How you do business is influenced by your choice of strategic drivers, and I learned the hard which was best for me. Being of entrepreneurial mindset, I challenged the “three strategic driver” principle (Operational Excellence, Customer Intimacy, or Product Innovation) – unsuccessfully. I was thinking there must be other ways to drive your business, but at their bases, all my ideas fit into one of those three categories. I thought – and still think – My strategy professor was absolutely right that there are just three, and I evaluated this as I sold my interest in two companies.
When I discussed the idea for my current company with an advisor, he said, “Bonnie, how fast can you write?” He assumed I had made the decision for my literary consultancy’s strategic driver to be operational excellence. The more clients, that better. Like McDonald’s – billions and billions sold. For the first year, I thought he was right. I concentrated on building my literary consultancy to the largest volume client base I could manage.
How do you evaluate your business?
Beginning Year 2 of that business, I conducted the analysis to review the previous year of business, as any good MBA would do. I was doing pretty well, I thought. The market had validated my idea with several good prospects, and two clients had even finished their book projects. I had as they say, “a going concern,” but was I running it the right way?
“Kaizen,” another advisor mysteriously told me. “Continual improvement. Do you need a change to improve?”
I asked myself and my financials some questions. How am I finding prospects? What is my proposal-to-client-conversion rate? What are my client acquisition costs? What is my lifetime value of clients? How much am I spending on each client?
What size of business is right for the kind of work you do?
With these figures, I realized the service I was presenting in my firm was unique to the market in this regard: I was hands-on with my clients, hands on with my vendors, hands on with my subcontractors. I love McDonald’s, as a former employee, a shareholder, and a consumer. However, McDonald’s we are not. My business isn’t about how fast we can churn out books or how cheaply we can do it. It is about creating a relationship of encouragement and accountability, with a diversity of product offerings.
My firm was then – and all my companies are, to this point – boutique, specialized; we don’t take on every prospect we meet so my competition isn’t high volume entities like lulu.com or xlibris.com. As I suspected, my driver really was – and continues to be – customer intimacy, with the product innovation overlay. I knew I had to make some adjustments in marketing and pricing to reflect the time and care each of my clients was receiving, and partner with entities whose services were complimentary to mine.
If you’re just starting a business, ask yourself: What kind of author business do you want, and what kind of strategic driver will you have? What does your marketing and pricing need to accomplish that?
If you’ve already started a business, ask: How much time do you spend with each customer? In a 40-hour work week, how many customers can you realistically serve? What has worked for you in the past that you’d like to continue, and what needs to change? Do you need to alter some of your processes, marketing or pricing if you have a different type of company than you thought you have? I look forward to hearing your comments below.
[Updated excerpt from Building A Business, Building a Life by Bonnie Daneker et al.]