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So you want to become an entrepreneur!

16 Jan 2014 00:00

People are not born entrepreneurs, rather they have managed to develop a certain way of being and it is something from which we can all learn and develop.

People are not born entrepreneurs, rather they have managed to develop a certain way of being and it is something from which we can all learn and develop.

I differentiate between a businessman and an entrepreneur. Whereas businessmen are often pragmatic, and focused on what makes financial sense for establishing a commercially viable business, entrepreneurs’ give more attention to the poetic side of the business; things that bring charm, future possibilities, change in the social and business connections and a sense of being part of something bigger than a set of products. As a result an entrepreneur has a different perspective on what is important, in life and commercially. But to setup and maintain a successful business we really need elements of both. 

Influenced by success stories such as Facebook, LinkedIn, Google among others young “entrepreneurs” are in search of a "fresh", "new", "unique", “innovative” idea to start a new business. But not all successful businesses are built upon that brand new idea; instead they are an extension of or a twist on an existing one.   Take Starbucks which started in 1971 with a small coffee shop in Seattle selling bags of speciality whole bean coffee to connoisseurs. In 1987 Howard Schultz, inspired by a revelatory trip to Milan where he experienced firsthand the ‘espresso experience’ bought the company for $3.8M, started opening new stores and extended the offering to espresso style beverages.  By 1992 the company had 141 stores in US which has now grown to have 20,891 stores worldwide.

There was nothing new or innovative about Starbucks offering. Italians have been serving coffee in a place that people can hangout for generations. But that was new to Americans. Schultz believed that ‘people need a place outside work and home where they could relax and enjoy each others company.   The only unique thing about Starbucks was Schultz’s belief and commitment to introduce a new way of being into his own community.

Let’s look at Apple iPod which seemingly was the main driver in pushing Apple’s share value from $7 in 2003 to $180 in 2008. It first appeared in 2001 using a technology that had been in development since 1987. But they managed to launch the digital audio player revolution.

iPod was anything but an immediate success. For the first three years they were selling 100-200 thousands a quarter. From mid 2004 the volume started to grow and by December 2009 250 millions of iPod were sold.  It wasn’t the digital media that revolutionised the music industry. It was the iPod + iTunes idea which together with the availability of high-speed internet made music easily available that changed the industry.

We shouldn’t forget that Sony developed the first digital audio recording device to be used by professional studios in 1978. They also created the personal audio market in 1979 by the introduction of the Walkman portable cassette player. I guess Sony got the idea from watching people carrying a large cassette player on their shoulders and thought there must be a market for portable music players!  In relative terms we have moved very quickly and definitively from the old style Sony Walkman to the iPod generation. There is no going back.

So called innovative products are only a small step further than their predecessors. Also, innovation is never enough to establish a commercially viable business. From my perspective all successful business ventures have started from the community which they intend to serve. They either committed to addressing a shared concern or to bring forth new possibilities.

We always see the influences of innovative enterprises on our society but we fail to acknowledge that it has been the social and business environments that spawned the innovations in the first instant. Entrepreneurs are great observers of trends. They notice anomalies that are on the edge of our societies and bring them to the centre though new product and service offerings.

The most effective way to influence people is through our emotions - and stories are perfect for that. In fact, I reckon stories are part of human consciousness. Great storytellers package and convey their message such that it resonates with us emotionally. Through their stories they influence our behaviour and persuade us to take certain actions. Every business needs to have a story which describes where they stand in the community and what they intend bring forth. Entrepreneurs always have a compelling and emotionally charged story which they are committed to.

Creation of successful products spreads wealth in the global value chain well beyond the company whose brand appears on the product. The history of iPod is a good example of an interconnected, globalised, outsourced economy that we live in today. The iTunes + iPod idea originated by Tony Fadell a Lebanese American engineer who was later hired by Apple. Apple’s initial manufacturing partner was Taiwan Inventec Appliances which manufactured iPod in China. A Silicon Valley start-up founded in 1999 was a key partner in the iPod development. They provided the main microchip and accompanying design that controlled the iPod basic functionality.

The market power can be situated almost anywhere in the value chain of a product but this wasn’t the case for PortalPlayer. They went public with an IPO in 2004. By 2005 Apple represented 93% of the PortalPlayer’s sale. The high level of dependency on Apple made them only one product revision of iPod away from falling to serious difficulties.  In 2006 the new iPod was designed without PortalPlayer’s processors and in November 2006 Nvidia signed an agreement to acquire the company for $357 million. I don’t know whether this was a good return for the investors or how PortalPlayer contributed to people and the society. The only thing that we know for sure is that the business entity is no longer here.

I have been seriously struggling with a question for while. What determines a successful entrepreneur? The most obvious answer is creation of successful businesses. Even then success is not absolute and has many interpretations. But I believe regardless of the definition of success entrepreneurs need to be ‘ahead of the curve’, be good listeners, committed to a mission, have the ability to understand their own shortcomings and use their story telling skills to attract a right team as well as financial backing.

By their success we can measure them, for sure, but in their efforts lays their true worth.

Category

Blogs

Date

16 Jan 2014 00:00