Growing Fast -- and Smart
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So, you're ready to seize that business opportunity? First, answer these five questions.
Wall Street Journal
By DONALD N. SULL
June 16, 2007; Page R8
Much of the literature on entrepreneurship focuses on how to find and evaluate opportunities. But for many entrepreneurs and managers, seeing the opportunity is the easy part. The real challenge lies in seizing it.
Those who have identified a gap in the market often stumble because they can't scale their organization to meet booming customer demand before competitors encroach. To use a military metaphor, a general must not only spot an opening in the enemy's defense, but also marshal the resources to execute an attack before the window of opportunity closes.
The rapid growth required to seize an opportunity places enormous strains on a company's resources, organization, balance sheet and management. Here are five key questions entrepreneurs and managers should ask themselves before scaling a promising initiative:
1. What are you betting on?
This is a fundamental question, and should be easy to answer. "I don't know" is a bad answer. When entrepreneurs cannot provide a clear or compelling answer to this question, it typically signals that they haven't yet articulated a clear customer need or settled on a business plan that makes financial sense and provides an advantage over competitors.
The most compelling answers to this question often link back to changes in the broader context, including technology, the economy or society, that spur demand for new products and services or better ways to meet existing needs. The combination of increasing disposable income and growing health concerns, for instance, spurred demand for bottled water in China, an opportunity Groupe Danone seized.
Whatever the source of the opportunity, clarity on what the big bet is provides a focus for subsequent activities and clarifies the pitch for resources.
It is normal for entrepreneurs to go through several business models before settling on one, but a common mistake among both start-ups and established companies is to overcommit resources before the business model has been nailed down. Premature commitment will expose the problems in the business model but leave little time to resolve them.
One technology founder decided to launch his product nationally, against the advice of his board, because he wanted money to endow a building at his alma mater, and a phased rollout wouldn't have paid the bills.
While personal ambition is a necessary ingredient of entrepreneurship, it alone is a bad reason to scale a business. The same is true when outside directors or senior executives push managers to aggressively expand a business to satisfy investor demand for growth -- rather than because a real opportunity is waiting to be seized.
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