miércoles, 8 de septiembre de 2010

Innovation to assemble and to dismantle

This year I have been involved in the business development of innovation projects in the area of Software Development (data cleansing) and Biotechnology (Bio markers, mobile organs, and stem cells among others) that I have been thrilled to thing about innovation

Also I recall a group of MBA students of the Georgia Institute of Technology that I addressed at Universidad of Palermo this year.

Even thought the topic was “Economic Overview & Argentina Business Environment” one of the lessons that I took from that talk is that innovation applies to assemble and to dismantle as well.

Together with Andres Borenstein, Master in Finance & South American Chief Economist at the British Embassy, we address the proposed subject from a macro vision and also towards a more micro theory and practice of dealing, with the Argentine environment.

I had to provide some cases and deals that address the ways and mechanism for resolutions that entrepreneurs for Latin America have in environment like us. Also a little bit of the local and business gossip.

After the debate, the Dean of the Faculty of Economics Gabriel Foglia; Professor Daniel Seva MBA Program Director and Emilio de Pedro, executive of Impsa joined the panel as well.

Since the scenarios on which an American and a Latin American entrepreneur must dream and figure it out how to do it, are so different, that questions and concerns arose.

They were shocked with the statistics that a crisis occurs approximately every 5-7 year in our countries.

The talk and discussion was rich and I would like to extract a distilled reflection of an exchange that took place about how an Argentine entrepreneur manages to create an environment not proactive with these purposes.

We should clarify that crisis for us is not to restrict consumption in Starbucks, or go shopping on Saturdays, or to change the car and or the property every other year, but the absence of medium and long term goals as a country, the lack of planning and strategy, the lack of financing programs, and also inflation rates in double digits at some point in our history, a week-etc. You name it!

To the dismay of the audience for this economic diagnosis, I gave two examples of how two entrepreneurs turned out and used a strategy not to create but to disarm (or menace to do it) as a valid tactic in the ongoing strategy of creation of wealth. How they used also as an excuse the “Lehman Brothers” effect.

In the first case, and even though his business enjoyed very good health in the Southern Cone, the entrepreneur at the very moment he read the newspaper about the Lehman Brother crisis, almost instinctively, took a taxi to Ezeiza Airport and flew to USA, the place the headquarter of the master franchise of his business was. When he reached their offices, he said that the purpose of his trip was to terminate and return the franchise agreement due to the ongoing financial crisis caused by Lehman effect. As the American executives were themselves passing for a moment of anxiety and uncertainty, they took it for granted that also South America operation were collapsing as well. But the termination of the franchise agreement would ruin their global strategy and also the value of the company as a whole.
To make a long story short, the business of this entrepreneur got a renegotiation in the fee of the master franchise agreement with a "waiver" for several years in the payment of royalties to the U.S.

The other case, more or less at the same time and using the same arguments, an important group led by a serial and consecrated entrepreneur defaulted all the domestic and international debt, using the same Lehman argument, and afterwards obtain more favorable terms in those debts.

Then I explained that what I wanted to highlight and point out, it is not the nature of those negotiations neither justify them, but to point out the dynamic and ability to react that you need to have to operate in a more unstable and uncertain world.

However, it is no coincidence that in the past year and a half, is the fifth lecture which summons me to give EMBA's MBA'sy various American universities, who come to have this kind of cross cultural experience, to try understand that you mean by "smoke under water."

After the talk I was thinking about this way of arm and disarm, not as a strategy, but as a tactic of supporting the reinforcement of every long-term dream. One thing is the program and other strategic mission.

In a constantly changing environment, the success of the company or project is delivered not only by the ability to understand how to adjust the strategy from time to time, but also the ability to respond consistently to changes in the environment, in a way that we can adjust programs and tactics.

In a complex world full of uncertainty the ability to prognoses the future is as important as the ability to respond the facts that the environment provides to your project.

jueves, 2 de septiembre de 2010

More about EXECUTION: Business Plan and Modular Strategy.

The idea about this blog is to share thoughts, experiences and insight that may enrich entrepreneurs and investors community.

Having said that, sometimes mainly because what I read or thins that I hear, seems to be that all of the material that not tend to encourage or motivate the community is rather consider negative, something politically incorrect and improper for a field (entrepreneurship) that is supposed to be only for GoFor people.

I believe it is important to find a balance between the consumption of material type "Hop-Hop” or “Clap your Hands” and “say 100 times that you are a winner” with other type of food that tends to highlight other aspects of the nature of successful entrepreneurs and investors who tend to sacrifice and act with resilience (to summarize).

I need to say, that for the long run, I guess those last elements (sacrifice and character) are the ones that will conduct the entrepreneur or the venture to the fulfillment of its objectives.

In this respect, I want to continue thinking in how to implement an idea, a project or an enterprise. At this time I want to relate the “Execution” mentality with the prior step of the elaboration of the Business Plan, and point out some Do Not´s in its presentation.

To execute is to perform something, and this is a laborious task full of thorns and sorrows. The conception of the idea has its problems associated with a mental field (the ego), but to implement those ideas adds relational problems to that equation, the problems that deal with the ecosystem (the others) and its systemic behaviors.

The GOFOR style speech, that preaches sweet messages, and cites examples such as Google, Twitter, Napster or other local icons I believe has its place, as a resource to motivate the entrepreneurial character, the main driver in the realization of any business ventures.

However, that is not the end, and in reality the success of the venture will depend not much in the innovation of the idea but in the implementation of it. This has been demonstrated empirically, and we have referred to that in prior posts.

In business and entrepreneurship, there is a lot of taking about of how to conceive and idea, and/or how to get something to the market firs (FIRST MOVER). However there is a lot of business people that have experienced and pointed that that what matters is not being a first mover, but to get the correct things done.

One of the problems in focusing only on the product and/or in the idea without considering the execution of it, to gain a kind of illusion or a delighted thought, that ignores the reality as it is only concern about the concept. Therefore, if we can not relate the idea with reality, our analysis will be incomplete.

The result of this shortfall is a mere image of what could be accomplished rather than an accomplished goal. And this asynchronism can be seen from early moments, as early of business planning state.

Some entrepreneurs focus and some investors consume those only high-sounding expressions and get to little deep in the "how to do it." I rather believe than the latter is an exercise that must be nurtured from an early stage.

I agree with a friend´s statement that goes: "If you shoot for the moon you will probably miss it, but if you shoot for a skunk, you will probably hit it."

However, onto that big thinking mentality in the creation of a business shall be added a small thinking in the execution part of it.

What makes a successful venture is not the success but “how to succeed”. For example some months ago, I have participated in some boards meetings of a foundation in which I am a Director in Argentina, and although it has many years of presence in South America, has again the same challenges. The NGP have great and laudable ideas, but small problems in implementation that at the end of the day may jeopardize the operation into a whole.

Starting with the business plan, going only for the magical thinking of the plans and ideas, and not take into account what important is the implementation of the idea, produce arguments that are considered relevant (but they are not) : for example (i) this project is “ first mover ", or (ii ) "This project has no competition in the market."

Both statements show at least superficial, unawareness of the market and lack of awareness about the importance of implementation in every company or venture.

I want to point out a post by Carlos Blanco, on which are the Do Not’s to say to investors, which is quite graphic and relates the following hypothetical situation in relation to the argument that the project has no competition in the market:

Explaining to Daniel (entrepreneur) why the submission of his project is wrong: ( He has an statement that goes: “my project has no competition in the market”)

-Imagine that the planes did not exist
-You invent a flying machine, an airplane, that will astonish the world
-It will serve to transport people and goods at incredible speeds
-You Patent the IDEA
-You calculate 500,000 million profit

And you said: Without imaginable competition: who else will have planes if you were the only one that has invented and patented the first one?

-You always have infinite competition. In this case: trains, cars, motorcycles, trucks, boats, walking shoes, and chairs and couches to sit even discourage people from moving
- One thing is to have a plane, and another (which has nothing to do whit your discovery) is to have one company that can sell tickets, climbing bags, areas in airports, pilots, the ground staff, take a snack on flights
- And a third thing is to convince people to use, purchase, or use your product or service because they are so new, patented, and so flying, maybe so scared that nobody wants to use
-In fact, even (additional sample circumstances) if the model flying machine created only serve to cross such distances Madrid-Barcelona, the business would be a wreck before you start, because competing with a railway line Madrid-Barcelona AVE implemented would crazy (having high-speed trains, riding a line of new aircraft with a newly invented device, the plane of our example, thinking about replacing the train-about as fast and more comfortable, it's even unreasonable)


Perhaps this new flying machine that will astonish the world may serve to make a good business ... but if you think you have no competition, and believe that only by having a patent technology or have a business and 300 million ... is that you have not heard of anything, you show little sense, it shows you're a "novice entrepreneur rather" or directly, one of many "blown away" who think they are going to ride Google2 because they have a program in your home "

A possible tool to avoid falling into such temptations I believe is the modular thinking.

It's OK to dream big, is one of the drivers of whom we have an entrepreneurial spirit. However it will be better if since the Business Plan, you consider and think about how to execute small results.

Every process of reaching an achievement a goal includes small victories, and the mental exercise or breaking down the big picture into small results will deliver the project a share of f reliability and affordability (feasibility in the financial lingo).

This attitude and approach will also reveal that the entrepreneur has already has a training which will sustain through his entire career and will be in my opinion one of the key factors of success in his career.