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A common sense approach

Booklet Authored for The Week, June, 26th, 1994

After all is said and done, the key to success in your business will essentially rest on two factors: Choosing the business that offers you the best chance of success and finding the right people to help you translate your vision into reality. All the rest, strategy, systems, structure etc. will flow from these two decisions. The first question to ask, are there lousy businesses? Businesses in which you just can't win? Absolutely, lousy businesses are all around you. For instance, businesses that have low barriers of entry- any cottage industry like shoe repair, dry cleaning, the restaurant business or the retail shop, for example - tend to become fragmented because more and more people go into them. You can perhaps make a living out of these, but not much more.

Even businesses with significant barriers of entry can be bad choices when they are touted excessively as businesses of the future - computer equipment for instance. In effect, there's not much you can do if the business segment itself has low potential.

So the first step is to choose a business that offers three kinds of potential: profit potential, growth potential and diversification potential. Any one of the three is a positive thing to have. Taken together, they are a sure recipe for success.

But which one should you look for first. Undoubtedly, growth potential. It is almost always easier to be successful in a growing business than in a declining one. Growth means that customers want more of the value than the business provides. Therefore, multiple competitors have the opportunity to succeed while avoiding direct competition.

Profit potential is directly dependent on the number and type of competitors in your chosen field. Your profit will come from your ability to create and sustain a significant advantage - in terms of price, value service or whatever - over the others.

But it is when you are making a comfortable profit that you need to look towards diversifying your business. For no matter how much money you make today, your business will eventually mature and decline. It will be overrun by change unless you create or discover a new business to jump into while the going is still good.

But diversification succeeds if your new business has a strong linkage to the one you are already in. So the question goes back to selecting the right kind of business in the first place.

The second key to success is finding the right kind of people to help you run your business. One way to attract good people, is of course, to be in a profitable and growing business with a sound vision of where you want to go. And for this, one doesn't have to be a multinational. The principle is equally applicable to small businesses.

The primary requirement is of course to know what kind of person you are looking for. The secondary is not to confuse traits with skills. Things like intelligence and a sense of humor might be useful to have, but they are not skills.

The following guidelines, in order of priority, may help you find the right kind of persons you are looking for your business:

Search in the same business you are in and among the same kind of functions you are wanting to fill.
People in related business, but performing the same function.
People performing the same functions in an unrelated business.
People in different functions in unrelated business.

The last category is known as raw talent. It could involve investment in training. But if your company is one which prizes learning and has also invested in systems to keep the people you hire, in the long run that kind of person could well turn out to be your best investment.

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V.K.Madhav Mohan - The Leader : Mentoring Services, Mentoring Workshops, Mentoring products- Articles / Audio / Video/ Posters, Lectures