Small & Entrepreneurial Businesses
Rex C. Mitchell, Ph.D.

* Distinguish between:

* New ventures have small chances of success (of the order of 1 chance in 4 to 8). How can we improve the odds?

  1. Dunn & Bradstreet failure rate study found that the key feature differentiating successful new ventures from failed new ventures was that the successes had substantially more of the following:
    • Technical competence (in the business you have chosen)
    • Marketing competence (know how to find your special niche in the market, how to identify your customers, and how to sell enough of what you offer at a price that will return an adequate profit for your efforts)
    • Financial competence (know how to plan for, get, and manage the money you will need to start and keep it running)
    • Management skills (to manage it once it is started, including developing and implementing a strategic business plan)
  2. Make use of strategic management (but adapted - see final major section)
  3. Make use of an appropriate business plan
    • To force you to think through key questions and create plans to deal with major issues
    • Not just when you need to seek financing
    • Are many aids available (books, software, examples)
  4. Capitalize on sources of innovation. Drucker identifies seven, listed in descending order of reliability and predictability:
    1. The unexpected
    2. An incongruity or discrepancy between what is and what ought to be
    3. A problem or need in an existing process
    4. Changes in the underlying industry or market structure
    5. Changes in demographics
    6. Changes in society's attitudes, beliefs, priorities
    7. New knowledge or technology that can be applied creatively
  5. Some suggestions for generating new ideas:
    • Hobby or personal interest
    • Why isn't there a...
    • Shortcomings in existing products/services
    • Extraordinary uses for ordinary things
  6. Three things to watch out for in a new venture, if you want to increase your chances of surviving (Drucker again):
    • Don't try to be too clever
    • Don't try to do many things
    • Don't try to innovate for the future (it is hard enough to excel in meeting an established need, without also trying to create both the need and the solution)
  7. Some environment factors that improve the chances of a new venture's success:
    • Rapidly changing industry
    • Early, high-growth stages
    • One big, dominant competitor
    • Product is not vital to buyers' success
  8. Make use of the Growth Vector Matrix in considering expansion plans:
    • Is a 2D matrix with 3 market options (existing, expanded, new) in one dimension and 3 product alternatives (present, improved, new) in the other
    • As you move from the corner with present products and existing markets, risk & cost increase progressively as you move farther from the present


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Last modified October 25, 2008 Copyright 1985-2008 Rex Mitchell