Sunday, July 31, 2011

Execution Businesses

Some businesses have such barriers to entry and such competitive advantage that they can still thrive even with poor execution. Companies that have patents, government regulation, rocket science(very tough intellectual property to copy) , massive development costs to get into the business, high capital cost, high market share etc.

EMJ was an execution business. It was simply not that hard for anyone to get a product line to distribute. Over time we were able to grow to create barriers to entry with things like size, having the "good" lines, and having market share within a niche but in the end, it was always still an execution business.

It can be fatal for an entrepreneur not to realize that their business is an execution business. Ask - is it really that tough for someone to copy what we do? If the answer is no then follow these steps for success:

9 Ways to Thrive in an Execution Business

1 - Be frugal. Frugal does not mean cheap, it means getting appropriate value for money spent. Spend on function, not on show.

2 - Focus on process. The key is to create replicable steps that can be repeated time after time. As an early entrepreneur, often this means trying it yourself. Time how long it takes to make 10 calls. Track which message gets the most meetings. Refine and learn.

3 - Test everything. Fail Often, Fail Fast, Fail Cheap. This is a continuation of Focus on Process.

4 - Look for areas of minor competitive advantage. Really that is what execution businesses are all about. Although they may lack the monopoly or defacto monopoly characteristics of other businesses, they can have minor advantages in many different small areas. If I look at why EMJ was a success, it was not one thing, it was a number of tiny things.

5 - Know your numbers. By nature, execution businesses have small margins for error. Competition ensures that there are few "high profit" opportunities. So knowing what areas make and lose money and knowing true costs is essential.

6 - Look for niches. Often execution businesses can develop competencies within a specific expertise. Within a niche, it is easier to be the expert - less to study, less people with your focus. It is also easier to figure out ways to thrive and customize your company to address only those specific things the niche needs.

7 - Work hard. We worked long and hard year after year. My work ethic was a competitive advantage.

8 - Take full responsibility. It does not matter if the economy is good or bad, if China is selling for X, if the US$ is trading at Y, or "the VP sales cannot sell well enough" or any other "condition". Those are just conditions. We live with them and figure out how to be profitable. There are no excuses - if we fail, we are the ones that did not execute well so we need to change our product, our approach, our tactics and anything else.

9 - Study and practice time management. I think that is why I ended up writing a book on time management. This is really an extension of Be Frugal. Time is the biggest cost so get the best value from it possible.

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