Month: September 2011

Entrepreneurial Sustainability: Building New Markets

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Ervin “Magic” Johnson was perhaps one of the greatest NBA players from my generation.  Watching the Lakers battle the Celtics became an American obsession.  Johnson, who was the floor general for the L.A. Lakers (aka “Showtime”), always performed well in big games.  His list of athletic accomplishments could fill a phone book. 

Yet, it’s Johnson’s off-the-court behavior that is a benchmark for individuals who search for sustainability in business.  Being a visionary and a doer, Johnson found opportunities in underserved areas where most traditional businesses would not pursue. 

Johnson explains, “I am grateful for my experience as an athlete. Yet the rewards of my entrepreneurial endeavors have been even more fulfilling. I’ve learned that creating jobs and providing goods and services to urban communities beats even five NBA championships.” In fact, he has used his economic power to leverage economic development in urban depressed areas. Therefore, he has become a social change agent.

In his book, 32 Ways to Be a Champion in Business, Johnson explains how he developed his entrepreneurial mindset. The book provides practical advice on starting, financing, marketing, growing a business, and capitalizing on market opportunities.  Clearly, Johnson went against the grain and showed that lucrative markets are not all abroad. Like Johnson, today’s businesses will need to explore more market opportunities. Entrepreneurs inject creativity and innovation for greater profitability. In fact, they seize market problems and turn them into opportunities.

Robert Hisrich, Michael Peters, and Dean Shepherd, authors of Entrepreneurship, argue that while business owners take risks on new markets, entrepreneurs understand how to exploit these risks to their advantage.  They note, “Though many individuals have creative new ideas, few can bring their ideas to the market and create new venture. Yet entrepreneurship and the actual entrepreneurial decisions have resulted in several million new businesses being started throughout the world.”

Social media platforms such as Youtube.com may be the next frontier for entrepreneurs.  For example, Facebook now seeks to capture more of the small business market.  With 750 million users, Facebook COO Sheryl Sandberg notes that 9 million of the nation’s 30 million small businesses are using Facebook to communicate with their customers.  Sandberg explains, “I think every small business should…be using Facebook. We’re not going to stop until all of them are using it to grow their businesses.”

Currently, small businesses use free Facebook pages to communicate with their customers. However, Sandberg argues that Facebook services can offer more to small businesses: “Facebook takes word-of-mouth marketing and makes it work at scale.” 

Facebook will launch a plan to attract more small business advertisement by offering a free $50 advertising credit to approximately 200,000 small businesses.  Like Magic Johnson and Facebook, today’s managers need to embrace the entrepreneurial spirit and search for new market opportunities.

Describe a potential entrepreneurial opportunity for you over the next five years.  How will you be able to sustain any success given market forces (i.e. Porter’s Five Competitor Forces)? 

 © 2011 by Daryl D. Green                                    

[1] “Facebook wants to be big among small businesses” by Jefferson Graham

Bridging the Emotional Divide

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As we look at the number of underemployed Gen Yers in our nation, it’s easy to understand how they might be discouraged about their future employment.  How do today’s leaders inspire the next generation of employees? I don’t think it will be solved with the status quo.

In fact, employees are looking to follow a special type of leader in the future. In the 21st century, leaders who have the capacity for caring become an inspirational magnet to employees. Most managers don’t care about the personal welfare of their workers.

Furthermore, many managers do not understand how to care and love their employees. I’m not talking about sexual harassment or inappropriate conduct.  I’m talking about a leader with a genuine concern about the growth and well being of his or her employees.  Therefore, this relationship goes beyond this manager’s own self interest.  Contemporary organizations simply do not have sincere affection for their employees.

Unfortunately, some managers view their employees like any other business commodity (like a computer, fax, or cell phone). Jeffrey Pfeffer, author of the Human Equation, notes that today’s conventional wisdom holds that the way to economic success is to cut costs. This simply means cutting people. A company may be concerned on a very superficial level as in “how are you doing today,” but don’t feel a sense of caring for its employees.

If organizations hope to sustain any success in the future with the next generation of employees, managers will need to make a giant paradigm shift. Dr. Bruce Winston, my former dean and a leadership guru, advocates the need for more caring leaders.

Leadership is about giving, not taking. It’s more than just being the boss. John Hoyle, author of Leadership and Futuring, suggests three characteristics of this new leadership model. These characteristics include the following: (a) ability to communicate with followers, especially the organizational vision; (b) a capacity for caring and concern; and (c) a persistent attitude. Many leaders operate under a very authoritarian mode.

Sadly, the lack of concern for people is a growing issue for effective organizations. It also creates an unproductive work environment for employee development. What America needs is more people-focused leaders. If leaders are truly concerned about their employees, then the workforce will be transformed into a 21st century organization, thereby changing the world. However, it must start with a different leadership model.

Describe your professional and personal experiences with this new leadership model (concerned & involved leadership).

 

Sustainable Job Creation

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Several weeks ago, I was exercising at the YMCA downtown.  I was starting my workout at the bench press and noticed a young man lifting a lot of weight (not typical for this recreational area).  He asked me to spot him with this heavy weight. I learned that he was a new professor at Lincoln Memorial University Duncan School of Law. 

I mentioned I was serving as an adjunct professor for the same school in the School of Business. We talked about various issues—as we both tried to complete our workout at the same time.  As I walked him through my strategy of giving MBA candidates practical application for studies, he asked me a question that stopped me in my tracks. He asked me what would I advise President Obama about the current financial crisis.  I didn’t have an immediate answer. I have always tried to deal with this economic crisis at the local level.  Yet, I knew what worked locally might not have the same results nationally.  Therefore, the answer was very complicated, especially regarding job creation.

We are in troubling times. In August of 2011, our nation posted no job gains.  This economic slump is historical since it’s the first time since World War II that the economy has had precisely net zero for job creation for a month. Retail, manufacturing, information services, and construction all lost jobs.

Furthermore, government employment fell by 17,000 as state government begun their budget exercises which included downsizing government employees including teachers and policemen.  According to some financial experts, the economy must add 13.7 million jobs over the next three years (381,000 each month) to bring unemployment from a current rate of 9% to 6%.

 With over 15 million people unemployed in our nation, worried U.S. citizens look to their government and/or business leaders for job creation. Is this faith misplaced?   The concept of job creation is a hot buzz word among politicians and media pundits.  Last week (September 8, 2011), President Barack Obama announced a ‘job creation jumpstart’ plan before a Joint Session of Congress.  A $447 billion American Act proposal, consisting of infrastructural upgrades, was proposed.  Yet, partisan politics make this job creation initiative an uphill struggle. Furthermore, many people doubt that the government can create any sustainable jobs. 

 

Other individuals look to businesses to create millions of jobs because they are considered commensurate with job creation.  They argue that giving businesses major tax breaks and other financial incentives will encourage them to create millions of jobs. However, anyone taking a basic course from the School of Hard-knocks understands that businesses primary mission is making profit for their investors.  

Financial experts applaud major outsourcing initiatives and layoffs by corporations because they feel it will lead to greater profitability for shareholders.  However, John Gamble and Arthur Thompson, authors of Essentials of Strategic Management, suggest that a low cost strategy can backfire on a business. 

They note, “Perhaps, the biggest pitfall of a low-cost provider strategy is getting carried away with overly aggressive price cutting and ending up with lower, rather than higher, profitability.”  Despite an economic crisis, many U.S. corporate profits hit all-time highs at the close of 2010.

According to the Federal Bureau of Economic Analysis, corporations reported an annualized $1.68 trillion in profit in the fourth quarter. The previous record (without being adjusted for inflation) was $1.65 trillion in the third quarter of 2006.  For example, General Electric posted worldwide profits of $14.2 billion, while JPMorgan Chase’s profits went up 47%.  The financial firms were some of the biggest winners.

While the federal government provided aid during the economic downturn to save many of these ‘too big to fail’ institutions, these firms did not return the favor.

They found little incentive to provide loans to struggling U.S. businesses to assist in job creation. Their investors applauded their actions since it moved toward greater profitability. Yet, the public frowned on their self-servicing actions which were interpreted as market driven.

Given this financial crisis in America, there are two concepts at odds with each other.  They are economic viability and one’s quality of life.  Economic viability relates to creating jobs that are necessary for a business.  One’s quality of life involves an unwritten standard of living for a citizen to live reasonably comfortable given his or her work effort.   

This reality for many organizations has meant outsourcing high-cost activities such as manufacturing, to countries abroad like India, China, and more underdeveloped countries. 

If it costs $20 an hour for customer service in the U.S., would a business give up sending that work abroad for $1 per hour?  Therefore, companies that have a focus on a low cost strategy will continue to search for the newest lowest labor market to be competitive. 

Yet, this reality drives down the wages for US workers and the quality of life for U.S. citizens.  Therefore, the concept of job creation as it relates to sustainability is a difficult problem for any nation to solve.

As U.S. businesses deal with globalization and hypercompetition, is it possible to achieve economic viability and a good quality of life at the same time for U.S. citizens? If so, how?

© 2011 by Daryl D. Green

Visionary Sustainability

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Steve Jobs, Apple’s Founder and Legendary Innovator, announced he would resign from his CEO post several weeks ago.  Jobs co-founded Apple in 1976.  Many people would consider Jobs a visionary leader. Tim Cook, who had been Apple’s chief operating officer, was named acting CEO.

Cook is quite familiar with this position. Since January, Cook has been acting CEO due to Jobs’ medical leave.  Jobs’ absence for the company could mean more financial trouble for Apple.  To shareholders and investors, it’s déjà all over again.  Jobs has been battling a series of illnesses (i.e. battling cancer, a liver transplant, etc.) that have forced him to take medical leave three times in seven years. 

A good vision, clearly communicated, can propel an organization into high performance. In fact, a well constructed vision has several advantages, including (a) it captures senior executives own views about the long-term direction of the organization, (b) it reduces the risk of careless decision making by managers at all levels, (c) it builds support from employees at all levels and help convey a shared vision, and (d) it helps an organization prepare for the future. 

John Gamble and Arthur Thompson, authors of Essentials of Strategic Management, argue the staying power of a good vision: “An engaging and convincing strategic vision has enormous motivational value – for the same reason that a stone mason is inspired by building a great cathedral for the ages.”

Who will be the next master mason for Apple?  Jobs had to come out of retirement in 1997 (a 12 year hiatus) before to rescue the struggling company. With Jobs at the helm, Apple began making its creative presences heard with iPhones, iPads, and iPads.  

In fact, what separated Jobs from the rest of the CEO pact was his keen strategic mind and vision. Columnist Margaret Heffernan noted the shear persona of  visionary leadership: “It was because, at the beginning of the century, Jobs had put in place a product plan aimed at one great external future event: the moment that broadband penetration in the U.S. exceeded 50%. Once that occurred, digital entertainment became technically and commercially feasible.”  Many will predict the demise of Apple once Jobs is finally gone. 

Why? Steve Jobs is Apple.  Cross Research analyst Shannon Cross observed about Jobs’ impact on Apple, “Steve Jobs put in place at Apple a culture of innovation.”  Yet, many organizations will find themselves in a similar situation when their visionary founder is no longer a part of the organization.

How does an organization sustain a solid vision when the founding or inspirational figure is no longer communicating that vision to the organization?

© 2011 by Daryl D. Green