Ent

repr
eneur
shi
p&BM CHAPTER:
THREE Page#31
Behav
ior
alOr
ient
ati
onoft
heEnt
repr
eneur
s
Topi
cs:
LocationofBusi ness
ChooseaSi te
ChoiceofBusi nessLi ne
Innovati
onofPr oductandPr ofi
tMar gi
n
Crit
eriathatMakePr oductInnovat
ionSuccessful
Whatar ePr ofi
tMar gins?
WhatCausesPr ofitMar gi
nst oDecli
ne?
Howt oIncreaseYourPr ofi
tMar gi
nStep-By
-Step
ManagementofBusi nessGr owth
HurdlesEntrepreneur sFaceWhenAt t
empti
ngt oGrowaCompany

LOCATI
ONOFBUSI
NESS
As we look athow l if
estyl
e and ent
repr
eneurship are blending toget
her,perhaps pot ential
entr
epr
eneursshoul
dl ookathow muchsensel ocationmightmakewi t
hrespecttost art
ingy our
busi
ness.Wecouldlookatlocati
oni
ntwoway s.Onei nthephysicalsenseifyouareplanningabr ick
andmor t
arbusi
ness.Theot heri
sbasedonwher ey ouwanttol ive.Bot
hhav esever
alvariablesthat
arei
mportant
.

Fir
st,let’
slookatthei mpli
cati
onsofaphy si
calbusi
ness.You’v
eprobabl
yheardtheclassi
cadv i
ce,
“Location,l
ocat
ion,locat
ion.
”Thei mport
anceoft helocati
onofyourbusi
nesscannotbest r
essed
enough,despitether i
seoft echnol
ogy,vi
rt
ualcommuni cati
onandcloudbusi
nesses.Abusiness’
s
l
ocationwi t
hrespecttoyourcustomerbaseiscri
ti
cal
.

Howimportanti slocationtoy ourbusi ness?Reviewt hesequest

ionstohelpyouunder
standwher
eto
l
ocat
eyourphy sicalbusiness:
 Doest hesuccessofy ourcompanyr el
yheav i
lyoncustomert r
aff
ic?
 Islocat ionconv eniencei mportanttoyourcust omers?
 Doy our elyonl ocalsuppl i
ersofgoods?
 Isbr andv i
sibi
li
tyimpor t
antf oryourgrowt h?
 Aret her eanyl egalimplicati
onsofy ourlocati
on?
 Willy ouhav ecompet it
or snearby?
 Willy ourcust omerbasechangei nthisl
ocat i
oninnext10y ear
s?

Positi
oni
nghasal way
sbeenanimportantel
ementofsett
ingupanewbusiness.Yoursuccessasa
businessdependsonhowwellyouarepositi
onedtobefound.Posi
ti
oni
ngi
ncludesvari
ousf act
ors,
fr
om locat
iontothepri
ceofy
ourproductorser
vicet
othemessageyouusetopromotethebusiness,
onli
neandof f
li
ne.

I
f ,however,y
ouar ethi
nki ngofstar
ti
ngacompanybasedony ourl
ifesty
le,wher
ey ouwanttoli
ve,
theny ouhaveot hercri
teriatoconsi
der
.Andit’
snotnecessar
il
yaboutbei ngadigit
alnomadand
wor ki
ngr emotel
y.Itismost lyaboutwhereyouwanttol i
veandenjoyy ourli
fe.Butyoushoul
d
understandexactl
ywhatr esour
cesareavai
l
abl
eintheci
tyyouwantt
ol i
vein.

Let
’sl
ookathowy oumi ghtevaluateyour“locat
ion”basedonanonlinebusiness:
 Isthestatesomewhatt axfri
endlyforonli
nesales?
 Cany ouf i
ndtheexactt al
enty ouneedinthatcity
?
 Cany ouaf f
ordthetalentinthatcity
?
 Asy ougrow, whatwilli
tcostt ohouseempl oyeesvi
arentandbusinesscost
s?
 Whati sthecostoflivi
ngi nthatcit
y?
 Isthereast r
onginvestorbasei nthatci
ty?
 Doest hecityhaveasol i
dent r
epreneurnetwork?

Mostent
repr
eneur
sdon’
treal
l
ythi
nkaboutt
hel
ocat
ionoft
hei
rst
art
upwi
thr
espectt
owhatt
heywi
l
l
needt
ogrowthecompany.

I
t'
sal
soi
mpor
tantf
ory
out
ounder
standt
hedemogr
aphi
cpr
ofi
l
eofy
ourpot
ent
ialcust
omer
sinor
der

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:
THREE Page#32
Behav
ior
alOr
ient
ati
onoft
heEnt
repr
eneur
s
toproperlyevaluateacommuni t
yf orlocation.Toseei fthecommuni tyyou'reconsi der
ingoffer
sa
populat
ionwi t
ht hedemogr aphictrait
snecessar yt osupporty ourbusiness, l
ookatt hecommuni t
y'
s:
 Pur chasingpower .Findoutt hedegr eeofdi sposableincomewi thi
nt hecommuni t
y .
 Resi dences.Ar ehomesr entedorowned?
 Meansoft ranspor tati
on.Dopr ospectivecustomer si nthear eaownv ehi
cles,ri
debusesor
bi
cy cl
es,andsoon?
 Ager anges.Doest hecommuni t
yconsi stpr i
mar i
lyofy oungpeopl est il
lapproachingthei
r
pri
meear ningy ears, y
oungpr of
essionals,empt ynesters,orretir
ees?
 Fami l
yst atus.Ar etherelotsoff amiliesinthear eaormost lysingles?
 Lei sure act i
vit
ies.Whatt ype ofhobbi es and r ecreati
onalact ivit
ies do peopl eint he
communi typarticipatein?

Whenyou'
resat
isf
iedthatt
hecommunit
yyoupl
antoser
vehasthequal
i
tiest
osuppor
tyourbusi
ness
andi
sconveni
enttoyourcust
omer
s,t
henbegi
nlooki
ngf
orasi
te.

CHOOSI
NGASI
TE
Accordingt oSBA st udi
es,poorl ocati
oni samongt hechi efcausesofal lbusinessf ail
ures.In
determini
ngasi t
ef oraretail
operati
on,youmustbewi ll
ingt opayforagoodlocati
on.Thecostoft he
l
ocat i
onoftenreflect
sthev olumeand/orquali
tyofthebusi nessyouwil
lgenerat
e.Nev erselectasite
mer el
ybecauset hefacil
i
tyisopenandav ai
l
ableorbecauset herentisl
ow.Keepi nmi ndthatthereis
adirectcorrel
ati
onbet weenl owrentandhighadverti
singexpenses.Basey ourselecti
onofasi t
eon
themar ketinfor
mat i
ony ou'veobtai
nedandt hepot entialoftheareatogener at
ei ncomef oryour
company .

Themosti mportantconsiderati
onf orchoosi ngasi t
ef oraser vi
cebusi nessisconv eni
encefor
customer s.Servi
cebusinessest hatdealdirectlywithcustomer s,l
i
kenai lsalons,t
ravelagenciesand
drycleaners,don'tneedt olocateinhi gh-
rentdi st
ri
cts;t
heyj ustneedt obeconv enient
lylocatedon
thebeatenpat handv i
sibletotheircustomers.Ser vi
cebusinessest hatarerarelyv
isit
edbycust omers,
l
ikeTVr epai rshopsandpestcont roloperators,canbef art
heraf i
eld.Buttheset ypesofbusinesses
havet omakeanongoi ngefforttol etcust omersknow t hey'rethere-
-hence,thev al
ueofdi spl
ay
adverti
singinthenewspaperorYel l
owPages, f
orexample.

Manufacturer
swi l
lusuall
yber est
ri
ctedtoindust
ri
alareasbyt hezoningordi
nancesofmostt owns
andciti
es.Themai ncri
teri
af ormanuf actur
ersi
sthesuitabi
l
ityofshi
ppingandloadi
ngfacil
i
ties,the
dist
ancetokeysuppl i
ersofr awmat erial
sandmar ket
s,theavail
abi
li
tyofcheapfuel
,andtheskillof
thesupportstaf
finthelocalarea.

Li
kemanuf act
ur er
s, whol
esalersar
er est
ri
ctedbyzoningl awswithinmostcit
ies.Theirmaincri
ter
ion
i
spr oxi
mitytolocalmar kets,si
ncetheydon' twantdeli
ver ytot
aketoomucht ime,especi
all
yifthe
producti
sperishable,orcoststoomuch.I fcostsi
neithert i
meormoneyar eev ent
uall
ypassedont o
customersint
hef orm ofhigherpri
ces,customerscoul
dwi nduplooki
ngforothersuppli
ers.

CHOI
CEOFBUSI
NESSLI
NE
Oncey ou'vedeci dedt owal ktheent r
epreneur i
alpat h,thenextquestiont oasky oursel
fis,"Whattype
ofbusi ness do Iwantt o start
?"Ther e aret housands ofchoi ces.Shor tofsomet hing li
ke
pharmaceut icalst hatr equiresenormousr esearch&dev el
opmentbudget s,ther
ear ev i
rt
uall
ynol i
mi t
s:
automobi l
emanuf act uri
ng,f oodpr oducts,impor t/export,andmanyot hersar eopent oev enthe
i
ndividualent r
epr eneur .
TheTr adit
ionalAppr oach
speaking,theappr oach consi stsofr esearching t hemar ket
,identif
ying a need,and cr eati
ng a
businesstof il
l it
:
 I dentifyt hei ndust r
yy ou'
reinter
estedi n.
 Resear cht heki ndsofbusi nessesandv ariousbusi nessmodel swi t
hint
hatindust r
y.
 Per for m mar ketresearcht oseewher et herei sanunmetneed- -geographicall
y,pri
cewi se,
compl ement ar yproductsandser vices,etc.
 Anal yzet hecompet it
ion.
 Dev elopapr eliminarybusinessplanf orabusi nesstomeett hatneed.

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:
THREE Page#33
Behav
ior
alOr
ient
ati
onoft
heEnt
repr
eneur
s
 Conductmoremar ketresear
chtoassessthereal
i
sticmarketpot
enti
alf
ory
ourbusi
ness.
 Revi
sethebusinessplananddetermineyourf
undingrequi
rements.
 I
fneeded,seekoutlendersorinv
estors.
 Star
tthebusiness.

Needlesstosay,thi
sisnotsomethingyoujustknockouti
naweekend.Themostobv iouspr
oblem
wit
ht hisapproachisthati
t'
sext r
emelylabor-
int
ensiv
eandpotenti
all
yexpensi
vetoev endecide
whetherornott ogoint
obusiness.Ofcourse,t
hattimespentonthefrontendr
educestheri
skof
f
ail
uredownt heroad.

CommonScenar
ios
 Noonewant stobuyi t.You'repassionateaboutit,butappar entl
y,nooneel sei s.Youcan't
sell
peoplesomet hingtheydon' twantt obuy.
 Someoneel seal readyt houghtofi t.Youhav eagr eatidea,buti t
'sani chemar ket,and
someone al r
eady beat  you to i t
.I ft hey
'r
e bet ter funded,t hey may be doi ng it
bett
er/
faster/
cheaper .
 Alotofpeopleal readyt houghtofi t
.Highl
ycompet it
ivemar ketsarenof un.Ify ouconstantl
y
havetogohead- to-headwi thcompet it
ors,
itwil
lgetoldv eryquickl
y.
 There'
smor etoi tthany our eal
ized.Youunderesti
mat edthecosts,orthedev elopmentt i
me,
ortheincubati
onper iodf orthemar keti
ngtotakeef f
ect ,
ortheamountofener gyrequir
ed,or
thetol
litwouldtakeony ourpersonal l
if
e.

Bestofbot
hWor
lds
Theseappr oachesar enotent i
relymut uall
yexclusive.Let'sstartwi t
ht hei
dea,rat
herthanwi t
hf ormal
resear
ch.Someoft hepossi blesour cesforbusinessi deas i
nclude:
 Sel f-discov ery.
 Findoutwhaty ou'
retrulypassi onateaboutandf igureouthow t omakei ta
business.
 I nspiration. Thatideat hatjustpoppedi ntoyourheadonedaymaynotbesocr azyaft
eral l
.
 Obser v ati
on.  
Beconst ant l
yl ooki
ngforunmetneeds.I st hereapr oductorser v
icethaty ou
woul dbuyi fitwer eaccessibleandaf f
or dable?
 I mitation. Onewayt oi ncreasey ouroddsofsuccessi st ofindapr ovenbusinessmodeland
repli
cat eiti nadi ffer
entmar ket.Consi der
 buy i
ngaf ranchise,wherey ou'
l
lhav eapr oven
business  model andout si
desuppor tfory ourbusiness.

I
tdoesn'tmat terwher etheideacomesf r
om.Whatmat ter
siswhatyoudowi t
hit.Andnomat terhow
bri
ll
i
anty out hi
nkt heideais,youneedsomeext ernalinput-a"sani
tycheck"
,ifyouwill
.Eveni fyou
don'
thav et het i
meormoneyf orext
ensivefor
malmar ketr
esearchorbusinessplanning,dot he
i
nformalr esearchy oursel
ftofindoutifther
e'samar ketfory
ourideaandt oassessthev iabil
it
yof
yourbusi
nessconcept .

Youcanasky ourfr
iendsandf ami
l
y,butwheny oudo,makesuretol
etthem knowexactl
ywhatyou
arelooki
ngfor-
-honest,detai
l
edfeedbackontheidea.Tr
uefr
iendswi
llbesupport
iveofyourabi
l
ity
tosucceed,
buttheywill
alsobehonestwit
hyou.

TheNextSt
eps
I
fy oumakei tpastthefri
endsandfamil
yroundandst
il
lthi
nkyou'vegotavi
abl
ebusinessconcept
,
puttogethera basi
cbusi
nessplan.I
tdoesn'
thav
etobeincredi
blydet
ail
ed-
-you'
renotgoingtothe
bankorinvestorswit
hit
.

Thinkofthethreetofi
vemostsuccessf
ulentr
epreneursy
ouknow.Contactt
hem andseei
fthey
'l
l
takealookatyourbusi
nesspl
anandmeety ouforcoff
eeorluncht
odi
scussit
.Nowwouldal
sobea
goodti
met o 
fi
ndament or.

I
fyouf eelyouneedsomemar ketresear
ch,turntoanonl i
necommuni tyinwhi chyoupar t
icipate
r
egul
arl
y ,orfi
ndanonl i
necommuni tyofpeoplewhomat chyour
 t
argetmarket
.Askaf ewquest ions
i
nthediscussionforums,pref
erabl
yopen-endedonest hatwi
llgetyouquali
tat
iveinfor
mat i
on,rather
t
hanjustquant i
tat
ivedata.I
tmaynotbeasst at
ist
ical
l
yaccurateasformalmar ketresear
ch,buti f

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:
THREE Page#34
Behav
ior
alOr
ient
ati
onoft
heEnt
repr
eneur
s
y
ou'
renottal
ki
ngaboutri
ski
nghugesumsofmoney
,it
'spr
obabl
ygoodenough.Thehi
ghert
her
isk,
t
hemoreformalr
esear
chyouneed.

I
NNOVATI
ONOFPRODUCTANDPROFI
TMARGI
N
Pr
oducti
nnovati
onisdef
inedas:thedev
elopmentofnewpr
oducts,changesi
ndesi
gnofestabl
i
shed
pr
oduct
s,oruseofnewmat er
ial
sorcomponentsi
nthemanufact
ureofestabl
i
shedproduct
s.

Productinnovati
oninvolv
escr eati
ngnew pr oductsori mprovedv er
sionsofexi st
ingproductsthat
i
ncreasetheiruses.Thi
sinnovationcanbei nthepr oduct'
sownf uncti
onalit
y,oritcantaketheform
ofnew technology.Thi
nkabouthow of tencellphonemanuf actur
ersandcarmanuf act
urersmake
new ver
sionsoft hei
rproducts.Forexampl e,carmanuf actur
ersmakeonenew careachy ear
.Cell
phonemanuf actur
erstendtor el
easeanewv ersionoftheirphoneseveryfewy ears.I
ndoi ngso,the
manufacturertr
iestointr
oducesomet hingunique.Productinnovati
oni sallaboutimprov i
ngupon
whatyouhav e.Youtakecustomerf eedbackandy outurniti
ntoanimpr ovedproduct.

Let
'st
akeal
ookatt
het
wot
ypesofpr
oducti
nnov
ati
on:

NEW PRODUCTS
Thef irsttypeofpr oductinnovat
ioninv ol
vesintroducinganewpr oduct.However,youcan'tintroduce
j
ustanynewpr oduct.Thi
snewpr oductmustsol v
eanexi st
ingpr oblem i
nanewandexci ti
ngway .Or
thepr oductneedst osolv
eacompl et
elynewpr oblem t hathasar i
sen.
Forexampl e,att he2016ConsumerEl ectr
onicsShow,t heelectronicscompanyLGi nt
roducedanew
typeofscr eent hat'
ssof l
exi
bley oucanr ollitupl ikeanewspaper .Thi
susedt obet her ealm of
sciencef icti
onmov i
es,butnowi t
'sar ealproductthatcoul dbecomer eadil
yavail
abletoev er
y bodyin
ashor ttime.Thi sinnovati
veproductsol vest hepr oblem ofpor t
abil
it
y-i nst
eadofusi ngal arger
,
unwi eldyscr een,peoplecanshowav ideoonascr eenthatt heycanf oldupwhent heyar edoneand
putitint heirbag.

Thesearet
hef
ewst
agest
hatabusi
nesshast
ounder
gowheni
ntr
oduci
nganewpr
oductl
i
nei
ntot
he
market
:

 Mar ketr esearch:Thi scanbedonei nt hef or

m ofpr imar yandsecondar ymar ketr esear ch
wher et hebusinesswi llgat herasmuchi nformationaspossi bleaboutt hepr esentt astesand
prefer encesofi t
spot entialconsumer s,and t hegapsf i
l
led i nt hebusi ness'spar ticular
i
ndust ry.Secondar ymar ketr esearchi nvolvesgat heringdat at hathasal readybeencol lect ed
byanot herparty,andi spr i
mar i
lybasedoni nformat i
ont hathasbeenf oundedf rom pr ev i
ous
studi es.Oneadv antageofsecondar ymar ketresearchov erpr imar ymar ketr esear chist hati t
i
sl ow- cost ,t
husenabl i
ngt hebusi nesst obeabl etoinv esti tstimei ntoot hermor ei mpor t
ant
mat ter sandnewpot ent i
albusi nessv ent ures.Pri
mar ymar ketr esearchi nv ol
vest hebusi ness
gather ingdat aindividually,andt hi
scanbedonev iav ari
oussampl i
ngmet hods.Ot herf orms
ofpr imar y mar ketr esear ch include f ocus gr oups,i nterviews,quest i
onnaires,et c.One
adv ant ageofpr imarymar ketr esearchov ersecondar ymar ketr esearchi sthati tdel ivers
muchmor especi f
icr esultst hansecondar ymar ketr esear ch,andi sonl yav ail
ablet ot he
busi nessi tsel
f,rathert hansecondar yr esear chwhi chi smadegl oball
yav ail
abl
e,asdat ahas
al
readybeencol lected.

 Productdev el
opmentand t esting:Thisst agei nvol
v escr eat
ing atestpr
oductcal led a
protot
ype.Theprotot
ypeensur esthebusinesst hatit
spr oductisfuncti
oni
ngproper l
y,andall
thenecessaryarr
angementsar emadet oenhancet hepr oductasmuchaspossi ble.Afterthe
protot
ypehasbeendev ised,thebusi nesscannow uset estmar ket
ingwherethebusi ness
i
ntroducesapr oducttoasmal lgroupofi ndividual
st ogi vethecompanyi nsightintot he
effect
ivenessoft
heproductfrom thev i
ewsoft heirpotential
customers.

 Feasibil
it
yst udy:The busi
ness wi llnow lookatt he l
egaland f
inanci
alrestri
cti
ons of
l
aunchingt heproducti
ntothemar ket.Thisiswherethebusi
nesswil
lcreat
esalesforecasts,
establi
shthepr i
ceoftheproduct,theov er
allcost
sofproduct
ionandprofi
tabi
li
tyesti
mat es.
Thebusi nessalsohastoconsiderl egalaspectsi
ntermsofsafet
yandI nt
ell
ectualProperty

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
n@gmai
l.
com
Ent
repr
eneur
shi
p&BM CHAPTER:
THREE Page#35
Behav
ior
alOr
ient
ati
onoft
heEnt
repr
eneur
s
Ri
ght
s(I
PR)
.

Af
teral
lthesest
ageshav
ebeensuccessf
ull
yrunt
hrough,
thent
hebusi
nesscanof
fi
cial
l
ylauncht
he
pr
oduct
.

EXI
STI
NGPRODUCTDEVELOPMENT
Exi
stingpr oductdevelopmentisapr ocessofinnov
ationwher eproducts/ser
vicesar eredesi
gned,
ref
urnished,improved,andmanuf acturedwhichcanbeatal owercost.Thiswil
lpr ovi
debenefitsto
boththecompanyandt heconsumeri ndiff
erentways;forexample,i
ncreasedrev enue(benefi
tsthe
company )cheapercost s(benef
it
st hecompanyandconsumer )orevenbenef i
tstheenv i
ronmentby
i
mpl ementationof'
green'product
ionmet hods.

CRI
TERI
ATHATMAKEPRODUCTI
NNOVATI
ONSUCCESSFUL
Mostnewi deasdonotl eadt osuccessf ulproduct sorser vices.60to80per centfai
lonthemar ket.
Thisar t
icletell
sy ouwhicht encr it
eriamakeapr oductinnov ati
onsuccessf ul
.
 
1.Relev antcust omerbenef it
Ist heinnov ati
onr el
evantf orthecust omer?
I
nor dert obesuccessf ul,ani nnovationmustsat i
sfyacust omerneed.I nnovati
onsoftendon'tbri
ng
thedesi redsuccessbecauset heydon' tbringrealbenef it
st ot hecustomerorar eaimedatthewr ong
tar
getgr oup.
 
2.Rel evantdi f
ferent
iati
onf rom t hecompet it
ion
Isy oursolutionsuper iorinoner elevantaspect?
Ani nnov ati
onmustdi fferentiateitselffrom thecompet i
tionandbedi sti
nguishedbyatl eastone
uniquef eature.Thisdif
ferentiati
ngf eatureshoul dbehi ghlyr el
evantfortheuserandshoul dbeableto
bemai nt ai
nedi nthelongt erm.

3.Accept
anceandexpl ainabil
ityoft hepr oducti nnovat
ion
Cany ousimplyexpl ainthepr oductbenef it
sanditsuniquenesstocustomers?
Sometimesapr oductinnov at
ionput sconv entionalcustomerideasintoquesti
ontosuchanext ent
thatt
heydonotr ecogni
zet hei
rbenef i
ts.Whent hefir
stsupermarketopenedinGermanyinthe1930s,
i
tsoonhadt ocl oseitsdoor sagain.Oneoft hemosti mportantreasons:Theself
-serv
icepr
inci
ple
wassimplynotacceptedbycust omer s.Anot hertwodecadeswer etopassbef or
esupermarket
swer e
ablet
oestabl
isht hemsel
v esinGer many .

Ifnew dev el opmentsfrom customersrequir

eamaj orrethink,i
tcanbeusef ultoprepar
ethetar
get
groupf orthemar ketlaunchwithani nf
ormati
oncampai gn.Anotherpossi
bili
tywoul
dbet ocombine
thei nnovationwiththeoldversi
on.
 
4. Easyt otest
Isi
teasyforthecustomert otr
ytheproductandexper i
encethebenefi
ts?
TheSegway ,forexample,wasor i
ginall
ydesignedforthemassesandsol dbythemakersast he
"future"ofone- man passengert ransport
.Butdue t oi ts compli
cated oper
ati
on and need f
or
expl anati
on, thevehi
cleisnei
thereasytotestnorsui
tabl
ef orthemasses.

5.Easyt ochange
Isiteasyf orthecust omertoswi tcht oyourpr oductwit
houtr i
skandef fort?
Tost i
ckt ot heexampl eoft heSegway :Unt iltodayt hereisnosui t
ableinfrastructure.Thereisno
sui
tablepowersuppl yandt heSegwayi snoti ngoodhandsbot honsi dewal ksandonr oads.In
additi
on,therear etargetgr oups,suchaspensi oner s,forwhom theSegwayi sunsui tabl
ebecause
dri
vingtheSegwayi stoor isky.Segwayult i
mat el
yf loppedbecauset hecompanyhadn' tthoughtabout
anappr opri
atedistri
butionst r
ategyorinfrastr
uctur e.
 
6. 
Legalframewor k
Doy ougeti ntolegalconf li
cts(laws,norms, pat ents)orethnicconfli
cts(values)wi thproduct
i
nnovat i
on?
In2006,anAmer i
canbev eragecompanycamei ntoconf l
ictwit
hthel awt hatintroducedt heenergy
dri
nk" Cocaine"withthreet imest hecaff
einecont entofRedBul l
.Short
lyafterthel aunch, t
heproduct

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of.Dr
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repr
eneur
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p&BM CHAPTER:
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Behav
ior
alOr
ient
ati
onoft
heEnt
repr
eneur
s
wastakenofftheshel
vesbyt
heFDAduetothegl
ori
fi
cat
ionofani
l
legaldr
ugandt
hehi
ghcaf
fei
ne
cont
ent.Meanwhil
e,t
hedri
nki
sav
ail
abl
eagai
ninanadapt
edfor
m.

Themar ketlaunchofSegwayal sofail

edatthebeginningduet othelegalframewor k,ast heSegway
wasnotappr ovedf orroaduseandcoul dnotbeusedonsi dewalks.Ev ent oday,t herearestil
lno
uni
form regulationsi n manycount r
ies,and speci
alpermi t
sar eof ten requir
ed.Thi sofcour se
hampersdi st
ributionenormously.
 
7.Earni
ngspr ospect sofproductinnov at
ion
Doespr oductinnovati
onhavet henecessarypotenti
alforsalesandpr of i
t?
Manysuccessf ulnew dev elopment sof t
ent akeyearsaftermar ketl auncht o mat ur
eand of fer
att
racti
vev al
uef ormoney .New t echnologi
esshouldalsobet akenint oaccountwhenassessi ng
rev
enuepr ospect stopreventanewl yintr
oducedproductfr
om beingdisplacedbyanewt echnol
ogy.

TheAPScamer asar eacl assi

cexampl eoft his.Launchedi nt hemi d-1990sbyl eadingcamer aand
fi
lm manuf act
urer s,theywer esi gnif
icantl
ybet tert hantradit
ional35mm camer as.Butjustaf ew
yearslat
er,APSt echnol ogywasl argelyreplacedbydi gi
tal
photogr aphy .
 
8.Integr
ationintoexi st
ingpr oductpor t
foli
o
Cant heproductbel aunchedwi thoutdirectlycompet i
ngwi thy ourexist
ingproductportfol
io?
Thei ntr
oducti
onofi nnovativepr oductstot hemar keti
ncreasest her i
skthatt heywi l
lbeatt he
expenseofexi stingpr oducts.Brandcanni bali
zationcancostmar gi
nsandr educethev alueofthe
company .Cannibal i
zati
onshoul dt heref
orenor mal l
ybeav oided.Howev er,t
herearealsoadv ocat
esof
"pr
eventivecannibalizati
on".Thedeci sivefactorher eishowcanni bal i
zati
onaffectstotal
revenues.

Inthi scont ext,thesay i

ngofSt eveJobs,whosai ddur i
ngt hei-Phonei ntr
oduct ion:"Ify oudon' t
canni bali
zey ourself
,thensomeoneel sewi l
ldoi t",i
swel lknown.Att het i
me,t hei Podwasgr owing
steadi l
y,generating50per centofAppl e'srevenue.Jobsbr oughtthei Phonet omar ket,althoughhe
knewt hatitwouldmassi velycannibalizetheiPodbusi nessandev entuall
ydisplaceitcompl etely.
 
9. 
Pr acticabil
it
y
Doy ouhav ethenecessar yr
esour cest otechnicallyi
mpl ementandmar ketthepr oductinnov ation?
Youmayneedt obr i
ngonboar dpar tnersfort echnicaldevelopment( technologies,compet encies,
meansofpr oduct i
on)ory oumayneedsal espar tner
st osuccessfullypositi
onapr oducti nnov ati
on
ont hemar ket(suit
ablesaleschannel s,nobar r
ierst omar ketentr
y).

Numer ousinnovat
ionsfai
lduet oal ackofcooperat
ionbetweenimpor tantbusinesspartner
s,on
whom t hesuccessofani nnovati
ondepends.WhenRober tChesebroughi nvent
edVasel i
neinthe
secondhalfofthe19t hcentur
y,hetr
iedunsuccessf
ull
ytowi nphar
maci esasdi str
ibut
ionpart
ners.
Only when Chesebrough deci
ded to di
str
ibut
e hisinvent
ion t
ot he publ i
c did he achi
eve his
breakt
hrough.

WHATAREPROFI
TMARGI
NS?
Youmustunder st
andt
hepr of
itmar gi
nf ormula–thedif
fer
encebetweenyourrevenue(t
heamountof
moneyy ourcompanybri
ngsin)andy ourcosts–andt akecont
rolofitt
osucceed.Sinceyourpr
ofit
margi
ni show muchmoneyy ouact uallygettowalkawaywi thafteratransacti
oniscomplete,
under
standinghowtoi
ncreasey ourprofitmargi
ninbusi
nessisf
undamentaltogrowth.

WHATCAUSESPROFI
TMARGI
NSTODECLI
NE?
Toi ncreasey ourprofitmargin,under standt hatpr ofi
tmar ginsar esubj ectt oav ari
etyofinfluences
thatcancauset hem t odecli
ne.Allindust ri
esar eatt hemer cyofov eralleconomi cconditi
ons,whi ch
i
mpactev erythi
ngf rom consumerbehav i
ortoi nterestratest othecostofr aw mat er
ial
s,laborand
production.Youri ndustrymayf inditsel fupendedbyadi srupti
venew t echnologythatchangest he
mar ketovernight.Somet hi
ngasst raight f
orwar d(andf ixable)ascar elessaccount ingprocedurescan
alsoimbal anceyourr evenuevs.profitratio,causingy ourpr ofi
tmar ginstodi p.

HOW TOI
NCREASEYOURPROFI
TMARGI
NSTEP-
BY-
STEP

Pr
of.Dr
.Shai
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Behav
ior
alOr
ient
ati
onoft
heEnt
repr
eneur
s
1.Str
iveforincrementalgrowth:It’
seasytogetaheadofy our
self
,especial
l
ywheny ou’
reworkingt o
i
ncreaseyourbusiness’profi
tmar gi
n.Youstartthi
nkingaboutyourult
imategoal,andforgetaboutall
theli
tt
lestepsi tt
akesalongt hewayt ogetthere.Inst
eadoff al
l
ingintothattr
ap,learntostrivefor
i
ncrementalgrowth.It
’simpor tantt
ohaveanendgoal ,butit’
sevenmor ecrucialtosetsmal lgoals
thatyouandy ourbusinesscanmanageandt rackov ert
ime.Thisallowsy outomakeconsi stent
progr
essandmoni t
orhowy ourbusinessisperformi
ng.

2.Focusonst rat
egi cinnovati
on:Therearen’
tmanycompani esthatcansayt heyhonestl
yof ferthei
r
customer ssomethingbr andnew.Atthispoint
,successf
ulbusi nessesexpandonexi sti
ngi deas,but
theydoi ti
nawayt hat’susefulandappeal
ingtothei
rcustomer s–t heystr
ategical
l
yinnovate.Tot rul
y
understandhow toi ncreaseprofi
tmar gi
nnumber sfory ourbusi ness,i
denti
fywhoy ourcust omer
real
lyis.Whoisthisper sonandwhatneeddot heyhavefory ourproduct?

Anexampleofast r
ategi
cinnovat
orisNet
fli
x.Bef
oret
hestreamingser
vicecameal ong,
peoplewer e
happytorenttapesatBlockbuster
.Netf
li
xsaw how theycoul
dcapitali
zeont hi
sneedf orhome
enter
tai
nment,
andf oundawayt omakemov i
esevenmoreaccessi
blef
ort hei
rtar
getaudience.They
str
ategi
cal
l
yinnovat
ed.

3.Createanincredibleteam:Dev el
opingasizabl
epr ofitmargi
nispartl
yabouttheservi
ceorpr oduct
you’r
eofferi
ng,butit’salsoabouty oursuccessinbui l
dingateam thatworks.Whodoy ouhav eon
yoursidethatsuppor tsyou100%?Whowor ksf oryourbusinessthatnotonlyknowst hecompany
i
nsideandout ,butiswi ll
ingtoraveabouty ourbusinessandbr inginnew customers?Toincr ease
profi
tmar gi
nsfory ourbusiness,creat
ingani nter
nalcul t
ureofr av
ingfansisj ustascri
ticalas
l
ocatingyourtar
getaudi ence.Wheny ouassembl eat eam ofpeoplewhoareexcitedtoworkfory our
brandandspready ourmessage, itbecomesahundr edt imeseasi
ertobesuccessful.

4.Identi
fywhat ’snotworki
ng:I
fyouar enothappywi thyourprofi
tmargin,youneedtot akean
obj
ectiv
el ookaty ourbusi
nessandident
ifythegaps.Evenifyourcompanyi ssuccessf
ul,there’
s
somethingy oucandot omakeitmorepr of
it
able.Lookatyourexpensereport
s,per
sonnelreviews
andcurrentsales.Whatar
eaisl
acki
ng?Ift
here’sanoti
ceabl
egap,addressi
t.

5.Fine-t
uney ourpr oductionpr ocesses:Thef asteryoucant urnaproductaroundf r
om or derto
deli
very,
thefasteryou’reabletogener aterevenueandincreaseyourpr
ofi
tmar gi
n.Takeacl oselook
atyourproducti
onpr ocesses,from yourf i
rstcont
actwithacustomertothemomenty ourproductis
deli
veredsafel
yi nt
ot heirhands.Howcany ouspeedupeachst epoftheprocess?Byst r
eaml i
ning,
you’
reabletotri
m cost sandincreasepr ofi
tmar gi
nsforyourcompany.

6.Wast enot ,wantnot :Thebeaut yofst udyi

nghowt oincr
easeprofitmarginnumber sf orabusiness
i
st hatprofitmar gi
nsar ebydef i
niti
onr ati
os.Youdon’tnecessar
il
yneedt oi ncr
easey ourprofi
tsto
i
mpr ovey ourmar gins–y ou’l
lli
kel
yf indsuccessinreduci
ngy ourexpensesaswel l
.Exami neal lt
he
way syourbusi nessspendsmoney .Wher eareyoulosi
ngmoneyt hroughspoilage,scraporwast e?Is
yourforecastingoff,causingy outopur chasetoomuchr awmat eri
al?Aretherequalit
ycont roli
ssues
withyourpr oduct?I syourpr oductsel l
i
ngsosl owlythati
tbecomesobsol et
e?Ar ey ourdistri
buti
on
channelsefficient
?Bycar efullyconsideri
ngallyouropti
onsfortri
mmi ngloss,youcancuty ourcosts
andincreasey ourprofitmar gi
ns.

MANAGEMENTOFBUSI
NESSGROWTH
BusinessGr
owthisast
agewheret
hebusi
nessr
eachest
hepoi
ntf
orexpansi
onandseeksaddi
ti
onal
opti
onstogener
atemor
eprof
it
.

Businessgrowt
hcanbeachievedeit
herbyboost
ingthetopli
neorrev
enueofthebusi
nesswit
h
greaterpr
oductsal
esorservi
ceincome,orbyincr
easi
ngt hebot
tom l
ineorprof
it
abi
l
ityoft
he
operati
onbymini
mizi
ngcost
s.

HURDLESENTREPRENEURSFACEWHENATTEMPTI
NGTOGROW ACOMPANY
CompanyCult
ureandNetwor
ks:Thepersonal
i
tiesofthefoundersofast art
upcanbeani mport
ant
dri
vi
ngforcei
nthegrowt
hofthestar
tup.Thef ounder
swi l
ldeterminethescopeandv i
sionofthe
company,
aswellast
heri
sksanddeal
sthecompanywi l
ltake.Foundersareresponsi
blef
orshaping

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
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repr
eneur
shi
p&BM CHAPTER:
THREE Page#38
Behav
ior
alOr
ient
ati
onoft
heEnt
repr
eneur
s
thecul tureofthecompany .Ast hecompanygr ows, thefounderswillmakenati
onalandi nt
ernati
onal
connect ions wit
h suppli
ers,compet itor
s,customer s and invest
ors.Founders with nat
ionaland
i
nt ernationalconnecti
onsar emor eli
kelytogr ow theircompaniest hanthosewi thonlyr egi
onal
connect ions.Al ar
genetwor kallowscompani estoeasi lyexpandandf indpartner
sinnew r egions
whi chint urnall
owt hem t
oqui cklyexpandtheircustomerbase.Bei ngabletochoosefrom av ariet
y
ofmar kets,aswellastheabili
tytoinnovateint
ernall
y,givesacompanyagr eat
erabil
it
yt oadapttoa
globallychangingmar ket
place.Thisinturnal
lowsf orsteadygrowth.

Strat
egicPlanni
ng:Fi rmsr equi
restrategicplanni
ng,bot
hshortandlongterm,inordertosucceed.
Longt er
m successr equir
esef f
ecti
vedai l
ymanagementandst r
ategi
cdecisi
ons.I
talsorequir
esthat
thesearenotatt heexpenseoft helongt erm pl
an.Fi
rmsthatdolessshortandlongterm pl
anning
areatagr eaterriskf orfai
lur
e.Manyf ir
mspur sueshortt
erm contr
act
sandqui ckprofi
tswi t
hout
consider
ingthelongt ermimpactoft heirchoi
ces.

MoneyMat ter
s:Manycompani espl anpoor l
yortaket oomanyr i
sksandf acefi
scalissues.Lackof
capit
alisachar acteri
sti
cofast artup.Ov er-
opti
mism ont hecasht hatwi l
lbeav ail
ablemaybea
deadlycharacteri
sti
cofast artup.Duet ot hehighfai
lurerat
esofst artups,itisdi
ff
iculttosecurel arge
amount soff i
nancingi fonecannotguar anteear eturnoni nvest
ment .Mostbanksar eunwi l
lingt o
fundstart
ups.Vent urecapitalfundingi salsodiff
iculttoobtainast her earemanymor ecompani es
seeki
ngsuchf undst hantherearef undsbei nggivenout.Formany ,gov er
nmentpr ogramswhi char e
usuall
ylesswel lknownandt hushav elesscompet i
tionprovideanal ternativ
efundingsour ce.Tr ade
credi
twithsuppliersisalsoapossi bili
ty.

CompanySt ructure:Whenacompanyi ssmal l

,itispossi bl
ef oral linformat ionchannel st obe
cent ralizedar oundoneper son,usual lythef ounder,enablingt hatper sont omakedeci sionsqui ckly
basedoni nfor mationdirectl
yf r
om t hesour ce.Dur i
ngandaf tergrowt h,ast hef i
rml osessome
i
nter nalt ranspar ency,i
tisoftennotpossi bleforasingleindividualtokeept rackofal ltheinformat ion
withoutset ti
ngupf ormalcommuni cationschannel s.Ast hecompanyexpands,managi ngdai l
y
oper at i
onswi llbecomeexponent ial
lydi ffi
cult
,ifthesamemanager i
alstructureiskept .Thiscr eatesa
doubl ei mpact ,gi vi
ng thecent ralf i
gur elesst imet o communi cat
ewi th other s,ast heyspend
i
ncr easi ngal l
ot ment softimeat t
empt ingtomanageoper ations.Manyf irmsf indt hisdif
f i
cultint he
fi
rstgr owt hcy cleast hefounderwi llof t
ennotf eelpsychol ogical
lycomf ort
ablewi thgiv
ingupdi rect
cont rolov eral laspect softhecompany .Hav ingadeepst ructureofshar edr ulesandbel i
efswi thin
thecompanywi llal
lowsucht ransit
ionst of l
owsmoot hl
y.Thi sal l
owst heempl oy eestowor kt owar ds
apur poser at
hert hanwor kataspeci ficjob.Thepur posewi l
lremai nthesameev enduringt urbulent
growt h, l
ett
ingempl oyeesknowwhati sexpect edandwhatt heyshoul ddo.

SkillsDev el
opment :Inter -
companyt r
aini
ngisagoodwayt oaccompl ishstabil
i
tydur i
nggr owth.
Trainingofempl oyeesshoul dfocusont heneedsoft hecompany ,r
atherthanwhati sav ail
able
externall
yt othecompany .Throughahol i
sti
ct r
ainingappr oach,itispossibletocr eat eadeep
structurewhichencour agesempl oyeestofocusongoal sandt ostri
vetowardsthem.Tr ainingal l
ows
growt htransi
ti
onst opasseasi erasempl oyeesknowwhati sr equir
edoft hem i
ntheov erallcontext
oft hecompany ,whichal lowsthem t oconti
nuetoeff ect
ivel
yfunctionevenwhent heindividual detai
ls
oft heirj
obschange.Tr aininginsti
ll
sasenseofcar eerintoindiv
idualswhoexpectt ost ayandgr ow
witht hecompany .Trainingmakesi tpossi
bletoswitchempl oyees'mindsetstothatofthecompany 's
culture,makingthem abet terf
itforthecompany .

ClosingThought s:Gr owthcarri

esriskandt hegr eaterthegr owth,thegr eat
erther i
sk.Iti
snot
possibleforastartupt ogrow wit
houtbeingexposedt ori
sk.Wai t
ingforaper i
odofnor i
skbefore
attemptingtogrowwi l
lcausestagnati
on.Theentrepreneuri
alspiri
toff oundersall
owsthem totake
ri
sksandf indopportunit
iesforgr
owthi navar
ietyofcircumstances.Iti
st heabil
it
ytofacefai
l
ure,and
therefusaltogetdiscouragedwhichleadstosuccess.

Therearenumer ousbenef i
tstogr owth,aslongast hegrowthoccur swi t
hanov er
alllongt erm
purposei
nmi nd.Everystart
upwi l
lrunintofundi
ngissues,atconcepti
onanddur i
nggrowthcy cles.
Successwil
lcomet othosewhopl ananddonotgi veuporst agnate.Growthwi l
lbeturbulentf ora
company,soacompanywi l
lhavetobef l
exi
bleandadaptableduri
ngandaf t
eraper i
odofgr owt h.
Hav i
ngafut
urev i
sionandset t
ingpolici
eswhicheveryoneknowscanhel pmi ti
gatetheturmoil.One
cannotpl
anf orallrisks,norcanonesucceedwi thoutbeingablet ot akeri
sks.Thesuccessf ul

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of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
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repr
eneur
shi
p&BM CHAPTER:
THREE Page#39
Behav
ior
alOr
ient
ati
onoft
heEnt
repr
eneur
s
ent
repr
eneurwillbef
lexi
bleenought
owor
kwi
thanyi
ssuet
hatar
ises,
whi
l
enotl
osi
ngf
ocusont
hei
r
l
ongterm goal
s.

Pr
of.Dr
.Shai
khShamsulAr
afi
n,skar
afi
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