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Succumbing to the Temptation of Grabbing Every Opportunity When an Opportunity is not an Opportunity Dr. Shridhar Lolla CVMark Consulting email@example.com Early Draft , Needs Editing Mar 2011, Bangalore, INDIA (This caselet belongs to ‘respecting the business’ series of CVMark. It is based on real life experience at InfoSoftCom- a software development firm; and several other new companies ) Key words: focused execution, entrepreneur, startups, entrepreneurship, investment, funding, business rules, business fundamentals, built to last, capacity building, entrepreneurial behavior, first generation entrepreneur, neu-entrepreneurs, value system, culture, focusing behavior Definition: Prime Rule (n)= Non negotiable rules Prime Rule #010 : Do not do what is not required, do what is required. This is a sequel to following caselets: 0. The Saga of Startups 1. When sales Staff quit, Clients switch over 2. Sales is the prime responsibility of entrepreneurs 3. Not Succumbing to Pricing Pressure 4. Entrepreneur Agrees to do Sales 5.Temptation of taking large orders 6.Pitching Business Idea within 3 minutes 7. Startup Carnival 8. Taking Funds NOW or LATER ________________________________________________________________________ Opportunities to earn money is always tempting and organizations have specialist to seek for opportunities. However, for any business, the market is always big enough, provided it offers the right value to the customers. In order to create and deliver right value, it requires organization to continuously engage in activities that offer better value. And remaining focused on ones organizational goal is the prime tactics of new businesses. While an organization is engaged in its activities, often big opportunities occur in areas that are peripheral to that of the organization. And there is often a tendency to jump at such opportunities. Copyright © 2010, CVMark Consulting, All rights reserved. 1 Since such opportunities are too lucrative to avoid attention, entrepreneurs succumb to the temptation of exploiting them and fall into the trap of shifting focus away from their main agenda. This happens too often and with too many organizations. The caselet here, reminds entrepreneurs of the danger of loosing focus. ______________________________________________________________________ Very often I receive calls from my clients saying that they have been approached by a big client to fix up a deal for a hefty commission. They argue that there is not much to be done, i.e. the order will not come into the organization but could be passed onto somebody and obtain commission without pain. Or that some company wants to enter into India and they want help in connecting them with the right people, organization and logistics etc. Most of my clients are in hard core value creation business of technology, service, solution or manufacturing. This chunk explains why it is not good to get diverted by opportunistic calls. For every business, the market is big enough, which means that the constraint of the business is most often within organization. As a company goes on conducting business, it identifies itself with specific market needs and attempts to create and deliver the right value proposition, that enhances its long term success. Now that the market is always big enough, time to time the company receives leads that are neither directly related to its key proposition nor to its key markets. Some times, these leads are very lucrative and often look like one time big opportunities. It is important that the organization understands the repercussion of engaging or indulging into such opportunistic moments. For a young company, its growth is directly dependent on its learning curve. The learning must happen in its chosen skills and capabilities such that it can deliver more value to its chosen customer segments. When an outside opportunity comes that uses none of its prime skills but say e.g. a hefty commission on passing on a large order to somebody or negotiating a large deal for somebody, in most cased it does not fit into normal business logic. For a startup, the time and effort it takes to deal with such large opportunities is huge. Say for example, there is an opportunity of outsourcing a software development deal that’s more than 5 times your capacity. You have declined to bid for the orders, since you know you can not deliver; but you realize that there is an opportunity to earn quick buck by mediating the deal for another company. However, the proposal preparation and negotiation cycle itself takes 3-6 months. Getting into such a process, prevents you from focusing on the prime value creation in your organization for substantial time. You might get a commission after 6 months, but since you have been engaged in the process of Copyright © 2010, CVMark Consulting, All rights reserved. 2 bidding, you loose focus and the growth momentum that is so necessary for your initial days. The same thing happens when a small organization tries to take a large order. The issue is that the large orders normally blinds the organization from focusing on those activities that are core to it. A large order saps energy from all the resources and interrupts the business cycle of the organization. Often such large orders come with risks that a new organization is not capable of dealing with. There are umpteen case studies on how startup companies collapsed just because they took a large order that choked the complete organization. Also look at the following example. An organization actually succeeded in mediating a large order and it got a good commission without much effort. This organization has been growing at 30% year on year and had set another 30% growth target last year. It was at Rs 15 Crore. The year had just started and it got into this lucrative opportunity to earn quick bucks from a mediating deal that is not same as a development work that it carries out. The deal was big enough and the commission was almost 10% of its revenue. The company decided to take a chance. The mediation however took almost the year for proposals after proposals, back to back negotiations and for sealing the deal. It got Rs. 2 Crore commission on this trans Atlantic deal. It sales and marketing team put tremendous effort and used the hidden knowledge of its development staff. The company however ended last year at Rs.14 Crore a well short of its yearly target. What happened? The company is a young company and it has been building its capability year on year that gave it a growth of 30%. But when this side deal came, focus and alignment of its team got disturbed and it looked for quick money than spending time in building capability to earn money. It did get Rs 2 Crore from the deal, but its capability remained where it was last year. So, there was nothing new that its own customer or client based got from it than what it did last year. What is expected if a young company looses the opportunity of 1 year of learning. What happened this year? The order books looked awful; that the company did not do any new thing last year and did not build any new capability; it had nothing new to offer to the market this year. Further, no one time opportunity was visible that could have given it an outside chance to earn quick bucks. The companies order book stood at Rs 2 Crore at the beginning of the year and they ended at Rs 6 Crore. What happened thereafter, was any bodies guess. So you know where you go if you defocus yourself from doing your work and try to earn quick bucks. Copyright © 2010, CVMark Consulting, All rights reserved. 3 The point to remember is that an opportunity is not an opportunity if you are not prepared for and you do not have a value proposition to offer. And an organization can be prepared for every opportunity. The preparation that you need to do is first in your area of focus. Any ‘request’ that you get outside your area of focus, may not be actually an opportunity, rather it could be a distraction from your focused area. It is true that the market is huge for any idea, but all opportunities in the market are not right opportunities for you. Chasing a wide range of opportunities, irrespective of size, scope, clients etc, only thins down your capacity to run and grow business effectively. This simple point of behavior could make a decisive impact on the performance of a startup (and for that matter later stage companies) and create a huge ‘operational differentiation’ that seldom any competitor cares for. This aspect is based on the simple but prime rule: ‘do not do what is not required’; by first principle of execution, by doing what is not required now, you are only wasting your ‘time’, that is the key constraint in the business. Though this rule seems innocently no brainer, it is the hardest to follow since it is so simple. It is ‘simple’ but not ‘easy’. Let me repeat, ‘it is simple but not easy’. It is simple to understand and every body understands it in the same way, ‘do not do what is not required’. However, we are used to do things through out our life, keep ourselves busy always, look working always. We therefore, have difficulty in giving some time and space for ourselves. Doing simple things calls for a change in behavior and habits ‘of an order of magnitude’ (switching our mind from the belief that only complex things give big dividends and that ‘not doing’ is a waste of time). Hence we have prime rule #010 (for focused execution): Do not do what is not required, do what is required. Copyright © 2010, CVMark Consulting, All rights reserved. 4 Disclaimer: CVMark Consulting is an independent business-innovation research agency based in Bangalore, INDIA. It handholds entrepreneurs and promoters in road testing their business ideas and in delivering breakthrough performance. CVMark Consulting intends to serve business community through advisory, consulting and coaching engagements. As a part of its engagements, it regularly brings out insights, perspectives, research reports, newsletters, issue-oriented reports and other products. This caselet captures description and direction of solution to generic problem faced by business owners. It is intended to share experience of CVMark with a wider business community. This document in part or full can be reproduced subject to a reference to CVMark Consulting and to this document. Factual material contained herein is obtained from sources believed to be reliable, but the publisher is not responsible for any errors or omissions contained herein. Opinions are those of CVMark and are based on research conducted for this report. CVMark holds no responsibility for decisions made on the basis of content of this report. CVMark Consulting Bangalore, INDIA Clet:11-22 ___________________________________________________________________ What do entrepreneurs and promoters do before they write business plan? They get their business idea road tested by CVMark. For developing, innovating and executing your business model, call Tel: +91 94480 70081 or Email details to : firstname.lastname@example.org . CVMark Consulting, #2304, Nandi Park, Gottegere, Bannergatta Road, Bangalore 560083, INDIA Web: http://www.cvmark.com Copyright © 2010, CVMark Consulting, All rights reserved. 5
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