Many entrepreneurs make three crucial mistakes early on. They do not pay enough attention to customer preferences; they ignore their competition because their product excites them, and third, they refuse to follow their business strategy. In fact, some have no strategy. They usually make all three of these mistakes because they succumb to pressure to get a quick return on borrowed funds.
In the January 2014 issue of Harvard Business Review (HBR) Roger Martin identifies rules to prevent common mistakes when developing a strategy. He states in this article, The great lie of strategic planning, that the first rule is “keep the strategy statement simple”. Instead of a long, often vague document, the company’s or entrepreneur’s strategy should summarize the chosen target customers and value proposition on a single page.
Crafting the strategy takes time and thought, so the owner must be patient and learn to filter out the many unsolicited voices telling him how he can make money fast. I can’t stress enough how crucial it is to develop a simple start-up strategy. This simple strategy will be the guide to carrying out the owner’s mission or purpose for doing business.
Harvard professor and author Michael Porter says The strategy must be unique.. He goes on to mention that strategy:
- by consensus is a bad strategy
- is not engaged; is clarity
- it’s about elections
- you need a set of unique features to help you stand out from the competition
Porter then adds that less than 25% of companies have a clear strategy.
The strategy does not have to be embedded in many pages, it can and should be clear and simple.
In his 1985 book, Innovation and entrepreneurship, the late management guru Peter Drucker (1909-2005) said that entrepreneurs create something new, something different and have unique characteristics. He said that McDonald’s exemplified entrepreneurial spirit; “They didn’t invent anything that no decent American restaurant hadn’t churned out burgers for years.” Drucker continued, McDonald’s asked:
What is customer value?” Then they standardized the product, designed processes and tools, dramatically improved yields, and created a new market and customer.
Drucker said that McDonald’s carried out the entrepreneurial spirit. Whether the entrepreneur is a large existing institution or an individual starting their business single-handedly, the same business principles apply. “The rules are more or less the same, the things that work and the things that don’t are more or less the same, as are the types of innovation and where to look for them.”
A new business owner often does not spend enough time figuring out the value of their product or service to the customer. He also doesn’t spend adequate time developing and testing his strategy. Instead, he focuses on making quick money. That is why it is crucial that the owner does the following:
- Take time to understand who the customers are
- Identifies needs and wants, real and perceived, and target markets.
- Decide how to meet those needs consistently and to a high standard
- Be patient and focus on the long term. Research shows that family businesses are more successful than non-family businesses because family businesses take the long view when making decisions.
Other things homeowners are doing wrong include:
- Listening to too many people with divergent views on the business
- Trying to “save” money by not getting the resources needed to consistently produce high-quality goods and services
- Not taking enough time to raise proper funds in the “proper” way. They often borrow from family and friends without clearly indicating the risks involved and the repayment terms.
Starting a business is risky but rewarding and requires patience and courage. However, heeding the tips above will significantly increase your chance of success.
