Wednesday, May 28, 2008

biz plan contd

Section V Management team

it is very important to put together a good management team in place, right from the word go. most entrepreneurs tend to hire people with lesser competencies simply because they are available at a lesser price. what then happens is that when the organization grows and the people who have been hired cannot grow with it, two scenarios are likely :-
either they have to be left by the wayside in which case all the time, money and knowledge invested in them by the entrepreneur simply goes waste; or the fact that they fail to grow with the organization can actually stop the organization itself from growing. both are unhappy scenarios for the entrepreneur.

the second show stopper is when the entrepreneur refuses to delegate to people with better competencies than himself. most entrepreneurs tend to be very possessive about their ideas and their biggest failing is that they believe that firstly they are as good at implementing as they are at ideating, which of course is a big blunder. secondly they believe that since it is their idea, nobody can do it better than them. which is an even bigger blunder.

successful entrepreneurs recognise early on that they cannot be good at everything, understand what they are good at and stick to doing only those jobs they are good at, and hire competent people to execute those jobs that they are good at.

this is how an entrepreneur build his team. i have heard entrepreneurs lament often enough that they cannot attract talent as startups dont have brand equity. this is true. but what is also true is startups, more than others, need evangelists in the team, people who believe in the biz as much as the entrepreneur does. obviously in a startup you cannot attract talent by paying more because in any case you are strapped for cash; nor can you attract on account of your name or credibilty, because those are yet to be built. so the only way you can entice people to work with you is to look for such people who are moved by ideas, who are willing to give up conventional comfort for the sake of a tremendous idea. ideas should not only move businesses, they should move people too, all stakeholders infact, customers, employees and investors.

as i keep saying, ideas are the starting point of all businesses.

Monday, May 5, 2008

biz plan, contd

Section IV Operations
in this section, it is important to describe in detail how you propose to create the product and reach it to your customer. if it has to be manufactured, you will have to mention location of factory, why you chose that location over other locations, - eg, is it cost beneficial or is it convenient from raw material perspective,- whatever your reason for choosing that particular location.

Eg George Lucas made Star Wars a profitable enterprise because he shot only a small part of the film in the US and bulk of the shooting was in UK, using local crew. at that time it was standard practice for Holloywood to move its entire crew from US to locations where they were shooting. and that used to add to the humungous cost of production.

Lucas did a number of inventive things to keep costs low because he was forced to. after nearly every Hollywood studio had turned him down, at the Cannes festival, Lucas had approached 20th century fox who agreed to fund the venture provided Lucas shot within the prescribed budget. Lucas agreed as he was desperate to make Star Wars because knew it in his bones that the entire series would be a runaway hit.

for instance, after the day's shooting Lucas would courier videocasettes back to Hollywood everyday for processing. even in movie distribution, they were very innovative. eg in Haiti and Mali, distributors were encouraged to sell movie tickets for vegetables as currency and then convert it to dollars! such out-of-the-box thinking led to almost 40% of revenue to come from outside US markets.

the movies were huge successes in Japan and Germany because Lucas saw to it that there was good quality dubbing. his logic was that the themes of the series were universal and were not culture-specific.

they went all out to convert to all home-viewing standards as there was no single international standard.

big time property licensing was initiated, eg Darth Maul, Princess Amidala, Jar Jar Brinks.

Pepsi printed the characters on its cans.

Tricon distributed the merchandise in its restaurants.

The Phantom Menace, which was a prequel to the trilogy was the first ever movie that was globally released in 1999. and by the year end, it had grossed $417 million in ticket sales, second only to Titanic.

all of these initiatives put together brought down the per viewer cost.

the choice of location could also be influenced by taxation laws, proximity to markets, availability of labour, government subsidy, etc. Eg the SEPZ may become the location of choice for the myriad benefits it offers to software exporters.

bio-diesel manufacturers may choose locations based on transportation access, warehouse convenience etc that may have a huge impact on the costs of operation and therefore their competitive edge.

in this section, you may also describe the entire logistics of reaching the product to the consumer. and this in turn is based on the sales channel that your company has identified for it, the length of this channel and access to the end Samsung sells its washing machines through dealer network which in turn sells it to the end user. Bingo snacks are shipped to distributors who in turn despatch them to retailers who in turn sell them to end customer. Dell sells its computers directly to customers on line.

this section basically deals with the entire process of obtaining raw material, manufacturing the product, and reaching it to the customer.

in my next blog,we will discuss Section V which is about management structure of the organization