Raj Shankar's Blog, page 30

Tough decision – what to focus on?

This is the time of the year for reflection and contemplation. This is the time of the year for reviews and planning. This is the time of the year to reflect on your priorities and focus areas. But most often this is not the time of the year that these are worked upon. Most entrepreneurs don’t seem to use this change of calendar to relook at the year passed by and reprioritize actions.

“What to focus on?” is a question that a lot of people ask themselves but don’t take the effort to answer. The reason they don’t do this is because of the lack of conviction in what they want in life. This leads to lack of courage to take tough decisions. This results in moderate results over another year. How do we avoid this?

By clearly finding out for ourselves what we want to do with our lives. If we can figure this out, we can put our entire focus on it and achieve it. It will also enable us say no to every other interesting opportunity that we pass by.

Every successful person first and foremost knew what they wanted. This led to them deciding where they would focus their time and effort. They also knew where they would compromise and where they would not. This enables one to spend more time working towards what we want and less time wondering which to work on! In fact in most of the cases of people who don’t achieve things they wanted to, the reason is rarely potential. It is a lack of focus. This results in lack of direction to the effort, thereby resulting in fatigue and boredom.

Try to avoid this in the coming year by thinking about what you want to spend your time on and why. Answer the why question so that your efforts become meaningful and results imminent.

Try it!

Interesting Links This Week: 29-December-2013

‘Persistence’ is an admirable trait. This goes beyond writers and well beyond the realm of art too. Many times in art we see aspiring artists give up too soon, for want of early recognition. Persistence helps in staying the journey for the sake of the journey. This makes the experience and life peaceful, happy and fully satisfying. Over and above this increases the chances of success. Here is Nick Whitmore, Managing Director of ContentWriting.org share some thoughts on how persistence pays in writing! Read more here – Link: http://www.copyblogger.com/persistent-writer/

 

The Dutch seem to be becoming the ‘go-to’ experts on water management, especially floods and storms. They seem to be spreading the word that resilience is not in building better fortresses but in partnering and opening up to the water flow. While there is a huge surge in demand for such help from across the world, the future seems to elicit human beings to better understand the ecosystem before living life. One interesting futuristic trend that this article suggests is building living spaces on water! Interesting insights! Read more here – Link: http://www.fastcoexist.com/3020918/how-the-netherlands-became-the-biggest-exporter-of-resilience

 

Do you have a boss who is demotivating? Almost every boss I speak to complains about the lack of a good team. Since some time I have been thinking about this problem, especially in the start-up world! I stumbled on this article and found the insight interesting. Three key ways to demotivate and remove all energy from your people, without even knowing you are doing it. When we look at the ways, it looks so humble and right! I hope every entrepreneur reads this and avoids at least these three habits. Read more here – Link: http://www.strategy-business.com/blog/The-Three-Habits-of-Highly-Effective-Demotivators?gko=81b98

Christmas 2013 and a giving routine..

The season around 25th of December every year brings to the mind colorful people. brightly lit streets, decorated churches, stars of all sizes, Santa Claus, gifts, wishes, happiness and celebration. Also inevitably one word that every person acknowledges thinking about is “giving”. However giving is reduced to what is shared with the downtrodden outside churches, outside homes, on our routes that we take. Take a moment and ask yourself ” Are they the only people who need?”

Why don’t we take a different walk this day? Why don’t we see the Lord in the first stranger who asks for help? Why don’t we stop judging if the person really requires our help or not? Why don’t we do this daily? Why don’t we start a small giving routine daily?

This can be to stop  holding back or delaying of payments for products/services that we have used/bought. This can be to stop negotiating with providers for little savings which are insignificant to you;  but giving it to the other man (knowing you are giving more) to whom it could be more significant.

So let’s start this Christmas a nice little attitude shift towards giving, towards sharing with all who we can.  But it is easy to start with people who are already asking us. The most important thing in practice of giving; is to do it without judging.

Seasons Greetings and Merry Christmas!

Pricing for Entrepreneurs: Seeking Vs Being Sought – impact on Price Discovery

I handle a lot of workshops and mentoring sessions with entrepreneurs and emerging business leaders (mostly entrepreneurs or CEOs) regularly. Almost every interaction, be it sales, marketing, strategy, or finance, invariably brings up the discussion on pricing. Pricing seems to be an important topic for every firm (more so for emerging firms). While effort is made to discuss many approaches and methodologies on pricing, rarely does it lead to better pricing. Fundamentally I think the reason for this failure is our expectation. We want to discuss to arrive at the right price, but from my limited research and consulting so far, price cannot be arrived at, at least not in the real sense of the term.

Price has got to be discovered if it is to be close to what the product / service deserves. The prerequisite for this is a good understanding by the customer of what ‘value’ the product / service proposes! The biggest hurdle to selling your product at the best price it deserves is customers’ not really understanding ‘value proposed’. Why should they take the effort to validate whether ‘value’ is commensurate to the price being demanded? Is it not the responsibility of the entrepreneur to do that? Pricing is not just a calculation or mathematical wizardry. It requires being out on the field and attempting to closely understand how the proposed value translates into real value for the customers.

If entrepreneurs do a good job of mapping ‘value proposed’ to ‘benefits experienced’ then the sales cycle would move from one where the entrepreneur keeps seeking customers to one where entrepreneurs become sought after by customers. This in my opinion has a huge impact on price. Can I turn my business from one where I seek customers to one where customers seek me? If we can, then pricing will yield the greatest ‘gross margin’!

Think about it!

Fired from your own company

Entrepreneurs always have funny incidents to share! They are funny to all who are listening to it and it becomes funny even to the entrepreneur in hindsight. But when they are going through the funny incident, it is pretty serious and full of stress and anxiety. One such incident is – “getting fired from your own company”.

The man who really made this popular was Steve Jobs when it happened to him at Apple. Of course over time he did come back to Apple and restore its glory. In the process he did raise himself to a different pedestal as well. But when he was fired from his own firm, life was tough. He had to acknowledge the challenge, accept the reality, handle himself, whip up his entrepreneurial spirits and start again so as to get moving ahead in life. In recent times I came across an article where George Zimmer faced a similar challenge. Here is the write up: http://finance.fortune.cnn.com/2013/12/09/george-zimmer-mens-wearhouse/

But the reason why I am writing this is because I had an interaction last week with one of the entrepreneurs in India who is going through a similar turmoil. He seemed surprised on how this could happen! When I shared the above two stories he acknowledged that this situation is actually possible. There are many reasons why it happens:

A more influential co-founder takes over the firm and asks you to leave or informs you about the decision

An outsider who comes in and becomes a stronger voice within the firm thereby establishing himself/herself

A rift between the founders divides the firm and the stronger or smarter one always edges out the other

And many more…

In the case of this young entrepreneur, their friendship was broken as the success grew. But little rifts and petty quarrels were ignored which eventually led to formation of two entities (not literally, but subtly) within the same firm. Over time when bigger decisions needed to be taken, it led to outsiders using this weakness to wedge the firm and eventually get one of the founders (the softer or more emotional one) out of the firm.

While it is a difficult situation for every founder to handle, in most cases they can be avoided or at least made less surprising! A business should be treated as a business and given respect as a separate entity apart from the individual founders. When this is done early, enough transparency can be maintained between the founders on company matters. This leads to a healthy relationship between founders, investors as well as people working closely with the founding team. Even early stage employees start enjoying the business and are clear on how the firm will progress. If this is not done, the business is always seen as an extension of the founding team. If this view persists emotions are bound to play their role, teams are always attached to people and there is always the possibility of factions within the firm. It becomes inevitable. Founders need to keep their enterprise creation efforts separate from their team building efforts. This helps keep emotions at check and enable build a healthy business. And this also reduces the possibility of such surprises, such as getting fired from your own company!

It is not a funny incident once you delve into the details, but learn to laugh at it and move on in life was my advice to this young entrepreneur. If he wanted to handle this problem, it should have been done way early, not now. Worrying over lost opportunity is not an entrepreneurial trait – so accept reality, build resilience and get back on the path to being entrepreneurial. Perseverance to the cause pays in the long term.

After a bit of mentoring, he is now back to the drawing board, trying to build his next start-up! My wishes to him to kick-start and build the enterprise of his dreams again!

Interesting Links This Week: 22-December-2013

Being entrepreneurial is becoming more important than entrepreneurship in general. When viewed at from this angle, the domain of entrepreneurship becomes more applicable than the narrow block of only start-ups. Eric Ries, author of Lean Start-up provides us some perspectives on this aspect, especially when applied within a large corporate. Read more here – Link: http://www.strategy-business.com/article/m00011?gko=2fdfe

 

In today’s attention deficit world if people don’t think great about you for a reason, then in all likelihood one does not get sufficient attention. But how does one gain attention of others – by carefully building a good professional image. While there is a lot of talk about what constitutes professional image and image consulting becoming quite common in professional circles, one wonder if image goes beyond dress and etiquette. Here is an interesting interview with researcher and Professor Laura Morgan Roberts on her upcoming paper on the subject from. Read more here – Link: http://hbswk.hbs.edu/item/4860.html?wknews=04032013

 

Dharmesh Shah of hubspot built a whole business around inbound marketing. But now he tells the world that it is not the complete answer. This is because people buy from people, which means everything at the end of the day is about solving people’s problems. We need to be more human in our approach to business. If a company is not caring about its customers, the algorithms will figure it out and no amount of advertising and PR can save the firm. Read the interview and learn some cool insights on marketing. Read more here – Link: http://www.inc.com/magazine/201311/jeff-haden/hubspot-co-founder-says-inbound-marketing-is-not-the-answer.html

Pricing for Entrepreneurs: Pricing Approaches

In an earlier post we discussed whether price should be set or discovered by entrepreneurs? If you have not read it, here is the link to it: http://rajshankar.wordpress.com/2013/12/10/pricing-for-entrepreneurs-is-price-set-or-discovered/

Extending our discussion, let us understand how price can be arrived at! There seem to be three broad approaches that entrepreneurs can use to discover price. While the first two methods seem to tilt towards setting price, the last method can lead to price discovery. Since setting price is easier, most entrepreneurs resort to the first two methods.

The three approaches are:

Cost based Pricing: This is probably the easiest method to set the price for a product or service. Since most companies can identify what they are spending to make a product or service, they tend to add to it a comfortable margin and set a price. While it may seem easy to find the cost of making a product or service, in most cases they are only close approximations. But since scale of operations is small this does not seem to affect the overall financial statements in any way.
Peer Pricing (market/industry): The second most commonly followed approach is to find what the market is currently paying for the product or service. If there is no direct competitor, substitutes are considered as close approximations. If an industry has players supplying at varying price levels, then entrepreneurs attempt to place themselves closest to the competitor they think they would like to be like. Many times the entrepreneur simply prices their products / services a little above or below depending on their imagined positioning.
Value based Pricing: This is probably what every entrepreneur wants to do, but doesn’t. The reason is because it is not as passive a method as the above two. In this method the entrepreneur needs to do a lot more homework on how the potential customers perceive the benefits, the product / service and what they think about the importance and urgency of the solution. This method also requires some experiments with pricing. All of this over time will help the entrepreneur discover the right price for the product or service.

These are probably the most common ways in which price can be set or discovered by entrepreneurs. Each method has its own pros and cons with respect to arriving at the right price. Pricing seems to worry a lot of entrepreneurs, but it simply remains a worry and does not proceed beyond that. In fact many entrepreneurs don’t have a plan out of the problem. They remain with the worry, cry over it, empathize with others about it and feel glad that it is a larger problem shared by the entrepreneurial community. But what they don’t realize is that the smart ones are quickly taking the risks early and trying to find the right price for the business. The question then is how much gross margin can the entrepreneur generate from the business? The more the merrier – isn’t it? How else to do it but by discovering what customers are really willing to pay for it?

Think on this till we discuss more on pricing in the future blog posts!

Interesting Links This Week: 15-December-2013

Blogging is today seen more as a fashion statement rather than an opportunity to pour out your heart. A lot of people blog and seek quick results. While real readership takes time and effort to build, many people drop off. Those who persist need advice to stay on track and not fall prey to temptations. Here is a list of 11 mistakes that you can avoid if you are serious about blogging. Read more here – Link: http://www.copyblogger.com/common-blogging-mistakes/

Platforms are the most common business ideas that young entrepreneurs come up with! It is because they sound interesting, exhibit potential for scale, and creates excitement amongst others. But it also poses the greatest risk to failure. Here is an interesting set of findings about creating platform based businesses. Read more here – Link: http://www.strategy-business.com/article/00218?gko=ac447&cid=20131112enews&utm_campaign=20131112enews

Using averages is a normal thing that most senior leaders do in an effort to analyze performance. But it seems to mislead than lead towards significant decision making. How much analysis should be broken down? At what level and to what depth should performance data be reviewed and how doing this changes decisions remains a big challenge for every organization. Here is an interesting lesson for all of us to learn from the experience of a large corporate. While it seems most of these apply to large corporate, entrepreneurs can draw lessons that can be applied to their own enterprises too. Read more here – Link: http://www.mckinsey.com/Insights/Corporate_Finance/Unearthing_the_sources_of_value_hiding_in_your_corporate_portfolio?cid=other-eml-alt-mkq-mck-oth-1312

Vedantic Wednesday: Finding purpose of life – is it the question right?

Every once in a while all of us face this question: “What is the purpose of life?” But the speed with which we hear the question is the same speed at which we forget it. We get back to our daily operational hustle and bustle of life. We are always busy and the remaining time we are exhausted trying to be busy. There doesn’t seem to be an end to this tiring cycle.

When I was listening to a session on ‘branding’ recently I was startled that while people were asking many tips and tricks to build a brand, no one asked the fundamental question – “what should my company / product be remembered for?” Without that question we will end up creating brands anyway. In fact brands will get created anyway if we don’t create them – isn’t it? Does this question then apply to life as well?

The bigger question that Vedanta asks us is “Why should you be remembered?” And I think it is important to think on this very deeply before we appreciate the peace and happiness that can instantaneously descend on us once we reflect on this question. The quest to find meaning is life then almost immediately gets replaced by trying to find why I have an existence? What role can I play in fulfilling this great opportunity handed down to me? How can I make a contribution with whatever skills and knowledge I have to the ecosystem? How much can I give of what I have been given? These then lead us into action. Then it looks like the most important activity of life is figure what is our real nature and how we can put that to use – irrespective of how much it benefits somebody.

Vedanta exposes us to many ways in which we can find this out for ourselves. It looks like tests and other people are not going to tell us this. It is a very personal exercise and experience. We have to go through these ourselves and discover who we really are. This is also the reason why throughout the ‘Vedic’ knowledge base we have self realized people from all walks of life. Is there are clear and loud lesson for us here?

Is it then time for us to change the question? If we don’t change the question we may actually end up finding right answers to the wrong question and wondering why we feel unsatisfied and unfulfilled even after all the achievement!

Think!

Pricing for Entrepreneurs: Is Price Set or Discovered?

Why does somebody pay 3-5 times the price for some brands of water over others? Why some MP3 players are 5 times more expensive than others and still preferred? Why do some laptops cost you 6-7 times they competitor equivalents and sell more? I am sure you are recognizing the brands I am referring to here – Evian / iPods / MacBooks? Why are some seen to be value at premium price points while others are seen as expensive at lower price points? Pricing seems to have been linked to branding and this has led to many entrepreneurs miss the philosophy of pricing totally!

Arriving at the right price is always a tough call for every entrepreneur. This results in almost every entrepreneur becoming a Good Samaritan! I know the world requires a lot more Good Samaritans’ but entrepreneurs becoming them that too unintentionally seems like they are being exploited on their ignorance. This is not very good for society as a whole. All of them end up leaving a lot on the table and then worry about scaling with limited ‘gross margins’. Further, if cash flows don’t aid them, most of them die a premature death. While they attribute this to their bad business sense or poor business models, the real problem is in price or cash cycle design.

The first aspect about pricing that entrepreneurs need to understand is that ‘price’ has to be discovered and not set. While every entrepreneur (especially the technical ones) create models and do a lot of mathematical magic, they invariably end up selling at prices close to what the customers feel comfortable. Almost every time this is either a ‘cost plus’ model or a ‘peer price’ model, both of which do not bring out the real worth of the product / service. The sad part is that many entrepreneurs do not even recognize this flaw!

While all of them are startled when I reveal this to them – the biggest take away from the discussion (either at a workshop or a mentoring session) is that ‘price should not be set’ – it has got to be discovered. The revelation about this is so large that the immediate effect is to hire me (not joking) to help arrive at the real worth of their product / service! Many of them believe that I have some secret tool that will give the answer quickly. When I detail the process that entrepreneurs must take to discover this ‘right price’ they are overwhelmed at the effort they have to invest (more than my cost). Many times our advisory / mentoring sessions have helped start-ups find the close to ideal price points. But the joy of finding the real worth of their product and the pain they experience of figuring out how much they have undervalued their products / services can best be explained only by them.

While I continue to share a few more blog posts on pricing, the very first lesson that I want entrepreneurs to keep in mind is that – the best way to find the right price for their product / service is to discover it and not attempt to set it!

Think on this as I build a case to help you discover the right price for your product over a series of blog posts.