It takes a different calibre of person to start a business from scratch. Besides having an enthusiastic vision, he must be able to translate that vision or passion into a viable business idea followed by proof of concept, prototype and a business plan. He needs to be able to take calculated risks, make good business decisions and above all, be a competent leader in a highly uncertain environment.
When Jeff Bezos started out in 1994, he confessed that what he was going to do was a crazy thing – sell books online. This was just doing old things (selling books) in a new way via the Internet. It just needed some outside-the-box thinking and a new business model. Today, Amazon is a US$8.49 billion company (as at end December 2005) with 12,000 employees. Not bad for a start-up that is barely 10 years old. Other examples of the New World digital businesses are Google, Skype and e-Bay.
So, what does it take for someone to start up a business from scratch and turn it into a billion-dollar entity? The “product” or concept of the “product”, which encompasses the services rendered, is equally crucial. In Amazon’s case, it began with the concept of selling books but leveraged on the Internet, similar to what Dell was doing with PCs and laptops, which earned them US$55.9 billion in revenues this year alone.
Pains of commercialisation
Of course, for any product to sell well, there has to be a sufficiently large, untapped market willing to buy your product in order to generate a steady and growing income. And this is where commercialisation comes in- taking the idea from the concept stage to rolling it out to the market. This is the toughest stage for the entrepreneur. The company size at this stage is usually small, everyone knows each other and the work environment is less formal. At this stage, survival is the order of the day and the urgency is in getting the product out the door, often at the expense of governance and process control.
If the business survives the crucial start up period, it will then enter a period of growth and this is where the growing pains start. Typical symptoms observed at this stage include capacity problems, product-quality issues, customer complaints, internal disputes, high attrition rates and lack of skills and funding. The business is most vulnerable at this stage; competitors will start to take notice and carry out retaliatory measures. The once-enthusiastic entrepreneur is often overwhelmed and overworked, with everything and everybody needing his attention and decisions. It is a constant struggle between priorities and needs, each exerting control in a fast-changing environment.
What is noticeably lacking in start-ups at this stage are good management skills. It may not be apparent when the company is small, but transiting from a 10-person firm to a 100- or 1,000-strong company requires a different kind of skills set, mentality and know-how. This is where most entrepreneurs, so used to having the pulse of the business at their fingertips, struggle miserably as the enterprise transforms. The entrepreneur will need to “professionalise” his organisation or it will suffocate or be retarded. He will have to employ professionals with the relevant skills and competencies to help them grow the businesses.
The top salesperson is usually picked to head the sales team. However, any experienced manager will tell you that this top salesperson may not necessarily work out to be the best choice for sales manager. The same applies to the technical or engineering leads. Such leads usually face an even tougher challenge, especially for those used to dealing with technical or expert subject matters, but now discover that they have to deal with people. If they do not have the right people skills and are left on their own, the business can flounder very quickly. People who achieve great individual results may not necessarily have the inclination towards or natural competency in people management.
Managing people on a larger scale
Managing anything more than a 30- to 40-person company requires a different kind of mindset. Checks and balances need to be put in place for better accountability and control. It also involves some degree of cultural change. Something as trivial as filling in of leave forms may be the cause of a major problem. In a small firm, everyone knows who is going on leave and when he will be back. Managers can easily keep track of such things mentally. But when it comes to managing a group of more than 40 people, some process control needs to be put in place. This is where the once “close-knit team” may have to make way for some degree of corporate formalisation. But it doesn’t have to be bureaucratic because this is where the person’s soft skills will really come in handy. Coordination within a growing, changing organisation is yet another issue. What used to be done by one person will now have to done by a few, if not more.
Take budgeting, for example. The boss used to be able to do it himself but with a company of four or five departments managing the budget, it can now become a nightmare. When more people are working on the same thing, a process or a procedure needs to be put in place. Issues such as budget approval levels, workflow and escalation procedures must be well thought out, executed and audited.
Test of sustainable entrepreneurship
The acid tests for the entrepreneur are, “Will the business run by itself if I’m not around?” and “Have I put in place the right people, systems, checks and balances for control and performance management?” In the rush to build one’s business empire, one must never forget that planning and building a strong internal business system and performance metrics and process are crucial for long-term success. After that, one must find the right people to fill the posts and keep them motivated, inspired as well as rewarded!
Even the highly successful US entrepreneur and philanthropist Bill Gates recognises this truth. He says, “Take away our 20 best people, and I will tell you that Microsoft will become an unimportant company”. Human capital talent is hard to come by but if the skills are lacking in the company, one should never be afraid to seek professional advice or hire the right kind of managers.
Ironically though, most new start-ups place human capital training and professional development at the very bottom of their list of priorities. The reason? “There’s no point in training people because my competitors will end up pinching them,” says an entrepreneur. He has a point, but remember, if all companies invest in training their staff, you won’t be worse off even if you pinch your rival’s staff in retaliation – although staff pinching is not a shortcut to getting trained staff! What goes around will eventually come around.
If you look at business in totality, training helps people to do a better job, make less mistakes and the company really benefits. Mind you, we are not just talking about technical skills but soft skills as well, such as effective leadership, innovation and critical thinking. All these requires training for people are rarely born with innovation opportunity, strategic direction and growth of the business such skills.
Training doesn’t always have to be a boring, one-way classroom-lecture occasion. Mentoring and coaching are two good ways to build and transfer much needed market skills and knowledge. Employees who volunteer to be mentors should be recognised and rewarded within the organisation for their efforts to encourage a strong sharing culture. Mentoring allows for the sharing of “smarts” and “capabilities” that will shorten the learning process shorter and equip younger staff with the skills and knowledge that are crucial for long-term competitiveness in an increasingly global economy. On a bigger scale, the industrial sector and the Malaysian economy in general will benefit greatly from an increased human capital talent pool.
The entrepreneur must realise that his role is to develop new businesses and mentor new people who can emulate them in starting new businesses some day. On the issue of staff attrition, it is the leader’s job to think of creative ways to retain the staff; one of these is having a “top talent” programme to identify, recognise, motivate, engage and reward good people to develop them into dynamic entrepreneurs themselves someday.
Don’t suffocate your businesses!
Once the above are put in place, the entrepreneur should delegate the day-to-day operations to the professional specialists, while remaining focused on the important but not-too-urgent issues such as the innovation opportunity, strategic direction and growth of the business.
Too often, entrepreneurs are unwilling to let go of their “corporate baby”, getting too involved in every function until they eventually lose sight of the company’s long-term goals and their own effective role. Entrepreneurship is synonymous with “out-of-the-box and innovative thinking” and “pushing the envelope” business strategies, but one must always remember that any new venture must still be tempered with traditional values, sound management and principles and best practices. The emerging or reinvented businesses based on new or technology models are now New World, and successful companies of today and tomorrow will have to look into the future with new lenses, and practise innovative ways of talent management and human capital development.
