Month: June 2013

“A product or service possesses quality if it helps somebody and enjoys a good sustainable market. Trade depends on quality.”

“Everyone expected the good times to continue and to wax better and better…In contrast to expectations, we find, on looking back, that we have been on an economic decline for decades…”

“We can elevate our our economy with specialized services and products. This change will require knowledge. In other words, our problem is education…”

“Customers expect what you and your competitors tell them to expect. And the customer is a fast learner… No customer asked for electric lights. No customer asked for photography. No customer asked for a telephone. No customer asked for an automobile.”

“Zero defects is not sufficient…(Products and services) must show constant improvement…Innovation is essential…It is necessary to innovate, to predict the needs of customers and give them more. The innovator will take the market.” “A good question for anybody in business to ask is ‘What business are we in?’ .. We must keep asking ‘What product or service would help our customers more?’ “

The Business-Customer Relationship

These are all taken from essays and presentations by W. Edward Deming; they appear collected in his 1994 book, The New Economics for Industry, Government, Education . Taken together, in the way I have them appearing here, they provide a good summary of the book while telling an essential story.

Here’s how I put these together:

When I’m a customer, I can clearly express my preferences from among product and service choices, but I don’t innovate, invent, or make. When producers and service providers bother to inquire and listen, what they’d learn about are my needs, interests, pain-points, disturbances. They’d then realize that their role is to invent, build, improve (through innovation) and provide the solutions. When I’m the entrepreneur, I have to make and provide those things and services which best solve the customers’ pain-points. I can be successful in the market place if I can tell customers that my innovation responds to their need, and if I can continually innovate so that I have constantly better solutions as well fewer and fewer errors.

That’s the core of the business-customer relationship: the customer informs the producer/provider, and the producer/provider creates, improves, and supplies the right response to that information. The customer and the producer are partners; their informed, educated exchange results in inventions and solutions that continually improve. When that partnership breaks down for any reason—the producer stops asking and listening, the customer can’t find ways to provide information, the innovation stops (because of business’ arrogance or loss of concern, or because—and this was big for Deming—business leaders lacked the knowledge and education to sustain continual innovation), the value diminishes in relation to price—then the economy as a whole suffers and businesses fail.

What Business Am I In?

And that goes to the question, “What business am I in?” We tend to respond to this with the most obvious answer. We state what product or service we offer. “I’m in the automobile carburetor business” is an example Deming uses. That might have been a correct answer as far as it goes, but it turned out to be inadequate because the carburetor got replaced by better technologies and devices. Had the business owner realized instead that his business was all about creating and building fuel supply systems for engines, that business might have gone on to produce fuel injectors; and eventually, electronic devices. The customer didn’t invent this; the customer’s need was for a continually improved mechanism for getting some energy supply to an engine, and to accomplish this with fewer mechanical problems and at a lower and lower cost.

Case Study: ExecutiveValet Airport Parking, Suffield, Connecticut

The business any of us is in is similar along this dimension: we’re all in the business of creating, building and improving a response to a need. And we improve the likelihood of our business success when we are mindful about all the details that go into building and managing our response. In the past week’s 21st Century Business Round Table, the one in Holyoke, I got to talk with Steve Lepow, business development manager for ExecutiveValet Airport Parking in Connecticut about this. ExecutiveValet provides highly precise, customer-centric, valet parking services for those using Bradley Airport. The business has grown from handling a few hundred cars a day to handling well over a thousand a day; its facility is large and comfortable, it’s processes efficient and attentive to customer needs, and it’s been able to successfully run full-tilt even during the past two year’s worst storms.

I wanted to know how this business addressed quality concerns, innovation, and customer service. We learned that a well-designed and well-run parking service is a great deal more than a large parking lot with curb-side pickup and delivery at the airport. Details abound: designing the lots so that winter plowing never ties up the lot, installing the equipment and lines to add in electric car charging stations as they become more popular, having a comfortable place to drop off one’s car, having the cars ready in advance for each in-coming flight, and on an on. The result is exactly what I’ve just been writing about: a system in which all the things the customer needs but never thought to ask for are created and provided. The customer is not only satisfied but increasingly satisfied, as the company continually explores what it can do to be better.

This leads to having more customers, to having repeat customers, and to gaining big bites of market share. Would you have guessed that an airport parking service would be at the cutting edge of innovation and quality production? I left the conversation with a lot to think about in my own work; between Deming and Mr. Lepow, there’s a lot to learn here about mindful entrepreneurship!

“Most leaders and policymakers don’t have a clue about what makes entrepreneurs successful” (from Gallup Business Journal, September 2012)

Adequate financing is frequently cited as the primary factor in success, while academia tends to believe that business degrees are essential. There are certainly many entrepreneurial cases to study in an effort to uncover what makes entrepreneurship work: according to the Kauffman Index of Entrepreneurial Activity 1996-2012, produced by the Kauffman Foundation — considered to be the world’s largest foundation dedicated to entrepreneurship — there were 514,000 new business owners each month in 2012. And if this seems extraordinary, consider that this is down from 2011 when some 543,000 new business owners created businesses each month. The decline is credited to an improved employment trend, which means that entrepreneurship is stimulated by, among other things, a lack of jobs. There are currently 12 million adults who own a business in the U.S. What drives this entrepreneurship and what drives success are increasingly important questions.

In our 21st Century Business Round Table sessions this year, we’ve been spending time with a few old tools to help us be successful entrepreneurs. I’ve dusted off a few venerable but tried-and-true techniques, such as SWOT analyses, in the context of tracking how well a venture is doing in aligning its resources and actions to its mission and vision. It’s a classic approach that, re-fashioned a bit for the small business owner and solo-entrepreneur, brings heightened awareness about capacity and capability in relation to challenges and opportunities. That is, we’re using, and coming to appreciate, some powerful tools that contribute to mindfulness and to our own successes.

When we dive into the data and analysis about entrepreneurship, the wisdom of this approach becomes very clear…

A few additional pieces of information from the Kauffman Index report are particularly useful in our exploration. The highest rates historically occurred 2008-2011, during the peak of the most recent recession. The “decline” in 2012 is actually a return to the trend line. The fastest regional growth rates of entrepreneurship in the United States, as well as the highest rates since 1996, have occurred on the West Coast, with the East Coast close behind. The lowest growth rates, as well as the greatest declines, have been experienced in the Mid-West.

The report I’m referencing, again, is the Kaufman Index of Entrepreneurial Activity 1996-2012. That time span allows some trend analysis, revealing that the rate of entrepreneurship has been higher for those aged over 45 than for those younger. In 1996, the gap between the entrepreneurship rate of those aged between 20 and 34 and those older was small; the gap has increased significantly since, as older entrepreneurs are starting businesses at much higher rate than younger. About 340 adults out of 100,000 aged over 34 are starting new businesses each month, whereas about 230 adults out of 100,000 aged under 35 are starting new businesses. In 1996, almost 35% of new entrepreneurs were aged 20 to 34, and a little over 14% were aged over 55. In 2012, 26% were aged 20 to 34 and 23.4% were over age 55.

If this age shift seems counter-intuitive, ponder the education shift. This one surprised me: since 1996, the entrepreneurship rate for those without a high-school diploma has always been higher than for those with a college degree, except in 2001, when the two groups had the same rates of business creation. Since 2001, the trend for those with less education has gone up to the point where it almost doubles the rate of highly educated. But this turns out to be more of a demographic shift than an educational variation: the rate of participation in entrepreneurship has increased dramatically for immigrant, Latino, and African-American populations who have not obtained higher degrees and who have become unemployed during the recession years. Among native-born Anglo/white population groups, people with higher degrees are far more likely to become entrepreneurs than those with less education.

Entrepreneurship attracts those confronting an economic or employment disadvantage, regardless of education; as well as older and more educated professionals. Seen this way, entrepreneurship is a choice made to create jobs, incomes, and life-styles for the entrepreneurs while being “free” from the difficulties of working for, or becoming unemployed from, other employers. Entrepreneurship is an opportunity and sometimes a necessity.

Let’s go back to that Gallup Business Journal article I started with. The authors, Sangeeta Badal and Joe Streur, reported on “What Drives Entrepreneurs to Win.” All the data points reported in the Kaufman Index now become really interesting: regardless of education level, nationality, birth place, gender, and employment, the unifying theme is that all these entrepreneurs are self-driven. The authors identify 10 functional demands “that are enduring and universal:” all depend on the capacities and capabilities of the entrepreneur. These 10 demands include nuggets such as “Know your personal brand: entrepreneurs must interact effectively with others; successful entrepreneurs know themselves…”; and “Take on challenges”, “think through possibilities”, and “be a self-starter.” The authors note that “Startups that are growing rapidly demand long hours of work and high levels of energy and stamina.”

We spend time on SWOT analysis because it forces us to pay attention to all these factors. At the heart of this tool is the very first demand: self-knowledge. Once I can clearly articulate my vision, and develop a mission that will fulfill it, I have to gather resources, make decisions and take actions that will move my mission forward. And to fully understand how I will do that, I want to commit serious thought to understanding my capabilities, capacities, opportunities and challenges. I love this process: I turn to it often, and it always brings new insights and discoveries that me drive forward.

Of the roughly half-million entrepreneurs entering the market places this month, some are old, some young, some with advanced degrees and some not, speaking many languages and born in many countries. They all share this same drive: to use their capacities to create enterprises. To be successful, they will need to be purposeful, intentional, and mindful.

Links: “What Drives Entrepreneurs to Win,” Sangeeta Badal and Joe Streur, September 6, 2012. http://businessjournal.gallup.com/content/156956/drives-entrepreneurs-win.aspx Kauffman Index of Entrepreneurial Activity, 1996-2012. Ewing Marion Kauffman Foundation. http://www.kauffman.org/research-and-policy/kauffman-index-of-entrepreneurial-activity.aspx