The Business Book: Big Ideas Simply Explained

by Sam Atkinson

Businesses were organized by precise routines, and the role of the worker was simply to supervise and “feed” machinery, as though they were part of it.

"Entrepreneurship is about survival, which nurtures creative thinking. Business is not financial science, it’s about trading—buying and selling."

The explosion of new businesses thanks to technology also helped to expand the availability of finance.

Risk might be inherent in business enterprise, but successful entrepreneurs are those who are not only willing to take risks, but are also able to manage risk.

The strategy for most companies is to differentiate; this means demonstrating to customers that they offer something that is not available from competitors—a Unique or Emotional Selling Proposition (USP or ESP).

"The only thing worse than starting something and failing … is not starting something."

Long-term business survival depends upon the company constantly reinventing and adapting itself in order to remain ahead of the competition.

Where once energy, ideas, and passion were enough, evolving businesses require the development of formal systems, procedures, and processes. In short, they require management. Founders must develop delegation, communication, and coordination skills, or they must employ people who have them.

Professional management, as opposed to entrepreneurial spirit, becomes essential to business evolution. Some leaders, such as Bill Gates and Steve Jobs, for example, are able to make the transition from entrepreneurial founder to corporate leader. Many others, however, struggle to make the necessary changes; some try and fail, while others decide to remain small.

In other words, that the task of marketing is to generate an emotional connection to the brand that is so strong that customers perceive difference from the competition.

"The first rule of luck in business is that you should persevere in doing the right thing. Opportunities will come your way if you do."

In fact, most businesses never grow beyond the scope of the owner—they start small and stay small.

Growth is not a strategy, he claims, but a complex change process, which requires the right mindset, the right procedures, experimentation, and an enabling environment.

Start-ups require the spark of entrepreneurship; but growth requires a different set of skills: a founder must transition from being sole decision maker to being a disciplined manager and a successful leader.

Note

"The function of leadership is to produce more leaders, not more followers." Ralph Nader

The danger for management is that, as US investor Warren Buffet warned, “chains of habit are too light to be felt until they are too heavy to be broken.”

Operational efficiencies, rather than revenue growth, are the key to profit.

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The ecosystem in which a business operates is rarely, if ever, static. Corporations exist in these ecosystems as living organisms that must adapt to survive; great leaders know that failure to adapt leads to extinction.

Zeus represents the “club culture,” in which relationships with the leader are more important than formal titles or positions.

Apollo’s “role culture” is defined by functions, divisions, rules, and rationality.

In Athena’s “task culture,” power lies within teams who have the expert...

In Dionysus’s “existential culture,” the organization exists to support t...

One of the most effective contemporary business leaders is Carlos Ghosn, CEO of car makers Renault and Nissan. Within a year of his appointment in 1999, Ghosn returned Nissan to profitability and was credited with saving the company from collapse. This proved to be one of the most dramatic turnarounds in modern business history.

effective leadership requires putting vision into action.

Plants

Shaper

Belbin Team Inventory

“stagflation”

recessions as a cleansing mechanism, allowing the weak to fall back and new, stronger companies to emerge.

it is wise to restrict borrowings to around 25 to 35 percent of the total long-term capital employed in the business. Any higher than 50 percent is regarded as carrying too high a risk level for a normal business.

if you don’t know where you are going, “it doesn’t matter which way you go.”

This is a trap that businesses must avoid—the starting point for any new venture is having a goal and there must be a clear strategy as to how to get there. It is also essential to have a vision of what success will be like once that goal has been reached. This vision must be shared and understood by everyone so that the company has a common objective.

Organizations with a learning culture and a shared vision enable people with different functions to work together to develop ideas, make decisions, and create new products and services more quickly.

Staff act as a group of entrepreneurs rather than as paid employees.

Some of today’s most successful businesses started with just one person, often in a garage or at a kitchen table.

Today’s consumers are increasingly demanding and discerning: they want to know how raw materials are sourced, how products are made, and how the company impacts the environment.

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Bigger companies also enjoy economies of scale: overhead costs are shared and money can be saved from increased buying power. Fixed costs can also be reduced because the combined business needs less staff in functions such as finance, human resources, and marketing, than the two separate entities.

US professor Michael Porter summarized five competitive forces that face companies: competition, substitute products, new entrants, suppliers, and buyers.

Grove added a sixth force: complementary products.

Even natural disasters as large as earthquakes can be managed with good contingency planning.

"He who fails to plan is planning to fail." Winston Churchill

Now referred to as Porter’s Five Forces, this model places existing competitors at the center, surrounded by four other forces: customers, suppliers, potential entrants, and substitute products.

“If you don’t have a competitive advantage, don’t compete.”

“generic strategies” consist of two types of competitive advantage: cost advantage and differentiation advantage.

Analyzing the value chain can also help companies to identify what areas of their business might be suitable for outsourcing, which can help the company to achieve a cost advantage.

purchasing (procurement); human resource (HR) management; technology development, including research and development (R&D); and infrastructure functions, such as finance and legal.

"When you’ve got only single-digit market share—and you’re competing with the big boys—you either differentiate or die." Michael