Some time ago I wrote/drew this piece about my take on Education for global leaders.
A friend asked me if I had another version for the small entrepreneur, the normal guy, the one of us.
Here it is.
As a side note, I found that charts in tones of red look amazing both in the daylight and dark version of the website, so I am officially making all my charts kinda reddish.
I would say with some level of confidence that the primary focus must always be on Marketing and its fundamentals like: pricing, competition, product/service, promotion/advertising and channels.
It does not matter if you are launching a product next week or you already have a running business, Marketing fundamentals will give you the parameters to adjust your value proposition to buyers’ expectations.
Sales comes next. Today there is a large debate about how to gain efficiencies out of your sales strategies, channels and overall business development. But again, it all boils down to what you have received from Marketing as input on how your target audiences, aka customers, want to buy your products or services. Yes, any successful business has a good level of understanding about how its customers want to buy. Maybe they are “high touch” types to like to have a in-person experience with the sales agent, ask questions directly and bargain price. Or, on the other side of the spectrum, customer may prefer a low or no-touch sales process running entirely online via self-service. Or maybe it is a blended strategy between your products and services.
The amount of resources allocated to Sales and Marketing operations in order to make the business wheel spin will require from the management team — and from you as the entrepreneur — a solid understanding of business Finance. In the end of the day, we are talking about ROI, Return on Investment, where you are making a bet to invest X amount of your Marketing budget on this TikTok’s influencer your team believes will help leverage sales among a specific target group. So now you are expecting to get “more than X” in return once customers start to put orders through.
A weak Financial team may have trouble tolerating risk coming from Sales and Marketing and thus restrict budget to a minimum. An over confident or inexperienced Financial team may allow Sales and Marketing to come up with expensive programs and tactics under the excuse to “sell more” or that “sales is the living blood” or “the oxygen” of the company, therefore, no one should deny them a fat budget.
It is not a matter of having a “fat” or a “slim” budget, but the ROI mentality and a clear notion of how risk plays out in the business environment.
Another key role of Finance is to evaluate input coming from Marketing regarding the need to expand or improve the current offering of products and services. The Marketing team may have identified new opportunities or threats coming from the market that will require the company to make an investment to either defend its position in the market or, in a more positive scenario, expand business to where the competition is not present yet.
But before that, Finance will have to study the feasibility of that business proposition from Marketing and, from an internal perspective, come up with an answer to the ultimate question: “Would we make a profit from this?“
Let us say there is great potential for profit and a moderate risk perception, in other words, there will be profit if we stick to our business fundamentals and do a good job. This is only half of the challenge.
The other half will come from the Local Regulations analysis. It is simply pointless to go ahead with a business idea if it known to be illegal in that particular market, for example. Or, in a less dramatic scenario, taxes and other obligations may turn operations around that product economically unfeasible, not matter how big and attractive the consumer market looks like. We are back to risk analysis looking at the capacity to the company to make a profit out of that new initiative.
People may argue what type of analysis must come first, the internal one that verifies the business’ ability to adapt to the market, or the external analysis on Local Regulations, which can point to a go/no-go type of decision to the company right off the gate.
Maybe a business plan build upon Marketing, Finance and Local Regulations input altogether is the way to go.
Of course, it might not be the case to build a full blown business plan to decide whether or not the company’s milk shake would come out with marshmallow. Maybe a quick meeting with Product Management would be suffice.
Some companies consider Product Management as part of Marketing, others do not, mainly because they believe it goes beyond the typical boundaries of Marketing into Research&Development (R&D) or even strategy.
In my view, Product Management sits within the overlap between R&D and Marketing, and often consults with Finance, Sales and Legal to fine tune its work.
The R&D approach is key to bring answers to pressing questions inside the company in regards to new raw materials, tech, machinery, partners etc. that could be used alone or in arrangements to provide the best value to customers and to the business itself.
Once the Marketing team’s research showed that electric bikes are in the short term horizon of the company, the Product Management team released a list of suppliers that could fulfill the parts needed to for the company to build the “basic” and “pro” e-bike models they have designed a year ago. Finance proactively worked on RFIs with some of the suppliers from the list and have two as the main contenders which prices are attractive to the company. Legal issued a report on Local Regulations around the types of batteries that the two short listed suppliers produce. One of them produces low priced batteries, but they are considered now “dirty” and harmful to the environment. The company could go ahead with them, but it would require the implementation of “reverse logistics” to pick up bikes with faulty batteries and give them the right destination. The other supplier works with newer batteries that do not harm the environment, so there is no strict local regulations around them, thus no extra cost for the company to implement reverse logistics.
So if you are managing a small business, it might sound as an impossible challenge to keep up with all those knowledge areas and excel at them.
No, that is not what you want.
My intention with the chart with the circles was for you to understand their importance and interrelationships for the business.
Once you recognize the dynamics and the need to be a high level contributor or even an influencer that interacts with agents from each one of those areas, you will be much more comfortable in making decisions — or even NOT making decisions until you have consulted with the right people on the right topics.
The next level in terms of internal efficiency may be achieved when leaders from each one of the areas recognize the need to interact with each other for the benefit of the business. In other words, defying the silo mentality and adopting a more integrated, process oriented view of the company and its relationship with the market.