The IoT Show

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Saturday, July 01, 2006

Building a business vs business savvy

I had been on the business side in big companies, successfully negotiating revenue generating contracts and building out web solutions, understanding the business needs from BBN/GTE Internetworking.

I had first moved from Engg to build the Web Group of BGS Systems (now BMC Software) in 96, by understanding their business pain of shipping tapes for each beta release and setup digital download of software with reporting to allow customers to install new releases and report bugs and tied field services to engineering reducing sales cycles.

In fact, I took pride in the fact that I understood technology and business well.

But, the real truth was that I seriously lacked business experience as an enterpreneur when I started with Coola after all this! Well, I didn't know it right away, I market validated and learnt on the job, the hard way.

Building a business from concept takes a different kind of business skill than what is required in a job. In an existing company, you know the customers, marketing channels are in place to reach the customers, you are in a position of power to negotiate contracts in large companies.

When you take a concept to build a business, you are alone, face it, all alone! Its a matter of perspective whether you sweat about it or think you have something unique and feel great about it.

For tech companies, technology and the business problem solved are so intertwined. If you have experience in a particular vertical and see a problem and dream a technology solution to it, you have crossed the first hurdle. My friend Sandeep Shah built Skyscape like that and its is a triving success story today.

But for the most part, I see tech enterpreneurs come up with a technology and think it will solve a problem for some particular segment, which may or may not be true. In fact,enterpreneurs believe too strongly on the viability of consumer ideas thinking of themselves as customers. I have repeated this error more than once.

I have come to believe that web consumers are too spoilt to pay. Even for acompelling business where they would pay, its too expensive (like Amazon) to build a brand and reach them.

So, the best way to find your customer potential is to insert your business into the existing ecosystem of businesses. Find an existing segment of business who would pay. Please, please, do not read this enterprise market instead of consumer.

Its practically executable for you the enterpreneur to reach an existing business and make it easy for the business by getting them the rare segment of consmers they cannot reach or by optimizing some business process by which they can skip a middleman and save money and pay you instead.

Having said that, how can one develop that skill? I am a big believer of learning anything at any age if you have the burning desire and the right attitude.

One way is to go about practising it before you need it. We all go through life wanting to become an enterpreneur for some time before we hit about the idea and have the life support to make it happen. So practice on everything you see around you.

I grewup in a household of CPAs who would look at any vendor and try to guess what his business breakeven point is. So, we can practise the same for every business we see around us or dream up imaginary ones and practise.

For example, you give your shirt for drycleaning. Look at the drycleaner with enterpreneurial eyes. If it were your business, how would you bring in customers, does he/she have a specific profile of customers, where do you see their major costs are ....

I saw a friend move and collected diaper boxes from everyone saying its perfect for packing. I see that as an opportunity to evaluate an hypothetical business viability. Can you make a business collecting a bunch of diaper boxes which seems around in many households and rent it out for a fee to movers. You can start small and spread the word to build customers. Ah! looks like a great business as you can reuse the same boxes if you collect them back after each move.
But wait, the more you think about it, it becomes clear, the real cost is in accumulating the boxes for sale and spreading the word around to people to give it to you. No business here!

Most of us dream up the potetential of sales and see the demand so easily for our ideas that we forget that we need to start from the cost of getting the customers and their real pain to come to us.