Resource Vortex

Posted: June 21, 2014 in Business Development

Many organizations, especially small organizations, have limited resources to leverage growth. This can be especially important when that organization is in a crucial growth phase where they are trying to expand and test new markets. In pursuing this, the organization may face bitter-sweet problem: how to pursue growth with the limited resources.

Wasting time is not an option, and neither is ignoring potential opportunities. With this comes the question of how to choose between activities worth the organizations resources. The idea of a “resource vortex” is very helpful in this situation, and even better, it is very easy to implement. So what is it?

Very simply, this vortex is abstract concept of how an organization funnels opportunities and when utilized it helps to make the opportunities resource efficient for the organization. To use this idea, we take all pending opportunities and feed them into our vortex. By doing this, we avoid the problem of ignoring opportunities. Once in the vortex, we are looking for the “black spots” in any given opportunity, where these would signify deal breakers from either end. For instance, if this is with regard to a sales process, if we find that a given opportunity wants a 3 year payback on an investment, but the firm can only provide a 6 year payback, we end the allocation of resources. We don’t need to erase memory of the opportunity, but we stop expending out resources to it. So essentially, send it out of the vortex. We do this with every opportunity, at all the different phases. What is in the vortex, is regarded as active and should be pursued as such. Of course, there will be different priority levels, but the idea of using this vortex helps a organization to manage opportunities and resources that they expend.

 

Electrical Innovation

Posted: June 1, 2014 in Energy

Think about some of the most important innovations that have occurred over the past two centuries. Without a doubt, there are many examples that would come to mind, but one that should be high on the list is the electrical grid. The grid has become vital to the modern day life, at least in the more developed economies, and are important in the growth of the developing economies trying to increase the availability of electricity to the people. In this post, I want to share what I find to be an interesting story about the development of the grid into what we have today. In telling the story, I want to focus on the figures that brought this development along, the “fathers of the grid”, something I came across from Philip Schewe. Schewe’s book, The Grid, is a great read and goes into the entire history of the grid in great detail with an interesting prose.

The point of sharing this is two part: 1) It presents an informational and interesting look into the history of this system, and 2) To provide a lesson that allows us to view the process of innovation that can take place for a variety of technologies. Often, the development of an innovation comes over time, where different steps of the process are led by various people. Sometimes the initial discovery of an improvement (system or product or technology, etc) takes time before the real innovation takes place, where implementation occurs. It is the connection of these phases that is crucial to adoption.

Thomas Edison is the first of these figures. Edison was the inventor of the grid, who was responsible for the first phase of application, and had created the system for the grid to be possible. After showing some of the potential, he was able to empower the idea through his ability to maneuver through the political and financial waters to convince people of the potential.

Following Edison, came Nicola Tesla and George Westinghouse who together powered the next stage of the grid’s development. Tesla and Westinghouse led the charge on utilizing AC currents, rather than the DC current of Edison. The AC systems allowed for a more dispersed grid, which gave the ability to connect a greater area of space to receive the power from the grid. In doing this, Tesla was responsible for developing the motor that allowed for AC to work and Westinghouse facilitated the wide-scale adoption of Tesla’s systems.

The last “father” I want to mention was Samuel Insull, who often is regarded with some distaste in the history books, but played a crucial role in developing the grid. Insull sought monopoly of the market, and in doing so, facilitated the large scale adoption of the grid, along with an increase in the demand for electricity. By doing so, he helped to create the economies of scale that allowed for a huge expansion of the network, which gave power to a vast amount of area and helped lead to the ability of all people to reach power, in the US.

These four figures together were largely responsible for the administration of electricity to millions of people, that has allowed a greater role of growth and independence in the modern society. This post is a just a slight insight to this story, and if you are interested in more I strongly recommend Schewe’s book, which again provides an interesting look into this history. The connection of these figures allowed the adoption, where the ability of each to link their insight into the previous is what led to the grid we have today.

 

Sales Process Caveat

Posted: May 27, 2014 in Uncategorized

Today, I want to discuss an issue related to the sales process of an organization. Sales, although often dreaded by many, is crucial to the success of any business. And remember, understanding sales translates beyond simply the selling of a product, as any business is involved in sales in some form. For example, a service related business may not sell a tangible finished good, but does have to sell themselves to a particular client. Whatever the “product” is that is being sold, understanding sales will help deliver greater efficiency to a business.

I want to touch on something I recently came across, which although it is fairly intuitive, deserves some formal attention. Any potential buyer, consumer or client, certainly cares about the economics of a deal, but I think sometimes we tend to think that is all that matters, and it’s not. Now I don’t just mean economics, as in price, as a low price obviously is only one aspect of economics, and could very well mean that the quality is poor and thus the value is not there. What I mean by economics in this sense is the value of the product is good, and typically a buyer would buy when this good economics presents itself, but then they don’t buy.

So for an example, a company sells a product that contributes a high value to the customer, for several variables, and in general if the payback on the product to the buyer is within, say 5 years, it is deemed as a viable project. Now, of course, different organizations will have their own acceptable payback or IRR, etc., but for arguments sake let us say that Company X is looking for a product that delivers a payback of under 5 years. So Company Z, is offering a product to X, with a payback of under 3 years, while delivering high quality and has a great track record of their products. Z believes they will sell very well to this company, but X says no. Why?

There can certainly be many examples of why they say no, but this is a true story and I want to use it to explain why it happened in this instance. Cultural attitudes and differences are crucial in understanding how to sell to a buyer. In this case study, X was a company in a very risk averse culture (this was an international case) and due to Z being from another country, X was far to concerned about reliability. X pitching the product in terms of economics is not going to be enough, but rather needed to understand that the barrier to a sale was assurance of reliability, not economics. The most important route Z needed to take was to emphasize the long-standing success of the product in the market and focus the attention on how reliable it is. When these concerns are met, a sale will take place.

The point I am trying to make is that do not make the mistake of only emphasizing economics of a sale, but be aware that other factors will apply. The economics will always be important to include, but overlooking other variables will impede a successful deal.

So you have a business proposition that you are looking at developing, but don’t have a lot of resources at your expense. This is very common amongst developmental stages of businesses or withing the start-up portion of an idea. We always, especially when short on resources, need to be as efficient as we can and this applies to our marketing efforts as much as any other aspect of a business. Efficient marketing is crucial to development, as we look to maximize the outputs while minimizing the inputs, or “get the most bang for our buck” if you will. So how to we create this efficiency?

What I like to call the 4 Pillars of Efficient Marketing, are concepts that I learned first learned from Rod Hosilyk and Matt Westfield at Strategic Growth Strategies in Reno, NV and then became a believer after utilizing them. These pillars are the questions we have to ask ourselves when determining how we are going to market the business. If we answer these questions, we are well are on way to efficient marketing.

Pillar 1: Who is the customer?

This is crucial in the attempt to an efficient marketing campaign, and although it is a straight-forward concept, there is more to it than just what’s on the surface. Within this we want to know the types of customers, the primary customers, secondary ect. and REALLY know them, examples like where to reach them, where they buy, or what they look for. These are some important steps we must take before creating a marketing campaign.

Pillar 2: Why from you?

This is another way of saying what is your value proposition? Or your differentiators. What is it that makes us different from the rest of the competition? This is probably the “strongest” of the pillars because how we differentiate from the competitors is how we will succeed, and is why a customer will buy from us.

Pillar 3: How do you let them know?

This is our modes of marketing, and especially important for the efficiency goal. Here we need to know where to find the customer and what marketing channel is most important. For some it may be television ads, some QVC, social media, etc. Of course, if resources are scarce, then the higher priced channels are not going to be a reliable tool. Marketing is absolutely one area where we should focus on spending what resources we do have, so it is okay to spend here. But I am always an advocate of bootstrapping as much as possible, so don’t just throw money at marketing campaigns without doing due diligence about reaching the customer.

Pillar 4: How do you get it to them?

This will change based on the type of business of course, but it is important to understand what channels we use to deliver the final product (good or service). A great marketing campaign is only as good as the ability to deliver to the customer. This includes not only the proper channels of delivery but really focuses on logistics and supply chain. Here I want to mention the importance of our demand forecasting and capacity planning, which is making sure that we have the capacity for our expected demand. We can be successful in a marketing campaign, but if we do not accurately (to a point) forecast demand and therefore have insufficient, or too much capacity and inventory, then the campaign will not be as efficient as possible.

So now that marketing strategies are help up by these pillars, we can take steps toward growing our business while keeping our spending to a minimum due to efficient tactics.

Ode to People

Posted: May 18, 2014 in Business Development

What is the most important aspect of any business? The people. People are the drivers of business, and in more ways than one. While this may seem cliche, it can be very valuable to any business looking to grow.

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Any business is going to have people moving it along. This may be one person or a family or whatever else kind of make-up it may have, but the point is that the people within this business have to be a good fit. Business can be difficult enough without having to handle situations in which the organization itself cannot seem to function. Making sure the organization has a cohesive atmosphere is essential when planning for growth. I want to point out that this DOES NOT mean everyone needs to be best friends or act the same. Diversity in an organization is a great resource, and so do not feel as though everyone needs to be similar to each other.

What I really want to emphasize is the idea that business transactions are person to person relationships. We have heard about business to business and business to consumer, etc. but they are all person to person relationships. The reasons we should focus on this is simple: people want to deal with people they can trust. Everything we do as a business should center around the fact that we are trying to build trust within our community, whatever that community might be. This is not only a good strategy for long-term development, but also will help the day-to-day stress of running a business, because we center ourselves around a core principle of delivering our service to others, with an acknowledgement that we have a foundation of trust between us.

Interest Groups: Alternative Energy

Posted: April 26, 2014 in Energy

So how does the power of alternative energy compare to that of the oil and gas industry that we looked at last week? Intuition would probably hold a couple of things: 1) the ability to have impact (give $) is significantly less than the oil and gas and 2) that democrats receive more of the money than do the republicans. In general these things do hold true, but are not completely accurate. 

In the past 20 or so years, the alternative energy industry has given 4.6 million dollars to candidates or parties, which was drastically less than that of the oil and gas industry. Important to specify, there is a difference between just donating money to a candidate or a party and lobbying for production or services, as I do not think I made that clear in my last post. Alternative energy has increased significantly the amount of money spent on lobbying in the past several years, and the strong focus on lobbying for government policy is a significant portion of that. By the way, yes this is the post that was interrupted by my Heavyweights connection. 

The total amount of lobbying spending for this industry has amounted to just under 22 million dollars, with 139 clients and 334 lobbyists withing this industry. Again, this pales in comparison to the oil and gas industry, but is what we expected to see. What I find most interesting about this is how the composition of donations has shifted politically. As mentioned earlier, one intuition would be that democrats would get a significantly greater amount of the money due to the wider support they give to alternative energy in DC. While it has been the case that typically they receive a majority of the funding, it does not always hold true and even when it does there is not a drastic domination in most cases. In fact, there are been periods when republicans received the majority of the money. Now I am not exactly sure the reason, but I am going to say that I think the bio-fuels play a large part. Republicans often have support of farming and look to tend to middle america’s farmers and subsidies for bio-fuels and ethanol would certainly be something to benefit some of those folks. This seems to be supported by the fact that Poet LLC is the largest contributor of this funding, and they focus on bio-fuels and about 61% of their funding goes to republicans.

There has been some flip-flopping from election to election in which party gets the majority of the money, and I think that would tend to be due, at least in part, to the current situation in policy. Sometimes we see republicans take initiative on alternative energy subsidies, and other times it is democrats. This industry is smart enough to understand that they do not need to focus on only one party, and that continuous “help” from government is needed to assure adequate development of the market. Again, it is similar to the boys at fat camp that are looking for any avenue to get that dance. Follow me on Twitter @devinxcombs and stay tuned for further posts.

So I began writing a post on the alternative energy interest group power, and in the middle of writing it, I got an epiphany. So I will post the interest group one another time, and instead wanted to share the following. It is a lighter post than typical, but I think it has some interesting parallels to the energy regulatory markets. Even if you don’t find it interesting to make a connection, you should at least enjoy the process of trying to do so.

Recall the movie Heavyweights, with Ben Stiller and the fat camp for young boys? One scene in the movie is where a dance is held at the fat camp, where “Tony” (Ben Stiller) invites a camp of girls to attend. These girls are not the fat camp kind of girls, and would traditionally not have anything to do with the fat boys at a typical school dance. However, since the fat kids were the only boys, those boys had the ability to dance with these girls, something that would have most likely never happened in the traditional setting. Of course the movie has it play out that both the fat kids and the popular girls had a lot of fun and it went well.

How about we take a leap and try to make a connection to energy. I know, this is a bit of a stretch but stay with me through the end before you judge. The popular girls are those that provide the large scale energy, so it would be those that are impacted by government policy. These entities would typically not choose to utilize alternative energy sources, for all the reasons we have discussed before. Of course, this means the fat boys are the alternative energy sources. The dance itself, being that the only two groups there are the popular girls and the fat boys, is the regulation. This regulation mandated that one of two things happens: either you don’t dance (utilize energy) or you dance with a new kind of partner (incorporate alternative energy).

While the fat boys at the camp were first apprehensive to the idea of the dance, due to embarrassment, they were also very excited about the opportunity to get to dance with these girls. The alternative energy industry is similar to this, as they want to have more of these “dances” where regulation requires more of the popular girls to dance with the fat boys. I want to mention, this does not fit perfectly because in the movie “Tony” wanted the boys to get embarrassed and was not happy that it worked out well and they had a blast. I do not think government regulation is trying to make the alternative industry fall on its face with these regulations, but give me a break, I am connecting Heavyweights to energy markets and regulation. In the end, this regulation made for a great way to connect these two groups and it worked out for both parties. I hope that we will see this play out similar in the energy markets, where policy helps to unite these two parties and find a great relationship that works well for both parties and therefore society.

If you have never seen the movie, please stop everything are go find a way to watch it, as it is an all-time great. But at least go watch this scene and while you enjoy the entertainment, just think about how you would connect different characters in the scene to potential participants to our energy regulatory markets. There is plenty of room for our own interpretation and I have some of my own that I think are fitting, so watch and share your connections with me in the comment section.