Wednesday, January 14, 2015

Lessons from the Entrepreneur - Part 3 of 3

What makes an entrepreneurial culture
It should go without saying that we now function in a world of intense competition. Additionally, those who invest in companies are becoming less and less confident in management's ability to create value. As a result, financial markets are becoming increasingly volatile. We also need to consider things like shorter product life cycles. Because of these factors and many more, it is absolutely imperative for every organization to build an entrepreneurial culture. This article will summarize some key components within the entrepreneurial culture.

Lessons from the Entrepreneur - Part 2 of 3

Seven key characteristics of an Entrepreneur
In our first lesson, we described a few basic concepts that entrepreneurs follow in managing a business. We will now expand on how entrepreneurs create value by looking at some characteristics of entrepreneurs. One common characteristic behind almost every entrepreneur is a strong commitment to a set of skills. Invariably you will find that entrepreneurs are extremely highly skilled in their chosen profession and as a result, they can attract customers based on this high level of expertise. Entrepreneurs are able to exploit this expertise and build a business around what they are good at.

Lessons from the Entrepreneur - Part 1 of 3

Three grounding principles
One of the best ways to create higher values is to simply think like an entrepreneur. If we can think like an entrepreneur, we can find numerous ways of changing how we manage and create wealth within an organization. Over the next three articles, I will summarize several concepts that I believe are paramount to creating higher values. All of these concepts come from thinking like an entrepreneur. Lesson 1 (which follows) will introduce some basic concepts. Lesson 2 will explore characteristics of the entrepreneur and Lesson 3 will outline the entrepreneurial culture.

Comprehending the IT Challenge

Desperate systems represent huge cost
For too long, finance has misunderstood and failed to comprehend the true costs and resources required for many IT (information technology) projects. Issues such as migration and integration are simply pushed off to the IT Department to handle. The two functions (finance and IT) struggle against one another. Additionally, finance does not define its role in relation to IT and vice versa; i.e. there needs to be a marriage of strategies. Likewise, some IT projects continue unabated with no supporting value analysis, leading to unacceptable ROI's (Return on Investment). According to Gardner Group, 51% of all IT projects go over-budget by more than 200%.

Creating Creativity - Part 2 of 2

Framework = Eight Creative Talents
One of the great misconceptions surrounding creativity has to do with new ideas. Most forms of creativity are not about new ideas. In reality, there are all types of creative talents that contribute to results. Creativity exists everywhere at all levels. The key is to understand these variations and know how to tap into them for creating value. Therefore, creativity is more about the full range of outcomes, not that one big idea. This broader approach to creativity is much more sustainable than the traditional and narrow approach of seeking some breakthrough idea.

Creating Creativity - Part 1 of 2

How to Create Creativity
All people and all organizations possess creative talent. However, the world we live in can actually constrain creativity. This can range from organizational boundaries that limit our freedom to learn and grow to a society that tells us what to wear, what to eat, and what to look like. The real world of creativity has few boundaries, placing a high value on the spirit of new ideas. This invariably requires a large influx of mistakes and failures. Contrast this to the “non-creative” world where success is placed in a huge spotlight and the notion of failure is greeted with great displeasure.

Learning to Think

The most important skill of all - being able to think
It has been said that everyone must possess three transferable skills – the ability to speak, the ability to write, and the ability to think. The most elusive of these three is probably the ability to think. Unfortunately, many organizations prevent people from thinking. For example, a lack of consistent standards throughout the entire organization may contribute to wide variations in results, making it difficult for people to make the right decisions. Many companies are plagued with compliance type thinking; i.e. people “go along” with decisions to avoid retribution, not challenging the bad decisions that are about to be launched. Instead, we need a simple and consistent framework for decision-making that allows everyone to think the way they need to think.

To Blink or Not Blink

Initial Impressions can be Powerful
In the last few years, there has been an infusion of psychological thinking into the business community. One such example comes from the psychologist Mihaly Csikszentmihalyi in his book, Flow: The Psychology of Optimal Experience. Csikszentmihalyi studied the most creative people and pioneered the concept of flow, how people get into the highest levels of productivity and creativity – recovering a sense of harmony, getting around the chaos, and controlling one's own experiences to obtain real happiness.

The Death of EBITDA

IC drives value and not EBITDA
Increasingly deal value is driven by Intellectual Capital. Intellectual Capital includes a wide range of intangibles: Talented Workforce, Ability to Innovate, Leadership, Loyal Customers, or Brand Recognition. These intellectual assets are flipping the traditional EBITDA model on its head. This is evident by acquisitions driven by intellectual capital (IC). Take for example a valuation of $ 10 Billion assigned to SnapShot which has no sales revenues. How can this company be valued at $ 10 Billion with no EBITDA? SnapShot is a social application now used by 9% of all Smart Phone owners. These types of examples are becoming common place. Take for example the acquisitions of highly innovative companies such as FlipKart, Dropbox, Square and WhatsApp. All of these deals were IC driven and not guided by EBITDA.

Tuesday, January 13, 2015

Welcome to the World of Complex Adaptive Systems

Every business is a system of parts
More and more, business is a function of increased specialization. We see this in the form of outsourcing. We also are witnessing how technology is used to respond instantly to the distribution of products. For example, Wal-Mart now requires its top 100 vendors to use smart tags to track inventory items. These smart tags, referred to as Radio Frequency Identification or RFID relies on satellites to pickup the movement of inventory items anywhere anytime. Eventually, we will see this technology at the consumer level, shopping carts displaying your items and amount due as you drop them into the cart.
So what's behind this trend? Many leading experts have characterized it as Complex Adaptive Systems – the next evolution beyond the so-called learning organization. Most businesses are bogged down in major planning activities – things like formal strategic planning sessions.