its about treating customers as people and offering them unexpected delights. If your basic products, services and internal processes don’t function then no amount of customer service will compensate in the long term. But in a competitive market it makes the difference between competing on price and competing on value.
With the econoclapse in full effect, most companies are cutting back, trimming the fat, stopping non-essential spend. Which is good, but what if the budget you’re about to slash is the one that’s keeping you alive?
The trouble with businesses is that once they get bigger than a couple guys with laptops in a Starbucks (and sometimes even before then) they get complex. When you have to do lots of things more than once, you tend to set a routine, because this helps save time and money and ensures consistancy.
The trouble with people is that (with a couple of exceptions, I’m not one) they can only cope with 7±2 ideas at a time. Which means lots of fudging and scribbled notes to remember for next time. Unfortunately, decisions get forgotten and when times change, who knows which of those routines are the ones that are critical and which were the nice-to-haves because someone at a masterclass suggested all well run businesses applied a 15 point check list to Quality Assurance…
Setting up automatic routines/reports/etc on Remember the Milk, or Basecamp doesn’t get away from the problem, it just automates it.
What you need is a picture of how your business works. The series of inter-linked activities that between them represent your unique business. Something that’ll allow you to hack’n’slash at your business in theory and diagrammatically before actually making a change that’ll piss of your best customer.
What you need is a business process model.
What you don’t need is a legion of McKinsey consultants. At the most profound level, process models are diagrammatic representations of the systems that make your business function. Boxes and arrows. Easy.
There are two simple things to remember with process maps (OK, there are a couple more but to get started in a blog post…); 1) the ICOM is your friend; 2) decompose where sensible.
There are lots of methods for developing business process models, I quite like IDEF0 (its what I used in my research work, it’s simple and robust, which is handy when developing models ‘on the fly’; there aren’t to many things to remember – back to the 7±2). The basic unit of the IDEF0 method is the ICOM; which stands for Inputs, Controls, Outputs & Mechanisms.
This basic unit forms the basis for modeling the business. As always there are two general approaches to generating a model, top-down or bottom-up. Bottom-up generally involves stapling yourself to an order and recording every activity that happens between the customer placing the order and the end of the cycle (either payment or receipt of goods). In larger companies this is how you find out how things actually work, rather than how the ISO9000:2000 manual says they work.
Top-down is often easier to explain how the method works. At the top level, there a 3 things that all businesses do, Manage, Operate and Support the business. You can decompose the Operate Process into Get Order, Fulfill Order, Develop New Product, and Support Product. Then start with Get Order, what does this involve? What controls how you get orders, what outputs are generated to enable you to fulfil those orders, what mechanisms do you use to make all this happen, what triggers the process in the first place?
Keep breaking these actions down until you get to the smallest unit of actionable work. When you get to ‘pour water into teacup’ you’ve gone too far! 🙂
The idea is to be able to remove, combine, move, change an activity and be confident that there are no unexpected impacts that aren’t captured by the diagram.
It doesn’t have to be a long draw-out process, you can sketch quickly with pen and paper and have a reasonably good set of diagrams after a couple hours. You also don’t need to model every..single…process in the business, just the ones you’re looking at.
Providing every box has an output, control and mechanism and that if you’ve decomposed a box the arrows that touch that box are represented in the child diagram; then you’re good to go.
Now if you cut an activity you’ll be able to see the wider impact. You can see which activities to combine and which are obsolete.
You can have a look at other businesses and see how they handle those processes, and copy them (best practice and all that). Rather than just cut’n’paste’n’hope you can figure out how processes fit together.
Plug the savings into your cash flow forecast, see what effect it has, rinse, repeat until you’ve looked at everything.
Whilst you’re plugging through the accounts, check every line against the business model; where does it fit in, which process does it relate to, does it add value or costs?
A variation of igFest‘s Moosehunt came to Bristol yesterday in the form of Vodafone’s LiveGuy, his mission (which it looks like he accepted with eagerness):
I’m travelling from the north to the south of Britain, laying down clues to my whereabouts. Your mission is to find me – and maybe even bag yourself a netbook. You’ve got two ways to win. Either Find LiveGuy in person or Find LiveGuy online.
<plug>All with the help of a very cool looking Dell Inspiron Mini 9 netbook connected to the Vodafone network and with a GPS chip giving location updates (delayed slightly for the purposes of giving LiveGuy a fighting chance).</plug>
Through the wonders of social media, Mike Coulter met with with LiveGuy at the start of his journey in Edinburgh. It was his blog & twitter stream that alerted me to the project. Mike then dm’d me to see if I wanted help drum up some interest around Bristol.
A few txt messsages, phone calls and emails led to an early morning rendevouz at a top secret location before the day’s excitment around Bristol. As well as bringing Liveguy and his support team (Alastair) up to speed with some of what’s going on around Bristol in the creative use of mobile & locative technology we also had a really good discussion over the future of such technologies and what you can achieve with them.
Obviously the creative and pervasive media projects going on around the Pervasive Media Studio were of interest along with the robotics research between the Universities, but what struck me was the genuine interest around communities, engagement and ways in which technology, and the service providers, can help facilitate that engagement.
Bristol has as checkered a history at public engagement as any other city but in recent years a number of really good initiatives have shown what can be achieved. The flagship is probably the Knowle West Media Centre with a huge and expanding range of community programmes covering pretty much all aspects of digital media. These are so good they’re now running a social enterprise with clients including blue chips and local community companies. They’ve also engaged in a number of innovative mobile and locative technology projects exploring the ways in which civic engagement can be facilitated by technology.
We also talked about the Connecting Bristol project which came out of the Digital Challenge. This is another area where creative use of technology is being applied to wide civic challenges. Under the wing of the City Council, but operating independently out of the eOffice on Wine St, Stephen Hilton and Kevin O’Malley are part of 10 city collaboration. As well as news about the DC10 grouping of cities, Kevin regularly posts about other initiatives and news that is of interest for those at the intersection between technology and civic change (environment, education, planning, transport, are just some recent topics).
With that it was nearly time for LiveGuy to fire up twitter and hit the streets of Bristol, and for me to head off also. I’m staying in touch with Alastair so watch this space for more announcements.
Disclosure: Although I knew where Liveguy was starting his day in Bristol, I didn’t know the itinerary and chose not to take part in the Find Live Guy challenge. There is no business relationship between jbsh LLP, Vodafone or the agency behind LiveGuy.
Update 1: the picture links to Picassa didn’t seem to work – so I’ve copied the images to jbsh.co.uk and linked to them here.
There’s always been a healthy market in one group of people selling access to a small second group of people that a third, larger group of people value. In many circumstances this is entirely right and proper.
I was recently at the 31st International Conference on Small Business & Entrepreneurship, this was a massive gathering of academics researching the world of the small business and entrepreneur (slightly devalued by the lack of small businesses and entrepreneurs but that’s another story). Part of the value was the stellar network of UK and International academics interested in supporting and developing businesses. It was certainly cheaper than schlepping my way around the UK and most folk were already in an ‘open mindset’ to making new connections. For the academics, part of the value was in presenting their research to other academics.
On the other hand, there are plenty of networks and the like that will provide access to potential investors (for a fee). It could just be coincidental timing but I’m seeing more of these networks and events pushing themselves harder than before.
I’ve nothing against introducing people to potential investors (something I try and do in a small way around Bristol), nor have I anything against events to get people networking for business benefit (e.g. OpenCoffee). It’s the bit where you fork out hard cash for the opportunity, to possibly, meet someone that might be interested in your business. And lets face it, no one sensible is going to hand over a wedge of used £20’s on the basis of a 1 minute pitch over lukewarm coffee and limp biscuit.
I can see a valid business case for someone that can introduce me to a sizeable chunk of funding receiving a suitable fee for that service, but a fixed fee rather than an arbitrary % and that should be no-win-no-fee.
As a business development professional, I would expect to get paid for adding value to a business. Sorting out a business strategy, or identifying new markets and executing an exploitation plan, or implementing an efficiency plan following some process mapping, etc.
I can see that with the profile of Kliner Perkins / Sequia / etc comes a great deal of attention and that access might need to be managed. On the other hand, folks like Fred Wilson, Rick Segal and others are openly out there sharing their stories of how to approach them (and how not to)! So why pay someone else good money to preview your business plan and then mailshot their contact list?
So get out there and have confidence in your business. If you feel you need support with the business of building a business, have clear deliverables contractually agreed before you hand over the cash. It’s a sales channel just like any other, the only difference is that you’re selling a stake in the business (or buying entry to a particular market) rather than a website or set of APIs.
I just posted an example where I’d worked up an Addressable Market calculation based on fairly good data. Of course, this data isn’t usually available; or it’s really expensive.
One of the services that jbsh offer is business consultancy, mainly strategic growth plans and help with the business planning activity. So what’s the addressable market for that?
Well according to the Office for National Statistics there were 2.16 million business enterprises registered for VAT and/or PAYE in March 2008, compared to 2.10 million in March 2007, a 3.0 per cent increase. As an aside, the ONS also report a continued move towards incorporation and away from sole proprietor and partnerships, perhaps reducing personal exposure in the downturn?
VAT is only compulsory when the value of your taxable supplies goes over £67,000 which isn’t that high. The ONS also offer us a cut for businesses between 10 and 50 employees, in fact there are 196,560 such businesses. The number of employees isn’t a great measure of which companies that will engage our services, I’m really more interested in those with a strategic growth challenge, and the revenues to pay our fees.
This information is available in the handy pocket-sized 432 page document that ONS produce on UK Business: Activity, Size & Location 2008 (well I can download the pdf to my phone but I’m not sure I’d want to read it there). On page 172 is the data about geographical regions by turnover.
Turnover in £000’s
0 – 49
50 – 99
100 – 249
250 – 499
500 – 999
1,000 – 4,999
ENGLAND AND WALES
Those businesses turning over less that £250k probably can’t afford us. That still leaves 573,515 which is much more attractive than 196,560 so there must be a lot of businesses with under 10 employees and over £250k turnover.
The next 17 pages detail companies by region, so for my local Unitary Authorities:
Turnover in £000’s
0 – 49
50 – 99
100 – 249
250 – 499
500 – 999
1,000 – 4,999
Bath and North East Somerset
Bristol, City of
Using the same criteria as above there are 8.195 businesses with a turnover >£250k in these three regions of the UK. You can do the same thing for Standard Industry Classification codes (SIC codes) within broad regions (North East, South West, etc). SIC codes don’t work for everyone but we’re not trying to identify specific clients at this point, just gather enough data to be able to say if there is a big enough potential market to sustain the enterprise. If you don’t fit one code exactly, pick a couple that make sense and interpolate.
So it turns out that if you’re selling to businesses, there’s quite a lot of data out there on how big your addressable market is. Of course, that doesn’t mean all 8,195 businesses in this area are looking for a business growth consultant, but if we can make a compelling enough case then they could be.
What markets are you in?
Is there good data?
If you think not, leave a comment and I’ll have a go at finding some sources.
Something that makes an appearance fairly early in a business plan is the addressable market size. This is usually the point where after some mumbo-jumbo you’d end up with something like “…and thus we only need 1% to secure $100m turnover.”
Mark Davies has a good post on the subject from a VC perspective but I thought I’d add some examples from real life. The first benefits from solid data, the second is more speculative.
An enterprise I’m working with have a new game for the education sector (and several others but for the purposes of this example I’m concentrating on the education sector). Education is great (as are most public sectors) because there’s so much great data out there to use. Tt doesn’t mean they’re any easier to sell into but that’s another post.
So this enterprise happens to be in Canada, and one of their markets is Quebec. Helpfully for me, the Ministère de l’Éducation du Québec has most of the data I need. With a bit of digging (and guess work, some of the better data is in French) you can find the 9 English School Boards, and 17 French School Boards. Between them there are 512,515 students in Secondary education (enrolled for Academic Year 2007/2008). Which is nice and big.
Trouble is, we’re not selling to all those students. We’re actually only interested (at the moment) in two of their 5 years at Secondary School, so we need to divide that number by 2/5 to get a more accurate number (371,739) which is still nice and big.
The next bit needs a bit more knowledge about the fundamental business model. The game is sold to a school, or school board, on a tired license model. The more licenses you buy, the cheaper the per student price. So one addressable market is to sell a single license to the whole of Quebec, ka-ching!
However, more likely is that we’ll sell to each school board separately (or even each school). Again, data is our friend here as we can find the enrolled student numbers for each School Board. Time to fire up Excel.
Quebec English Board
Central Québec School Board
Eastern Shores School Board
Eastern Townships School Board
English Montreal School Board
Lester B. Pearson School Board
SecI & SecV
And so on…
Now I can apply our tiered pricing model to each School Board and see what our ‘true’ addressable market is for Quebec. Of course these numbers include special schools that might not purchase a license; equally, it doesn’t include the private school sector which hopefully will.
I could drill down to individual schools (I have the list of schools, sizes, locations, who the Principal is and contact info) but we don’t really want to cold call each school and try to sell them each a separate license as we’re in bootstrap mode and the cost-benefit just isn’t there. Early conversations have indicated that School Boards are the most likely point of purchase so that’s enough detail.
This means I can say with high confidence that our addressable market for Public Schools in Quebec is $350,250. Shake rinse and repeat for the other Provinces and Territories in Canada and (for this business model) the Public Sector education market is $3,415,300.
How confident are you of the numbers behind your addressable market forecast?
What do you do if you don’t have those numbers? Stay tuned for my next post.
What makes successful companies different? What a great research question, and one that the University of Strathclyde posited a couple years back. They followed up with 37 companies, in 8 EU countries and gathered over 1,000 stories (interview descriptions of processes and activities).
Catherine Maguire from Strathclyde was presenting their findings. They began with the CIM-OSA model of business processes (one I’m very familiar with as it formed a good chunk of my research career). Turns out my supervisor was on the advisory panel for this work also, small world!
Basically, CIM-OSA identified three key processes that all businesses do: Manage, Operate, and Support. The research focus has been around Operate (and to a lesser extent Support). The research group I was with in Plymouth did most of the early work developing a reference model for the Operate Process. Catherine was looking at the Manage process.
Being a very industry orientated researcher (probably why I wasn’t very good as an academic) I always suspected that the actually process maps were less interesting that the activities and practices they represented. In my own research I concentrated more on these activities and the social systems around them, than the formal modelling (drawing boxes & arrows).
Catherine’s group has now confirmed what we all ‘knew’ but hadn’t ‘proved’. The actual processes in successful companies are the same as for less successful companies. Successful companies are a bit more integrated; the big difference is in the “how”.
Or as the song goes, “It ain’t what you do it’s the way that you do it”…
There are a hundred+1 jobs to do when you’re running a business, and they’re all important. Fulfilling Orders and Getting Orders (to use process speak) are probably the most important, but I was talking to a HR exec a couple nights ago that insisted that hiring the best people was the most important because they’d then make the business work (might have been a vested interest there).
So where do you start?
The more successful companies were generally more mature in all their Manage activities but Strathclyde did find that there were around 15 activities that seemed to differentiate more successful from less successful companies.
What Catherine’s research has found is that given equal resources, and for their 37 companies, higher maturity in these 15 activities was a reliable indicator of a successful company. Catherine flashed the activities up on screen and they were largely around communication (as I’d expect) but I didn’t get a chance to write them down, hopefully I’ll be able to update this post shortly with that list.
I did ask if they’d looked at how the Manage Processes that these activities represented subsequently interacted with the Operate Processes. From a business change perspective you’re generally presented with a whole load of symptoms operationally and have to analyse your way back to root causes. This research could really help by making explicit some of the implicit links that are learned from practice.
I’m following up with Catherine to see if I can reproduce that list of Activities here together with links to the online tool they’ve developed to help companies self-rate themselves.
Personally I can’t hold 15 things in my head simultaneously; what 5 activities are embedded in your organisation that differenciate you from the competition?
“Absolutely none”. The pitch to clients is changing, however, from how a great website can enhance your offering to one that points out how a great website can retain and generate more revenue from existing clients. Moving from selling vitamins to pain relief.
Angel investors have always asked what pain you’re addressing. This advice was been given by Greg McAdoo – Partner, Sequoia Capital at Y Combinator’s 2007 Startup School, more recently by Mark MacLeod, and before and since by many others.
Which is great if you’re thinking up your new killer app. What was interesting with David was that he has a successful business and is quickly positioning his product to be that pain killing pill that people will spend money on.
I’m not working with David, but a company I am advising (Heliotrope) has a game that promotes soft skills in the education market (I’ll come back to education in a later post on markets, and we’re looking at other markets than just education). At the moment it’s a pretty vitamin offering, helping kids understand themselves and their group and getting ready for the school term ahead. However, Canada is suffering a major pain with kids dropping out of school. Part of the extensive piloting for the game was with kids at risk of dropping out. The feedback on their increased self-esteem and desire to re-engage means we’re nuancing the emphasis from vitamin benefit, towards pain relief.
We’re also looking for new sources of pain that the game can address. The game and it’s holistic benefits haven’t changed, but people buy pain relief now when they’ll pass up an opportunity to perhaps make things better in the future.
How are you positioning yourself to be an indispensable pain relief pill rather than a nice-to-have vitamin pill?
On a dark and stormy Tuesday morning, with tales of economic melt down on R4, I wasn’t sure if anyone would turn up to Open Coffee.
I shouldn’t have worried, Bristolians are made of stern stuff. We even had a friendly bank manager type along to see what the excitement was about.
In addition to Andy, we had Peter Weeks from Business Link and two entrepreneurs Dave Cropley and Chris Keegan from newly formed evans & finch (holding website). Joel Hughes was back hoping to show his new social canvassing app, along with Sam, Nigel, Craig, Tom, Melissa, Mark, Janice, and apologies to anyone I’ve missed!
A fresh pot of finest ground coffee and some gluten-free chocolate cake kept everyone talking and mixing until after I had to leave.
From the conversations I flitted between there was a common thread that, while the impending financial apocalypse will hit, for most businesses it’s not here yet. The exception, as Andy admitted, is for those trying to raise or extend bank finance. Survival planning was largely around three themes that also came up at a Bristol Enterprise Network event a couple weeks back (Growth Opportunities in a Recession).
watch the cash flow (and reduce it everywhere)
provide an excellent customer experience (keeping existing customers is easier than finding new ones)
These last two in particular are being exemplified by 3 Bristol companies. Mark and Tom at The Web People are using their new SWiM service-as-a-service management software to provide excellent customer experience and innovating by licensing it to other web development and management companies. Nigel at Katugas Research Services is providing excellent service through analysis reports and multi-lingual support, and innovating through budgeting approaches that help both their client’s and their own cash flow. Dave and Chris at evans & finch are also planning both consolidation of cash flow through longer term client relationships and a new service that is still under wraps.
It may be grim out there, and things will probably get worse before they get better, but there are still some great business opportunities out there.