What SMEs need to know before going into business with corporates
Understanding the whale
Marc Andreessen, founder of Netscape and top venture capital firm Andreessen Horowitz, writes that corporates must be understood as entities that are, to a large degree, beyond understanding. He compares the small business owner to Herman Melville’s Captain Ahab, with the prospective corporate partner filling the role of the great white whale, Moby Dick.
Mr Andreessen writes that something strange happens when groups of people are drawn together in a commercial entity of many divisions and leaders – usual measures of predictability go out the window.
So, when you are presented with the opportunity to collaborate in business with a much larger partner, here are things to keep in mind to get the most out of the opportunity, as well as to know when you should back out too.
In your business, it is likely that the decision-making burden rests on you alone, as the owner, or among a small group of people, depending on the decision-making infrastructure at play. One of the great advantages of running a small business – being able to adjust to new circumstances with flexibility – stems from having to consider only a small number of people when contemplating larger decisions.
A corporate yields far greater power than you, but that clout is contained by internal processes and layers of decision-makers that will, unfortunately, remain opaque to you.
The first lesson of dealing with corporates lies in internalising the slow pace at which they are compelled to move. You may have very positive talks with heads of a particular department, but getting to the point at which signatures are exchanged will bring in people with whom you will never interact – branches of legal, other departments that may be affected by your prospective deal no matter how tangentially. If an objection is raised – from any quarter – your deal could quite possibly be tabled.
Even if the deal is as sound, and mutually beneficial as any ever made, factors outside of basic economic rationality may come into play. Corporates, you may be reminded, are not strictly commercial entities. From sheer force of human numbers, corporates become political entities – if you’ve worked at a larger organisation, you may have experienced this – it may be why you’re working in a small business. Personal vendettas, power plays, can leave you out in the cold in your business deal. In some unfortunate cases, it may seem as if your business idea and operation is taken in by the corporate, only to emerge as an internal division that now competes with your own operation.
This is not to say that a small business should avoid dealings with corporates. Such dealings can be the making of a small firm, and drive operations to new heights. The extended infrastructure connections that are gained in corporate deals can inspire new branches of your own business – a big leap towards empire.
You may land your white whale; but if you feel like your pursuance is driving you to the ends of your sanity, then be assured that it is not you who is irrational – a certain kind of craziness is contained within the nature of big C beast.
Working wherever – how to master the remote office life
The office – a place where distractions are disappeared, and work is done. To some, there must be a space that is the unchanging embodiment of this frame of mind. They think that they must be one among many with their heads buried in their laptops. Others are able to work in every space they inhabit; some, cannot escape the mind that pushes their productive efforts forward.
To work wherever is a possibility that has become reality for many people only recently. In the times before the internet filled communicative pauses, this remote work lifestyle was reserved for novelists, foreign correspondents, secret agents, private detectives, and those with enough clout to command people towards them. If most of your hours are spent in front of a computer, then you too may be a candidate for a remote office life.
How to work remotely?
If you’re considering moving towards a remote work lifestyle, you should begin by acknowledging that you will not master this ability immediately – nor should you think that your first pass at a work routine is the best that you can muster. The essential lesson of this post is to emphasise that you must test out different styles of work to discover a way that gets the most out of your working hours.
Working remotely as a personal experiment
Self-supervision is the crucial element to this process – you must consistently spend a small portion of your day detached from your client-centric work, and critically evaluate your performance. Gather the objective facts – when you began work; how much time you spent working; how much time was spent distracted, at leisure, or on a break; which tasks you did; how much you managed to get done; where you were when working – as well as the subjective facts – how comfortable were you with the amount done; what level of concentration you achieved; how successfully you managed to solve problems; whether the day was good or bad.
Review and re-view yourself
This sort of data is best gathered in a spreadsheet. On Friday, conduct a brief review of the week, and at the month’s end, evaluate your performance more thoroughly. Documenting in this fashion can illuminate aspects of your working day that you might otherwise overlook – perhaps you’ll find that some tasks are better tackled in the morning, or that you work better when starting the day at noon.
The self-supervision process will give you a sense of yourself in the third-person, and will help you to identify which aspects of your work process to tweak in order to be more productive by breaking past your hidden subjective biases.
The review process can be halted once you feel that you have settled on a way of working that brings out the best in you. You may discover, however, that the process is an intrinsically useful one. In your quest to find the best version of your working habits, you will have habituated yourself into a work habit that does something good for you. You may discover that you are a more dynamic creature than a fixed life routine can handle, and that keeping the work-tracking process as your key fixed feature works better than always beginning work at sunrise or following two cups of coffee ever could.
Getting into exporting
Our globalised world requires giving thought with global scope to our business. Where appropriate, you may come to believe that your product has a market beyond the confines of your immediate surroundings. You may be right, and here’s how to begin to evaluate whether the grass is greener (and the profit margins wider).
Barriers to entry
You may have a product that can compete with foreign products of a similar calibre, all things being equal. But it’s rarely so simple – depending on your product and your prospective market, the target country may look to exclude foreign companies from competing with domestic producers. If you’re a South African producer, there are a number of beneficial trade agreements of which you may take advantage – AGOA, with the USA opens up a large market to your goods. Check which tariffs you may be subject to using the WTO website.
Linked to tariffs are what are known as Non-Tariff Barriers-to-entry, or NTBs. These are standards that importing countries place on certain goods in order to protect domestic consumers. Sanitary regulations might be in play – the EU, for instance, insists on strict (some say excessive) quality controls for certain agricultural stock. Your product may get turned back if it doesn’t accord to the importing country’s standards
You know a lot about your product. You’ve developed it, discovered the costs, and, following your importing research, you’ll know where you can sell it profitably. But you need to know which of those countries has a market that might want to buy your products.
There are a number of ways that you can go about discovering what sort of interest people in foreign markets may have in what you’re producing. As a small business, you’re unlikely to have the funds to hire a market research firm in your target country, but you can get a semblance of that knowledge via other means.
One effective way to discover whether people are interested in you products is to run online ads across a demographic on certain key words. Using Google’s keyword planner tool can give you an indication as to whether there exists a natural interest in products of your kind, and using targeted PPC ads will drive potential customers toward your product. You don’t necessarily need to have you product available in your target country at this stage – your interest is in the interest of other people.
Contacting foreign agents
Once you’ve discovered a market that will import your products, with a consumer base that can make doing so profitable, you can either rely simply on the internet to handle your purchase orders, or, get in contact with an agent in that country to take larger stock orders. For many, using an agent means a greater level of stability – bigger orders, stable supply, local exposure and know-how at the cost of a reduced margin.
Completing these steps can provide you with enough evidence to be confident that your product can compete outside of your home territory. The rest will be up to you.
How to achieve the perfect product/market fit
Small businesses form attempting to take advantage of a need. A team is assembled, and a product is developed and honed to meet the expectations of a demand.
Successfully meeting a product to a market is an event that entrepreneurs dream about – Marc Andreessen characterises this as the moment in which production of the product is matched by sales. At this point, it becomes nigh impossible to make changes to your product since the day-to-day running of the business is taken up by managing the sales. Forcing you to hire sales and customer support staff.
This moment can happen rapidly, and dealing with the expansion will stretch new parts of your business skill set. But getting there is another world entirely.
Focus on the market
Michael Siebel, partner in Y Combinator, has a bit of experience in working with start-ups going through the product/market fit process – graduates from the Y Combinator program include Reddit, Dropbox, Twitch.tv, and Airbnb, some of the most innovative companies in the tech sector today.
He believes that the key to finding a successful meeting of product and market will happen through focus on the market.
The argument is that too great a focus on the team and the product removes the real intention behind entering a market in the first place.
A product isn’t finished until the point of fit. The process of refinement must involve playing close attention to the way that customers respond to your offering.
Two approaches to you crafting your product
There are two approaches to getting to the product/market fit – one, the Steve Jobs approach, emphasises pushing the product as the solution to the problem that your customers didn’t know they needed. The other is following customers’ needs closely and matching their demands – this is Mr Siebel’s preference.
The truth lies somewhere in between – a product, to succeed, needs to offer customers something out of the ordinary, and that sparks a desire to buy the product. But too far, and you’ll get visionary points, but too few people afraid to commit. Similarly, covering customer demands is a great way to turn customers into loyal purchasers of your products – too far in this regard will mean that your products can become stretched thin through over-compensation.
The Minimum Viable Product
At the Y Combinator incubator, start-up founders are pushed to develop a Minimum Viable Product (MVP). This is a product that represents the most basic expression of the idea that got the founders into business. An MVP is something that consumers can interact with, and find value in.
With an MVP in place, your business becomes testing how people enjoy your product – whether they find use in it, whether it does what you want it to. You only reach your product/market fit by using the feedback loop of customer interaction and product adjustment.
Following this test and design adjustment process cannot guarantee success, but failing by not using this process is guaranteed.