Category: Management

Last day, I spoke about some considerations that you must take into account while starting your business. While I am not too much a fan of grand vision and mission statements, I strongly detest the idea of being too verbose about profitability. As a young business you should not be driven by profits but you should understand what drives your profitability. First let’s attempt to understand what profit means. According to Michael Porter profits are no more than the sum of the difference between the price that customers pay for an activity and the cost of that activity. Thus, if customer is not paying for an activity then it’s non-revenue generating overhead. As a startup, you must minimize this overhead. The best way to do this is ask – “why am I doing this?”, before you add any process or demand a new report. Don’t put the cart before the horse, profitability within the business depends on certain fundamentals and you need to: 1. Drop the image of a lone warrior and focus on building a team. You’ll need to hire and retain the best people you can find. If you don’t have good talent then you will never be able to do things as effectively and efficiently. On the other side, the cost of replacement of your best people is incalculable. If you have good people then you will navigate through anything. 2. Minimize overhead. You need to ensure that maximum efforts are put in revenue generating activities. If your best people are not spending their time productively then you are not growing as fast as you should be. 3. Be crazy about customer success. You need leave a breadcrumb of successful projects and clients. If you focus on this well then, you marketing and sales will almost be on an auto-pilot for lifetime. 4. Stop competing on price. It’s not wrong to enter a matured industry without having something special (read different) to offer to the market. But, you should never differentiate yourself on price. The reasons for this demand a separate article but I would like to hint that a differentiator should not be easily copied by competitor and price could be easily cut further by an ignorant competition.

There is a lot of literature around about starting your own business and growing it. The problem young companies face is that it’s often a single man who has to do everything and it’s easy to loose your priorities. The age old adage – “All’s well that ends well” does not work here, it’s important to start well! Here is a small list of things that if you can follow: Keep customer satisfaction above everything else Service business runs on referrals and reference checks. While, there are plenty of blog posts around that talk about getting even with customers or firing them, I recommend you abstain from them for a while and rather choose your customers carefully and then do everything to keep them happy. Remember that you’ll need projects that you can showcase in your portfolio and people who can give you five star feedback. Build your management team You will not be able to grow if you have to everything yourself. You need a line of leadership within your organization that can take care of entire functions and handle tough issues. A start-up is usually starved of cash and hence do get too crazy about hiring management grads. Instead hire people who are keen to learn, have a fire in their belly and are ready to grow with you. Assign them responsibilities early-on and let them do their jobs. Invest in Tools and Processes It is much easy to adopt a tool and process in a 5 people company than in a 50 people company. Thus, it is important that you sit with your team and employ tools in the areas on project management and establish key processes atleast in the areas like Project life cycle, Accounts & Invoicing and HR. There is plenty of free stuff in the market and you will realize later that your PM tool has become a goldmine of information and even a platform for information sharing. Specialize Don’t fall into the trap of trying to pick of all sort of projects regardless of price and technology. This garbage collector approach will put you in a death spiral from which you will not be able to recover from later. In the initial days it is important that you specialize in only certain type of projects. It will be easier to manage! Try looking for simmilar type of projects as the code reuse can boost your profitability as well as you can surprise the customer with a quick delivery. You must have proper management body in place before you undertake any diversification initiative. Save Cost Don’t run into renting the most plush offices that overlooks the ocean and buy expensive furniture with Aeron chairs. Remember you are startup and you are not competing with IBM. Keeping your ego in check and that will help you control your expenses. I don’t remember where I read it but I must quote and say is that being successful is not about doing things exceptionally well but it’s about making lesser mistakes.  

Aristotle was one of the greatest philosophers who ever lived. I think his contribution to both science and philosophy is enormous. He described that there are four types of “causes” i.e. Material, Formal, Efficient and Final. Let me describe these causes in the following way: Let’s assume that a programmer has made a software using PHP. In the above example, PHP is the material cause because this forms the material from which the software has been made. The Formal cause is the essence or the need for fulfilling which the software has been created. The efficient cause is the act of programmer keying in PHP codes into the computer because this act actually results in the software to be created. Otherwise, the programmer can look all day at the screen and there will no software at the end of the day. The final cause of the software is the programmer itself and what he had in mind about the essence of the software. Why is this important to know? When I spent some time thinking about it, I realized that the impact is very deep. For one thing, causes leads to effects. The final cause of the software is the programmer’s interpretation (or misinterpretations). Thus, the final cause may end up producing a software which is very different from the formal cause. What if there is unity between the final cause and formal cause but the material cause is insufficient i.e. the technology used to produce the software is incapable of producing the desired application? Thus in order to meet the formal cause of any software application it is important that: The technology (or material cause) should be available or acquirable. The process and resources (efficient cause) should be available or acquirable. The understanding of the formal cause should be shared across the team members.

Organizations need to continuously improve themselves, not for capturing more market share but for maintaining the current share that it holds. However, most of the improvement efforts tend to focus on levels that are not directly contributing to creation and delivery of products and services. I don’t blame people for this, but if you are trying to improve too much without actually impacting the way the work is getting done then you will achieve too little. If you don’t see the link, then try to think your organizations performance as a summation of performance of all individuals within it. This chart will probably help you think: ∑ Individual’s performance = Performance of the Team ∑ Team’s performance = Performance of Department ∑ Department’s performance = Performance of Organization Now given the above relationship, look at what you need to do to improve the organization: To Improve the Organization => Improve Departments To Improve the Departments => Improve Teams To Improve the Teams => Improve Individuals Thus, before wasting a single dollar on any silver bullet solution, the most important questions to ask is – “Will it improve the way the individuals works?”. If you can’t say yes, then it ain’t worth doing it and on the other hand the smallest change that can improve the way an individual works, is worth doing right away.

A quick tip for budding entrepreneurs: If your business starts at the right time, you can extract maximum growth by getting ready when the industry segment gets the peak demand. I strongly suggest that a new business should be started during the “low-tide”, i.e. when markets are not doing well and industry sentiments are not positive. It helps in many ways: 1. You can get the best talent available in the industry due to lay off by major players. 2. You will not have major competition and you can prepare your competitive edge “in hiding” to give surprise to your competitors. 3. Tough times results in innovation. It is highly probable that your company will have the “innovation” advantage as you try to come up the adversities of a low-lying market. This innovation can become a catalyst when the markets are strong and can become the deciding factor. 4. You can concentrate in building the right processes, measurements, quality control systems and genetic-composition of your company which will result in its rapid growth when the right time comes. 5. Your expenses will be lower in building the fundamental framework for the company. It is well known that markets have both the ups and downs. I feel “downs” should be well utilized to prepare the company for taking maximum advantage of the “ups”. It makes much more business sense and also keep your spirits up! Note: It is important to be patient. It is very important to know that you are preparing for the “good days” and, it is most important to know that you should not blow up all your money, since capital is another thing that you need to scale up your company fast when the right time comes.