Tag Archives: Growth

Resurgence of Manufacturing Entrepreneurs

 

Any study of the world of design reveals that concepts go through cycles of acceptance, falling out of favor, and rebirth. New renditions using different media or materials are brought to market and find life. In the world of entrepreneurship, similar patterns exist. E-commerce stores allow small businesses to compete with acclaimed retailers like Costco. The old-fashioned corner store emphasized personal service. Now, there are customer service “departments” that are outsourced to stay at home mom businesses in the heartlands. Back in the day, before either the industrial or information age, there were many businesses operating out of the home. Now, with internet access, we see a return to “cottage industries.”

One of the sectors that has experienced severe shrinkage and job loss domestically is manufacturing. The decline has been steady over several decades and many have lamented that we can never get back to where we were. What if the principles of design, retail, etc were applied to manufacturing? Could it experience a resurgence that makes it a key economic driver again?  We are living in an age where start-ups are more plentiful and the amount of capital to get into business and keep it afloat is perhaps less than ever before. It stands to reason, then, that we could see a flurry of manufacturing start-ups, but what would have to happen for it to occur?

Bradley Starr writes in a blog for Entrepreneur Country about the (re)new(ed) trend of people who want to make products again, rather than intangible services–he refers to this group as “Makers.” He argues that the Makers are a movement that is good for small business and that many are realizing that they don’t have to become huge to be financially successful. Themes that ignite manufacturing entrepreneurs include technology, networking, and mass customization:

New technology driven tools such as the first of the low cost 3-D printers, numerical manufacturing machines cheap enough for the home and Arduino electronic controllers, enable small organisations and individuals to manufacture components, complete assemblies and machines that were previously the province of large organisations with big machinery.  Collaborating with other Makers, designers and business services amplifies the skills, capability and capacity.

Networked small business is a most powerful force.

So Where’s the Market?

In two places:

1)    Where made to order locally is more efficient than shipping in bulk from the other side of the world
2)    Mass customisation and other small run products

If, for example, you need spare parts for a car, does it make sense to tie up cash and warehousing holding stock?  The new machines can manufacture to order locally at a competitive price, and the low cost of the machines means that an engineer can run their own small business supplying this market.  You just need to hold a relatively small amount of easily available raw material in order to make a wide range of products to order.  Low cost of financing, fast delivery, great service.

The ability to produce small to medium runs of products cost effectively opens up the enormous opportunity of more individual products, giving free reign to design ambition and consumer choice.

Global product uniformity could be on the way out to be replaced by a far more interesting world.

Nothing short of a mini-industrial revolution is on the verge if enough believe what Starr says, in part echoing a Wired magazine article last year celebrating the Maker movement. This may become the “shot in the arm” so needed in former factory towns where “made in America” still carries a swagger and mentors abound with deep manufacturing experience. The potential to pair these experienced mentors with entrepreneurs, utilize new technology tools, benefit from networks and market conditions is an opportunity economic development groups should not ignore. Likewise, our educational institutions and chambers should champion the effort. Who’s game?

 

A Cord of Three Strands For Start-Ups

You know the old saying…that a cord of three strands is not easily broken. Yet, a cord with only one strand has much less strength. In the sports world, we see this concept played out most clearly in tournaments or playoffs. During the regular season, a dominant athlete can carry the team on his or her shoulders to seemingly improbable heights. Yet, under the microscope of postseason competition, the stakes are higher, the other team has similar talent, and the group with the most balanced attack with strong chemistry usually wins. Think Michael Jordan early in his career versus mid-career. Or, Robert Griffin III more recently. There are many stories of similar outcomes.

In the world of entrepreneurship, the principle rings true as well. Rare is the company founder who reaches great success who hasn’t enjoyed some substantial help along the way. Sometimes, it can be a co-founder. At other times, key employees. Externally, the founder may rely on a mentor or some key strategic allies. Whatever the dynamic, it is important to recognize our need for objectivity, resources, and expertise that we personally lack. 

Steve Olsher, the author of Internet Prophets, writing for Under30 CEO, espouses the virtue of serving before being served, and explores joint ventures versus alliances as a way to build a company. In the article, “You Can’t Do it Alone,” Steve defines joint ventures as being a more short-term relationship established for mutual benefit. He compares this approach to  the real estate market where someone invests in a condominium development, expecting a return as soon as the unit is built and sold. Alliances, continuing the analogy, are more like apartment investing because the return is longer-term and the fundamental math lends itself to retirement of debt early and increasing profits later.

Olsher offers the following advice on how to build a strong alliance:

Developing and maintaining strong alliances requires understanding the art and science behind the magic.

The first step is to know yourself. Grant yourself time and permission to understand who you are. Devote focused, quiet time to identifying your WHAT—that is, the one thing you were born to do. In order to form powerful alliances, you must know who you are. The reason is simple: an alliance is predicated upon providing value to others. If you’re unclear about what you have to offer, providing meaningful value will be met with consistent incongruities. The successful know exactly who they are and how they can best serve the world.

Before seeking to form alliances, understand who are the most likely beneficiaries of your knowledge and identify partners who can provide access to those who fit your desired profile. Ideally, the more you choose to live like a sniper and takes aim for the center of the bull’s eye, the more success you’ll realize. The successful focus on forging alliances with perfect partners and bring tangible value to the relationship. Like marriage, creating long-term mutually beneficial alliances takes work—a lot of work. The time and effort required for this to happen represents the single biggest difference between a joint venture and an alliance.

The “fiber’ of the strong cord is recognizing that one does not have a corner on knowledge–that there are others who have just as much–if not more–knowledge and/or experience in other areas. Taking the time to truly understand those with whom you need to build a strategic relationship is the “yarn” that is woven into your approach to business, and hopefully, your company culture. If you can systematically seek to know what will make others successful and determine to play a role in their success, you add strength to  their efforts as well as your own. Strands, then, are the individual interactions that you have with these allies, mentors, etc. They are periods of time when a significant exchange of ideas, perhaps monies, occurs and the interaction reaffirms the value of the relationship. While it is more allegorical than empirical, I’d argue that three mutually beneficial “strands” of interaction are a minimum for long-term success. Don’t be in a hurry to get an immediate return, as would a condominium investor–think about who and what you need for the long-term!

The Great Urban Entrepreneur

Five years ago, a pair of adventure loving buddies found a way to bring their love of thrills into an urban environment. They since have grown Red Frog Events into an $85 million business that hosts competitions during which teams solve clues and complete mental and physical challenges while discovering their city in a fresh way. Joe Reynolds and Ryan Kunkel have parlayed their $5,000 initial investment into a successful Chicago-based company with more than 60 full-time employees, three signature extreme races and a serious following.

The company’s most popular event, Warrior Dash, a 5K race packed with obstacles like a pond filled with logs, a rock wall, a tunnel of flames and a sinking mud pit, made appearances in 35 cities across the country in 2011 and drew 600,000 participants. This year the company is going international for the second time, taking its events to Ireland and Great Britain. Reynolds says, “When you’re really passionate about your business, you can see lots of tremendous opportunities.”

Nancy Mann Jackson says (in her Entrepreneur magazine article about him) “Reynolds had previously owned a house-painting company, but had no idea how to contend in the event-production business. What he did know was that he loved competing and creating fun experiences–and he wanted to share his passion with the masses. With hard work and dedication, he’s now doing just that. If, like Reynolds, you’d like to turn what you love into a viable business enterprise, start with these six tips:”

1. Don’t count on passion alone.

“Sometimes passion can blind you to the potential downside of your idea,” says John Torrens, a serial entrepreneur and an entrepreneurship professor at Syracuse University. “The one non-negotiable factor for any sustainable business is that they solve a problem for a specific customer segment in a way that is appreciably better than the next best alternative. Get as much feedback from potential customers as possible. No matter how great you think the idea is, you still need to understand what your market thinks.”

Remember the details. There are tons of ancillary functions that go along with running a business that must be performed well for it to succeed.

Dole out responsibility.  You’ll either have to delegate the primary work to others, or you may choose to delegate managing the operation to someone else so you can continue to focus on the primary work yourself.

2. Hire passionate people.

Having employees who share your zeal for the business will help your company succeed. For instance, at the Warrior Dash Louisiana in 2010, a series of tornadoes tore through the landscape during the event. Neither Reynolds nor Kunkel were in Louisiana, but the staffers who were managing the race stayed up through the night to repair the course and get all the obstacles ready again, so the competitors who weren’t able to finish could complete the course the following day.

3. Share your passion.

If you have a hobby, likely there are others out there who share that interest and would like to learn more about it. Sharing your knowledge can be a great way to build your business.

4. Keep the passion alive.

Reynolds and Kunkel make a point to continue competing in races themselves so they can maintain their love for running and recreation. Rather than feeling responsible for thinking of everything and micromanaging their employees, Reynolds and Kunkel empower their staffers to develop solutions to their own problems.

5. Prioritize fun.

Torrens says, “In the authentically passionate companies, everything grows from that passion, including the people, policies, branding and community relations. That obsessive focus on whatever it is that gets you out of bed can’t be faked, but it takes work to create the circumstances under which it can thrive. “

6. Expand your passion.

Reynolds launched Red Frog Events because he wanted to combine his love for adventure travel and competitive runs. But over the past five years, he and Kunkel have realized they are excited about producing recreational events in general, not just runs. This year they plan to enter the music festival industry, starting with their own Firefly Music Festival, which they hope will compete with some of the world’s largest such events.

Refuse to Lose (Investors’ Money)

Clarence Wooten, who sold his start-up Image Cafe to Verisign 7 months after founding for $23 million, told an audience at MIT/Sloan recently that there are keys to the entrepreneurial mindset. Barb Darrow with GigaOm summarized his comments into 12 lessons:

  1. Paycheck is an addiction. Not unlike crack cocaine. Entrepreneurs have to break that addiction to build an asset that will pay off long-term, not in a weekly paycheck.
  2. Beware of naysayers. Because 99 percent of this country works for the 1 percent, they  have risk-averse employee mentalities. Don’t listen to them.
  3. Just do it. Be like Nike. There is no roadmap. If you don’t do it, it won’t get done. Work lean. Corporate people are used to resources — HR departments, assistants but entrepreneurs do it on their own.
  4. Fail fast, fail cheap. You will fail a lot because you’ll need to try a lot things. So do that on the cheap. Instagram’s first product  – Brbn — failed but they distilled that app to its bare essence and it caught fire.
  5. Partner pitfalls. It’s scary to be out there alone. You want someone to share the ups and downs. Often one partner will work harder than the other but share the same upside. Share the downside as well and don’t necessarily split equity equally. Set up reverse vesting:  When you issue founder’s stock, make sure it vests in case someone leaves they don’t leave with all equity just with what has vested.
  6. Be naïve. Unlearn what you learned in corporate America about hierarchy. Being naive means being ballsy. Facebook turned down a $1 billion offer from Google and people thought Zuckerberg was crazy. He wasn’t but he may have been naive. That paid off pretty well.
  7. Business is a team sport. Would you rather own 100 percent of a $1 million-a-year business or 20 percent of a $100 million-a-year business? Everyone needs equity. You need as much brainpower as possible.
  8. Challenge your comfort zone. I knew I had to put myself out there speaking in public. I wasn’t comfortable with it but I did it.
  9. Image matters. People judge you when you talk about your company and you have one chance to make a first impression. If you’re not a design person, don’t do your own logo. Crowdsource if you need to.
  10. Shadow of a leader. You determine what your company culture looks like. Build it as a place you want to work every day. People watch you. At Image Cafe, I brought in a CEO who was religious. I wanted to act like a customer to get competitors’ pricing and she said “absolutely not.” She set the ethical tone.
  11. Investors want their money back. This is important. Investors back you. Your integrity is on the line. So know your exit strategy. I’ve never lost an investor’s money and I carry that chip with me every day.
  12. Cash and customers. Lessons 1 through 11 you can learn on your own but for #12 it helps if you have some education and understanding finance and marketing.

Wooten feels that entrepreneurship is a combination of talent, preparation and hard work. Following the 12 guidelines above will give you as an entrepreneur a chance to be more successful.

Secret Judo Guides Start-Up Success

What do you know about martial arts? Here’s a few things I found through a combination of sources:

  • Karate – is a series of punches, blocks and kicks that focuses on strength and offensive techniques; a primary theme is to either put or catch the opponent off guard and then attack.
  • Tae Kwan Do – incorporates many aspects of karate, but with more emphasis on the use of feet and spinning/flying kicks.
  • Jujitsu – uses strikes, kicks, strangles, locks and takedowns to disarm the competition, still aimed at offensive techniques for the most part.
  • Judo – uses throws and its intent is to avoid an opponent’s strength while redirecting its power to one’s benefit.

Tom Tunguz (whom I have quoted before), in his blog Ex Post Facto, encourages entrepreneurs to recognize the highlights of  judo philosophy  in never trying to fight strength with strength, and to find ways to maximize leverage. Tom also references Peter Thiel (from a series of lectures given at Stanford Graduate School of Business) who describes the use of a “secret” to secure a unique niche within your target market. The “secret,” though is not as one would think, but instead “something just not widely believed to be achievable or feasible. In other words, it’s an insight, a thesis that isn’t widely held.” The Secret becomes the “flywheel” of Jim Collins’ strategy – a series of well-executed small decisions that others find it near impossible to duplicate. For many entrepreneurs, the choice of distribution channels is a ripe field for building out one’s “secret.”

Tunguz writes of distribution:

Many companies are now using distribution as their secret – mobile app stores and Facebook Open Graph enable startups to access hundreds of millions of users in ways that incumbents simply aren’t prepared to leverage. Expensify uses mobile app stores to acquire hundreds of thousands of SMBs in ways that their market’s incumbent, Concur (market cap $3B), simply can’t copy. Branchout is building a massive job network on top of Facebook to compete with LinkedIn. If LinkedIn were to copy Branchout, they would marginalize the value of their existing network because LinkedIn would cede their graph to Facebook – an example of the classic “innovator’s dilemma.”

In order to remain relevant, (solve the innovator’s dilemma), entrepreneurs must find a way to continue to grow new ideas within their organizations, less their businesses become to mainstream and lose their uniqueness. This is where/how moving to principles-based strategy trumps reliance on a skilled technician and his or her own suite of strengths and abilities. Continue to recognize what strengths competitors have, then find a way to use those strengths against the competition and towards one’s own competitive advantage!