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Exploiting Trends

How to leverage trends to introduce new ideas and boost the value of your business.

Greg Fisher

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ExploitingTrends

Social, economic and political forces shape the environment in which we do business. As economies grow or shrink, demographics change and political regimes are replaced, so new business opportunities emerge. The recent changes in the global economy have given rise to a new set of business trends.

Here are eight of the most important developments that will lead to new business opportunities in the months ahead:

1. The imminent retirement of baby boomers.

The first wave of baby boomers are scheduled to retire in 2011, yet most of these people’s retirement funds have been sorely depleted as a result of the financial meltdown. They are going to be looking for smart ways to supplement their income from retirement annuity funds in the future.

If you can provide them with simple solutions to do this or with services and support as they seek to find new sources of income, then you will tap into an emerging market.

2. Economic uncertainty and fear.

Most people and organisations are still gripped by fear and uncertainty when it comes to making economic predications or taking bold bets on the future. The tumultuous ride in 2008 and early 2009 has left people with a longing for certainty and stability.

Those who can help alleviate uncertainty for others will tap into new markets and find new sources of revenue. Those who are brave enough to take some bold steps in these uncertain times may find that they pay off handsomely.

3. Government involvement in economies.

The meltdown of the financial services industry across the globe has put governments on the alert. With large amounts of state funds now propping up private enterprises, the influence of governments on economies has increased.

There is a strong likelihood of more regulation going forward. With new regulation comes opportunity; look at how accounting firms have benefited from increased regulation in financial reporting since the fall of Enron and the emergence of Sarbanes-Oxley.

4. Clean energy and greener business.

Although the recession has diverted people’s attention away from green issues, there is still a strong focus on managing businesses and the environment in a more sustainable way. Venture capitalists have large amounts of money set aside for green investments and many of the green ideas that were launched two years back at the height of the boom are now entering the market.

In the coming months we will see a host of electric cars come to market, many of them developed by new independent companies. We will also continue to see bio fuels become a more mainstream alternative to current fossil fuels. New industries are emerging and with those come opportunities for entrepreneurs.

5. Social networking and online community building.

Just when we think online and mobile social networking tools have reached their peak a new concept emerges. Currently Twitter is all the rage but what will be next? Social networking is now a mainstream activity and existing businesses are scrabbling to figure out what that means for their promotion, marketing and distribution efforts.

There are opportunities to create new applications for existing platforms and to help other companies figure out  how to use existing applications to make them more competitive.

6. Mobile and cloud computing.

Many of the largest and most influential technology companies in the world – Microsoft, Google, Apple and Amazon – have made large investments in mobile and cloud computing, a style of computing in which dynamically scalable and often virtualised resources are provided as a service over the Internet.

They are likely to flex their muscle to make these investments pay off. As Apple continues to push the iPhone, Google will continue to develop its suite of online applications and Microsoft and Amazon will encourage users to embrace cloud computing.

Users will need support to embrace these new technologies and companies that can provide products and services to make the technologies more effective will ride the wave.

7. Micro enterprises and solo entrepreneurs.

The economic recession resulted in many layoffs. As people struggle to find work in traditional corporations, it is predicted that many of them will look to go into business for themselves. This will give rise to a new wave of micro enterprises and solo entrepreneurs.

These people are looking for ideas, opportunities and support as they embark on launching a business for the first time.

8. Training, retooling and low cost education.

Some people view the lack of opportunity in traditional job markets as a chance to develop new skills. For example, autoworkers in the US realise that many of their skills are no longer desirable in their home country. As a result they are looking for cost efficient ways of acquiring new skills.

Online and distance education solutions as well as any other low cost ways of providing education present big opportunities in the current environment.

Greg Fisher, PhD, is an Assistant Professor in the Management & Entrepreneurship Department at the Kelley School of Business, Indiana University. He teaches courses on Strategy, Entrepreneurship, and Turnaround Management. He has a PhD in Strategy and Entrepreneurship from the Foster School of Business at the University of Washington in Seattle and an MBA from the Gordon Institute of Business Science (GIBS). He is also a visiting lecturer at GIBS.

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Business Model

Want To Change Your Business Model? Answer These 3 Questions

Here are a few pointers on figuring out the best way to grow your business and keep it sustainable for years to come.

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To grow sustainably, is it better to take on projects that are frequent and reliable, or sparse but lucrative?

Q: I own a film and production company, and I shot 100 videos last year – 70 weddings and 30 corporate, totaling $330,000 in revenue. The corporate videos are more profitable, but weddings are always happening. I don’t want to turn off a constant source of revenue, but should I spend more time pursuing corporate events to grow my business? – Trevor R.

Welcome, Trevor, to the entrepreneur’s struggle! You build a great product or service, make good money and the next thing you know, you feel like you have to change your model. It’s the age-old question of scale: What’s the best way for your business to grow, and does that mean making less revenue now in order to have more sustainable growth for years to come?

Related: 4 Types Of Business Models

With the bulk of your time being spent on wedding videos, you probably feel stuck in the slow lane, watching better profits pass you by. But remember that scale is not just about margins.

Numbers can be deceiving, and you control what you charge for your services. While your corporate videos are more profitable right now, going all-in might not be the long-term answer.

To figure out the best route for your business, start with a clear vision of your ideal final destination. How much money – and profit – do you want to make per year? It might sound like a frivolous question (who doesn’t always want to make more?), but it will allow you to reverse-engineer your business model and help determine a practical answer.

Let’s say you want $1 million in gross revenue per year. At this time, it sounds like you charge about $5,500 per corporate video and about $2,400 per wedding video. That means you’d need to sell either 182 corporate videos or 417 wedding videos. (That’s a lot of videos!) Use those numbers to guide your vision. Next, consider scale, which depends on a number of growth factors.

First, creating value: Make sure you’re charging the appropriate amount for your services in order to reach your goals.

Second, anticipating growth: Where is the greatest opportunity, not just at the moment, but in the future?

And third, limiting expenses: How can you keep costs down so spending doesn’t outpace revenue?

Related: 3 Types Of Ecommerce Business Models

Answering honestly will help you create several business models. For you, Trevor, those models are (a) weddings and corporate, (b) weddings only or (c) corporate only. As a case study, let’s consider “weddings only.”

Last year, you worked 70 nuptials. Before you consider hitting pause on that side of your business, revisit those growth factors to figure out if you can make it more profitable.

  • Should you charge more for each video?
  • How many clients did you turn down last year?
  • Could you have taken them on if you had extra help?

Weigh the costs, and consider adding another videographer to the staff. If that seems financially impossible, look for ways to at least maintain your current output while trimming production costs.

For a small business, profitability is a mad science of focus, projections, and getting out of your own way. What makes the most money on a per-item basis is not necessarily what will make you the most profit in the long run.

Related: How to Make Your Business Model Go the Distance

Consider Amazon: It created scale by focusing on smaller margins. It’s a helpful reminder that there are different ways to succeed.

Understand what you can charge, how you should save and who is most likely to buy from you in the future. By simplifying the complicated challenge, you can jump on the fast track to growth.

This article was originally posted here on Entrepreneur.com.

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Business Model

How A Clear Strategy Can Change The Game

Strategy seems to have this mystical aura surrounding it, but it is nothing more than applying some really deep (and perhaps objectively facilitated) thinking about five areas of focus.

Janet Featherstone

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At the point of creation, a new business has a strategy. There will come a time when that model is not as attractive as it originally was. Competitors may have entered the space, or upped their game, customers might be more demanding, margins may start coming under pressure, and you as the business owner might be working 12 hour days.

That’s the time when you need to have a formal strategy workshop. You need to think through what you are doing, how you are doing it, why you are doing it and what are its benefits. That’s not going to happen when you’re moving at breakneck speed trying to keep your head above water.

If your business is to succeed in this volatile, uncertain, complex and ambiguous (VUCA) world, then it must understand exactly where it plays in the market that you have chosen, and most importantly, how it intends to succeed in this space.

The challenge that most business owners face is that there is so much pressure to put out fires that very little attention is granted to the spark of industry-defining ideas. If you want to stay in business long-term, making the time to reflect and think deeply about the direction and competitiveness of your business is nothing short of essential.

Related: (Slideshow) 10 Epic Businesses Give You Top Advice on Innovation and Strategy

The Context

Every business operates within a far larger matrix. We are affected – positively and negatively – through external events over which we have little or no control. Currency fluctuations, Brexit, trade agreements, economics, the political environment, tax rates, legislation and a host of other influences that impact our business environment.

In a strategic planning workshop, at least a morning needs to be invested in understanding how these external factors impact the business. A PESTLEID analysis can be undertaken, and this follows the process of evaluating the Political, Economic, Social, Technological, Legal, Environmental, International and Demographic landscapes.

This process is not a conversation, but rather an in-depth analysis of each of the PESTLEID factors, each of which is broken down into detail. Each detailed factor is ranked in terms of probability and impact. High probability and high impact factors are firmly placed on the firm’s radar, and scenario planning is completed for these events. Low probability but high impact events are allocated to accountable individuals for observation, and might be scenario planned depending on their severity.

By the end of this process, each person in the room must have a sound idea as to the context in which the business is operating, and what external factors the business is likely to experience within the next year.

Through scenario planning, each individual will also understand what the best course of action will be for the organisation should any of the high-impact scenarios come to be, and will be equipped to play their role in taking those actions in order to minimise business disruption.

Customers

The only person who can tell you what your customers want and need is your customer. It is a fatal mistake to believe that anyone in your organisation is qualified to speak on behalf of your most valuable assets.

Key customers can be invited to join you for a portion of your strategy workshop, or you can survey your customers beforehand and present the information on the day.

In this conversation, you are unpacking what it is that your customers want from you.  But a note of caution that is magnificently phrased by Henry Ford when he said: “If I’d asked my customers what they want, they would have told me a faster horse”.

Remember that your customers can and will generally only tell you what they want and need given the same operating conditions for both yourselves and themselves. And that’s OK, because it defines the foundational sandpit in which you are operating right now.

Customers can tell you how your service ranks in comparison to competitors, how competitive your pricing structures are, their satisfaction with your sales process, how well your product performs, their experience of your service, and any gaps that might be sitting in your blind spot. This gives you the ‘as is’ situation and is an invaluable starting point.

Related: Go Above And Beyond With Your Customer Service

Competitors

business-competitors-advice

It is important not to become so fixated on your competitors that you lose sight of your own direction, but you certainly want to know what your competitors are up to, lest you get blindsided by their actions.

Ideally, you would arrive at the strategy session understanding the market shares of your various competitors. In addition, you would know the share of wallet that they attract, and compare this to the share of market. Variances between the two indicate a pricing strategy that may deserve closer inspection. If accessible, a study of the competitors’ financial statements is never wasted as this indicates industry growth rates, profit rates, margin rates and the like for comparative purposes.

Then, a subjective analysis can be completed, but this can be done during the workshop. Here, the focus is on the offering and the softer skills that your competitors bring to the table.

  • How strong are their customer relationships?
  • How well do they sell against your products?
  • How are they achieving their growth?
  • What do they do particularly well where your performance is sub-par?
  • What do you do particularly well, that outshines them?

The more heads that think through these issues, the more objective the information becomes.

What you’d like to achieve at the end of this session is a list of things that your customers insist you have in your offer, ranked against your competitors. Then, you’ll have a list of ‘order winning’ value added offerings, also ranked against your competitors. You’ll be able to see where you are performing better, and worse, than your rivals.

Competencies

This is the time to review what your organisation does particularly well, that when combined in the larger context and when compared with that of your competitors, can create a meaningful and valuable differential for your organisation.

What you are seeking here is something that your business does that your competitors cannot match. Often, these are the things that become ingrained in your culture. They are not a process, they are not a pricing point, but rather are embedded into the way you do business. Think Apple, think design and functionality.  Think Ferrari, think performance and exclusivity. When I think of your company, what should the association be?

Related: 10 Questions To Achieve The Clarity You Need For Your Business

If there is nothing that your business does that can differentiate it, then this becomes the part of the strategy workshop where you decide what skills your organisation needs to develop or acquire in order for it to effectively compete.

There are a number of frameworks that are useful at this juncture, but all of them ask  what your organisation can uniquely bring to the market, and how long you believe this uniqueness is achievable. If your competitors are able to replicate your uniqueness quickly, then your competitive advantage can be eroded before its paid for itself. Where little differentiation exists in a market, the common point upon which to compete becomes price. Margins erode in the effort to win business. Either differentiate, or be prepared to become a low-cost producer.

Creating a Unique Space

This is where strategy becomes as much art as it is skill. The real end-game of strategy is to create a space that completely disrupts your industry, and where your organisation sets the rules of the game. Playing by rules set by others means that you are always watching and waiting, instead of setting the pace and direction.

Thinking of a realistic opportunity takes incredible focus, deep thought, creativity and imagination. At times, new industries are created where the borders of current industries exist so this is a good place to look first.

What Happens After All is Said and Done?

The chosen strategy should be captured in an Executive Summary of no longer than 2 to 3 pages. Anything longer creates confusion and apathy by those who are expected to wade through reams of inputs in order to reach the implementation section.

The chosen strategy must be presented to and worked through in a workshop with those who will play any part in its implementation. Ideally, small teams will be tasked with the implementation of certain aspects of the whole picture.

Remember that the contents of that strategy must form the conversation point of the executives from that point forward. If all you talk about is profit, profit is what the business will chase. If you focus on strategic delivery in each of your conversations, the business will deliver. And, when you’re tired of talking about the strategy, you’ve likely only done 10% of the job needed, so keep talking strategy.

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Business Model

4 Types Of Business Models

There are four main types of business models, see which one suits your business concept.

Alison Job

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Different types of business models suit different types of businesses. A business model is the way that a company sells products to its customers. It describes how a business creates, delivers, and captures value.

What type of business model should you adopt?

A business model defines how the enterprise delivers value to customers, gets them to pay for that value, and converts those payments to profit.

Read: How to Get More Innovative About Your Business Model

There are four basic types of business model that any for-profit business will fall into:

1. Manufacturer

A manufacturer takes raw materials and creates a product, or assembles pre-made components into a product (E.g car manufacturers). A manufacturer may sell its products directly to its customers, or it can outsource sales to another company.

Related: ‘Quality’ to give SA manufacturers global competitive edge

2. Distributor

A distributor is any business that purchases products directly from a manufacturer for resale either to retail outlets, or directly to the public. For example, a car dealership would purchase vehicles directly from the manufacturer and sell them to the general public.

Related: How would I set up a “distributorship” with a large company in South Africa?

3. Retailer

A retailer purchases product from a distributor or wholesaler, and then sells those products to the public. A retailer usually has a physical location, but may also be an online retailer such as Amazon or Kalahari.

Related: 3 Ways Retailers Should Accommodate the Mobile-obsessed Customer

4. Franchise

A franchise can be a manufacturer, distributor or retailer, depending on what type of franchise you purchase. Here the franchisee adopts the business model of that franchise.

Under these four types of business, there are various other ways of structuring your business model.

  • A company that integrates a physical and an online presence. An example would be a retailer who allows customers to order products online, but lets them pick up their order at their nearest store.
  • A company that deals with customers directly via the internet without engaging an intermediary.
  • Direct selling to consumers making use of product demonstrations in the person’s home, for example. There are several cosmetic and jewellery companies that use this model in SA.
  • The Freemium business model works by offering a basic Web service or product, for free, while charging a premium for advanced or special features.
  • Online auctions, which are held over the internet.

Related: The Perils Of The Franchise Agreement

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