Platt Perspective on Business and Technology

Building a startup for what you want it to become 33: moving past the initial startup phase 19

Posted in startups by Timothy Platt on July 10, 2018

This is my 33rd installment to a series on building a business that can become an effective and even a leading participant in its industry and its business sector, and for its targeted marketplaces (see Startups and Early Stage Businesses and its Page 2 continuation, postings 186 and loosely following for Parts 1-32.)

I began discussing big data as a driver of competitive success for businesses, at least in the context of this series, in Part 28. And more specifically, I have focused on the issues of in-house developed, and third party provider sourced data that would be included and used there, since Part 31.

I offered a to-address list of topics points that are related to data sourcing in Part 31 as a core part of this discussion, that I repeat here as I continue addressing their issues, with:

1. An at least brief discussion of businesses that gather in, aggregate and organize information for other businesses, as their marketable product and in accordance with the business models of those client enterprises. (I began addressing this point in Part 31 and Part 32.)
2. The questions of where all of this business intelligence comes from, and how it would be error corrected, deduplicated, and kept up to date, as well as free from what should be avoidable risk from holding and using it.
3. And that will mean addressing the sometimes mirage of data anonymization, where the more comprehensive the range and scale of such data collected, and the more effectively it is organized for practical use, the more likely it becomes that it can be linked to individual sources that it ultimately came from, from the patterns that arise within it.

And I continue delving into Point 1 of that list here, from where I left off at the end of Part 32. To briefly recap this line of discussion, for purposes of smoother continuity of narrative, I have categorically divided all third party data gathering, organizing and bundling, and selling businesses into two general categories:

• The big players in this emerging industry, such as Google, Amazon and Facebook that tend to gather in organize and sell essentially open-ended ranges and varieties of largely individual consumer-based data, and to all types of business intelligence purchasing organizations (much of which is offered as anonymized demographic-level findings, though not all),
• And smaller niche market-oriented big data providers that tend to focus in on and specialize in meeting the needs of single target business-to-business markets.

I discussed data providers in Part 32 that specifically focus on gathering, vetting, bundling and selling retail auto and small truck sales leads to retail automotive dealerships as a working example of the second of those two categorical data provider types. And my key goal for this posting is to turn to and consider the bigger players in this field that have come to fundamentally shape, and I add drive this industry: the much fewer, much larger and more powerfully placed businesses that collectively dominate third party business intelligence providing as a business model, and both for demographics level detail and for offering individualized, personally identifiable data.

I want to very clear here, focusing for the moment on Google and Facebook in what immediately follows. I am going to discuss those two companies as they, are and as they are more commonly understood to be, at the level of their basic underlying business models and the level of what the public, by and large understands of them to be. As the evidence that underlies both views of these two businesses has been freely available for a long time now, I posit the differences observed between them: actually followed and publically assumed, are ones of interpretation and not of intentional deception. Both of these businesses are what they are, and they have in fact never sought to hide that for anyone who has really looked into them and how they generate their revenue streams. And in anticipation of further discussion to follow, this same disclaimer applies to Amazon too for when I discuss that business in the context of this series.

I will begin this narrative thread with Google. It is a large enterprise that comprises just one division of a still larger umbrella organization: Alphabet Inc.. And it was in fact the first business to have been developed that now currently resides within the Alphabet Inc. system, and it is still by far the largest, best known, and most powerfully placed entity in the overall Alphabet group. That said, it is a search engine providing social media business, with its email and other social media oriented services added onto an already powerfully placed, market dominating search engine capability. And crucially importantly for this discussion, most all of the services that it provides, and to the vast majority of its users, are provided for free to them.

True, Google also generates significant levels of incoming revenue from business customers that purchase labeled advertising space on search engine results screens, with their placement in them determined by what key search words those customer businesses have paid for, and how much they have paid for them through a bidding system. And if you look to their social media-oriented tools, they also sell licensing rights to a wide range of them for use by client businesses, for use within those businesses’ own IT systems. They also license use of search tool applications that client businesses would use, for example in their own intranets. But most of what they provide as products and services, and certainly when considered on the basis of levels of usage levels achieved with their systems, are provided gratis to end users of their offerings.

Facebook is more of a pure play social media company that offers a communications and sharing oriented networking site that is so well known that most of its users think of the name Facebook as a basic word in their vocabulary: they see the name of that business as the name for this type of social media-oriented web site per se. And this business offers their social media services for free to any and all who would like to sign up and use their site.

All of the details just noted in the above paragraphs are true: on the face of things. Much of what I have just said there is at least crucially incomplete and certainly for Facebook, if not accompanied by some there-unstated caveats too.

While Google offers software and service as profitably marketed and sold product as a part of its basic business model, it is also at least in large part a data aggregator and organizer and a data seller, organizing and packaging and selling use of the user data that they accumulate through their free services. That is how they generate the majority of their incoming revenue. But at least to my understanding, this is at least primarily if not entirely sold for access, as anonymized data as for example when meeting the targeted marketing requirements of businesses that seek more effective advertizing placement.

Gathering, aggregating and organizing, packaging and selling user-based and user-derived data is essentially the complete real, underlying business model in place for Facebook. That at least appears to underlie essentially their entire business model, and with that only starting with their offering targeted ad placement services on their users’ Facebook pages.

What does this mean, as to the level of impact and reach that Facebook can leverage through its business offerings, and when marketing itself to its business and other organizational clients?

• As of the first quarter of 2018, Facebook claims to have some 2.19 billion “active users.” In practice that number represents the total number of open accounts in place in their system, where some individual users have more than one account (e.g. a personal one and a professional one), some accounts are open but largely if not entirely unused by the person who set them up, and some account holders have actually died and any activity showing on them is coming from others posting there, with perhaps a level of family member or similar reply activity. Nevertheless, and even with those caveats added, Facebook has steady access to what can best be considered unimaginably vast amounts of personal information and from a number of actively involved individual users that has grown so large that it represents a significant percentage of the entire human population, globally. See Number of Facebook users worldwide 2008-2018 as can be found on the Statista portal.
• All Facebook users have to agree to that company’s terms of use, in order to set up and use a personal page on the Facebook.com web site. And they have to agree to any changes made there if they are to continue to use this service, when and as Facebook rolls out such changes to their offerings: which it has done on a regular, ongoing basis and certainly for how it can and does use and share its site users’ data.
• More specifically, Facebook usage agreements require that all users agree that they have seen these terms of usage requirements and that they understand precisely how Facebook as a company can and does use data that they post to their web site, or that they pin to and post upon the Facebook pages of others. And these agreements also allow the company to use and to sell usage of at least some of the personally identifiable information that its member users enter into their personal profiles too, that does not show live on the site for reasons of personal privacy.
• Note, and this is crucially important here: only Facebook users who have explicitly agreed to these terms of service and data usage can view content offered through the Facebook site, and only registered users can access a Facebook screen and view its contents – and for very specific legal reasons. That type and level of access restriction imposed, drives new people to join this service. They have to join there to be able to see what their friends and family are posting and sharing there. But at least as importantly and certainly from a legally framed risk liability perspective, this policy serves to keep participation limited to those who have formally, legally agreed to Facebook’s terms of service and particularly for matters such as data usage and data sharing or sale.

Google and others in this major player business category, sell targeted online ad placement insight and access to other businesses. Google’s paid advertisement search screen placement service has in fact added a significant revenue generating capability to their search engine site. Facebook profitably offers targeted advertising services to other businesses too, where those client businesses buy access to specific marketing demographics from Facebook, as identified through analysis of user data as carried out on a massive scale on an individualized member user by member user basis. But more than that, Facebook as has been highlighted in recent news stories, also sells access to its individual users’ data and of all types too, and for use in a vast and seemingly entirely open-ended manner.

I am going to continue this narrative in a next series installment where I will, among other things at least briefly discuss Facebook’s involvement with Cambridge Analytica, and its use of their data stores. I will cite at least a brief and select set of in the news links related to how Facebook sells access to user data in general too, and as a matter of explicit intent on their part. Then I will turn to consider the third business that I promised to discuss in this narrative: Amazon and how it leverages the data that it collects through its web site as a major source of incoming revenue. Amazon is primarily an online retail business, and an online store but it also generates income from a wider range of services that includes targeted ad placement and work with partner businesses that sell through its systems, tapping into the strength of its brand name and its product inventory and its purchasing user data. Like Google, this primarily means offering access to anonymized and demographic level data and the value that can be developed from that. But in anticipation of further discussion to come, this is also were Point 3 of my above-repeated to-address list enters this narrative, and the problem of how individually anonymous, anonymized data really is and can be, in a big data context.

After delving into those issues, and the issues of Point 2 from the above list as well, I will explain why I am looking so deeply into issues that are more about business intelligence providing businesses than they are about businesses that might acquire data and processed intelligence from them. I will simply add at this point in this series, that when a business purchases access to data from a third party provider they are buying into both the strengths and the weaknesses of those providing businesses, and in ways that might not be readily apparent and certainly up-front.

Meanwhile, you can find this and related material at my Startups and Early Stage Businesses directory and at its Page 2 continuation.

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Planning for and building the right business model 101 – 38: goals and benchmarks and effective development and communication of them 18

Posted in startups, strategy and planning by Timothy Platt on June 25, 2018

This is my 38th posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-37.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I focused in Part 37 of this, on franchise systems as an exit strategy that a young business’ founders and owners can build towards, as their new enterprise exits its earliest stages of business development and starts to become consistently profitable. That financial transition point serves as the starting point for a new business’ first real growth phase, and when viewed from the perspective of a franchise system-facing business model, that is when those business owners stabilize and effectively complete their first storefront that they began their business with, at least to the point where it can begin to serve as a prototype model for overall business systems expansion, through a replication process and through bringing in contractually licensed franchise holders to run these new outlets, as they are developed. (As a point of digression of some relevance here, that means in a would-be franchise systems context that this first storefront has reached a point in its development where it can begin to build brand strength that it can use in marketing its pattern as a viable franchise option, and first growth stage here means both further building out that storefront itself as a business in place, and developing marketing strength and reach from it too, as a basis for wider-ranging growth.)

I discussed founders, and those who would set out to build this type of business empire in Part 37. And I turn here to more directly consider the question of what types of people would seek out franchise opportunities as participants in this type of system. And I begin with the obvious – which I refer to as such because the points I will raise here, enter into essentially every pitch that franchise systems have ever offered as they seek to find and bring in, franchisee managers for their outlets:

• People who seek out, or who can be drawn into the possibilities and potentials of becoming a franchisee in this type of business, seek greater autonomy and independence and greater long-term growth opportunity than they have been able to achieve when working in-house for someone else and under their direct guiding management. Here, the guiding mantra that informs those recruitment pitches is “be your own boss and with a proven brand name and business support system to back you up, and increase your chances of success, and your speed to achieving that too. Come in and grow with this franchise system business, as a key participant in its success and as a key beneficiary of its success too.”

There are of course two sides to that bullet point and certainly to my more generically stated recounting of this basic sales pitch: independence, but in the context of a larger proven and established business and business model. And that means accepting trade-offs, and of a very particular type and blend.

Think of taking on a franchise license opportunity as fitting in between two other distinctive and commonly pursued alternative options:

• Continuing on as an in-house employee and manager, and
• Breaking away entirely from that career path pattern and seeking to build your own startup, and your own business future from it.

At least from my admittedly limited experience, most of the people who would find real appeal in becoming a franchise license holder have worked as managers, and generally lower level managers in more traditional businesses. And they have felt stymied there from a lack of opportunity for advancement, and from a lack of appreciation of what they can and in fact do contribute to the business they work for. And franchise opportunities also appeal to those who actively seek out opportunity to break into management and have more of a say in what they do professionally, and who seek to lead and manage larger efforts than just the work of their own hands. A driving need for the type of independence that I cited in the above bullet point enters into all of this.

And a desire to build towards success with a level of support that can ease the way towards that, and reduce the chances of failure in this, also holds real appeal here too. A well run, franchisee-friendly and supportive parent company does in fact provide stable and supportive structure and help while giving their individual franchisees a great deal of hands-on, day-to-day independence in running their own operations in their own storefront.

This type of career move can, and for many franchisees does serve as their last major career step transition in their work life. Well run and effective franchise businesses actively seek to recruit good people into their systems who can really succeed in this type of work environment as local franchise managers. And they seek to retain them, and their growing knowledge and skills sets for making their franchises thrive. So the approach to understanding these overall business systems and from both an overall business owner, and from a franchise holder perspective that I offered above is realistic, and certainly as an intended goal and for all stakeholder types in this type of venture.

Returning to the two career path alternatives to this franchise option that I noted above: a prospective franchise license holder, or a current one for that matter who might be questioning their decision here, needs to ask some basic questions as part of their own due diligence-based decision making process for their moving forward:

1. Would (or do) you have the level and types of support from the parent business that you need and want?
2. Would/do you actually have the independence that you seek, in being able to be your own boss and run your own storefront?
3. Or are you too hemmed in and in ways that are important to you, by the terms of the contractual agreements that have to be agreed to and signed in becoming a franchisee there, and from either a Point 1 or a Point 2 perspective?
4. In that, and as a specific case in point source of examples, are you required to use specific supportive services (such as, for example parent company provided cleaning supplies and only them) that you could acquire locally on your own and less expensively, improving your own bottom line and without cutting corners on maintenance and storefront appearance?
5. Are some of the centrally mandated and run quality control measures that the parent company provides and mandates, disruptive and in ways that they need not be, from a local franchise perspective?
6. And is the parent company too restrictive in what it allows their local franchisees to offer their customers, denying opportunity to them to effectively address local and regional tastes and preferences that they see real potential in meeting?
7. And this is where local autonomy or at least a measure of it in what is offered to the customer enters this picture too. And I close out this list of points with an open question that I have in effect been leading up to here. How can a franchise system parent company and their perhaps very widely dispersed franchisees with their local storefronts, reach and maintain a more optimized balance between what is systematically standardized across the entire system and in its overall branding and brand value, while also allowing for local diversity to address local community and related marketplace diversity?

And that last numbered point leads me directly to the issues that I will turn to in my next series installment where I will consider the issues of business-wide consistency, as well as storefront-level flexibility, and both in prototyping new product or service possibilities and in addressing local-to-store opportunities and challenges. What is and is not supported and even encouraged and rewarded in this? I will at least begin addressing this complex of issues in my next installment. And meanwhile, you can find this and related postings and series at Business Strategy and Operations – 5, and also at Page 1, Page 2, Page 3 and Page 4 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

Building a startup for what you want it to become 32: moving past the initial startup phase 18

Posted in startups by Timothy Platt on May 11, 2018

This is my 32nd installment to a series on building a business that can become an effective and even a leading participant in its industry and its business sector, and for its targeted marketplaces (see Startups and Early Stage Businesses and its Page 2 continuation, postings 186 and loosely following for Parts 1-31.)

I have been focusing in this series, since Part 28 on the increasingly important role that data, and that big data in particular are assuming as drivers of even just basic competitive business strength and for an increasing range of industries and business sectors, and when addressing an increasing range of markets that they would serve. And I have reached a point in that line of discussion (in Part 31) where I have begun considering the role that with-in business developed, and third party sourced business intelligence have come to assume in a cutting edge innovative business context.

I have been focusing on what is ultimately consumer sourced data in this progression of postings: Part 31 included, and on both individually identifiable and more anonymized data in that. And that narrative progression has led me to a to-address list of points that I will work my way through in what immediately follows in this series:

1. An at least brief discussion of businesses that gather in, aggregate and organize information for other businesses, as their marketable product and in accordance with the business models of those client enterprises.
2. The questions of where all of this business intelligence comes from, and how it would be error corrected and kept up to date, as well as free from what should be avoidable risk from holding and using it.
3. And that will mean addressing the sometimes mirage of data anonymization, where the more comprehensive the range and scale of such data collected, and the more effectively it is organized for practical use, the more likely it becomes that it can be linked to individual sources that it ultimately came from, from the patterns that arise within it.

Then after considering these issues and discussing them in at least selective detail for purposes of this series, I will use that narrative as a foundation for further considering in-house versus cloud based systems, and for acquisition, processing and validation, organization, storage and use of all of the raw data and processed knowledge that arises here. And I will proceed from there to consider these issues from a more business-development timeline perspective, bringing in the issues and challenges of cost-effectively developing a business for all of this and how and when, so as to more effectively support change and scalability while controlling possible risk. My goal there is going to be one of tying all of this discussion back to a startups and early-stage business context.

But before turning to that second complex of issues as just noted in the above paragraph, I will address the three above-offered, more immediate topics points, beginning in this posting with an at least starting discussion of Point 1. And I begin that by citing two relevant series of postings as background references, that I initially offered in this blog as a consequence of conversations that I had with colleagues:

• Big Data and the Assembly of Global Insight out of Small Scale, Local and Micro-Local Data (as can be found at Reexamining the Fundamentals as Section IV), and
• Mining and Repurposing of Raw Data into New Types of Knowledge (as can be found at Ubiquitous Computing and Communications – everywhere all the time, as postings 156 and following.)

I begin discussing the third party source businesses of Point 1, that provide business intelligence as business-to-business providers, by roughly dividing them into two basic categories:

• Specialized, or niche market big data providers, and
• Generalist big data providers.

The development and proliferation of big data and of big data opportunities, has created a large and varied business sector, and even an entire industry of business-to-business data aggregators and organizers that buy and sell business intelligence as their own value-added marketable commodity.

I have cited specific target-industry examples of this phenomenon in this blog, that would fit a more niche provider business model, to describe them in terms of the above-offered dichotomy. And one such specialized niche business intelligence provider type, that I have made note of several times in this blog is comprised of automotive retail business-supporting sales leads aggregators that service the needs of automotive retail businesses for car and truck sales: each claiming to be the best in their marketing and sales area for pre-qualifying their leads offered as current and as representing potential local customers who could afford to buy and who are in the market to do so.

My point there, is that these big data aggregator businesses, offer value added data that they would argue, their automotive sales dealerships could not cost-effectively match from their own data collection and filtering and vetting efforts. And they all claim to offer the best such sales lead data that would most easily be convertible into completed sales from their value-added data filtering and processing activities. And yes this data, and for most such businesses would include both anonymized and personally identifiable customer and potential customer data and in large and varied quantities. And it would be organized and offered in ways that would connect with their client business’ business models and their sales and marketing catchment areas.

I am going to discuss this working example, niche information provider type in my detail in my next installment to this series. And I will also discuss the bigger and more widely involved players in this overall industry: generalist big data providers there too. In anticipation of that, I will discuss Google, Amazon and Facebook for how they are positioned to provide this type of service, and Facebook as a particular case in point example for how they have built so much of their basic business model around monetizing user-sourced data as their primary source of incoming revenue. They sell targeted marketing and sales opportunities; this means they sell data related to and coming from their registered users, and access to the results of their big data analysis and processing of this data.

Meanwhile, you can find this and related material at my Startups and Early Stage Businesses directory and at its Page 2 continuation.

Planning for and building the right business model 101 – 37: goals and benchmarks and effective development and communication of them 17

Posted in startups, strategy and planning by Timothy Platt on May 3, 2018

This is my 37th posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-36.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I have been discussing exit strategies in this series since its Part 33, that a new business might attempt when it has first started to be consistently profitable and with at least a modest consistent positive cash flow: when it as a result of that, enters its first real growth phase as an up and coming enterprise of promise. And I began discussing a specific scenario that fits that pattern in Part 36, that I repeat here as I set out to continue and complete addressing, at least for purposes of this series:

• A new venture, and certainly one that is built around a growth-oriented business model, might build its first bricks and mortar site, in effect as a prototype effort that it would refine with a goal of replication through, for example a franchise system. And there, licensing fees and ongoing franchise-sourced income going back to the home company, would provide funds that could be used for further capital development of the overall business among other supported purposes, to keep a longer-term fiscal systems focus here and remain consistent with the approach I have been discussing in recent installments to this series.

I presumed in Part 36, that pursuing this type of business development path was an initial strategically considered and prepared-for objective for a business that would attempt this development pattern, and from its beginning. And I assumed in that, that its founders and owners have prepared and built accordingly and from their earliest pre-launch planning stages on. Some franchise systems are in effect backed into, as emerging need and opportunity make them an attractive possibility. I assume here at least as a starting point, that franchise was a topic of discussion from before day one when the founders of this enterprise first began to dream and plan.

That noted by way of background to this installment, I add that I ended Part 37 by stating that I would consider the people now who would enter into this type of venture. And I begin that “… with the business founders and would-be overall owners of this type of at-least potential business empire. Then after offering at least a basic organizing discussion of who would most likely build a new venture with this possibility in mind, and successfully so, and after going on from there to consider franchisees and who would be good fits for taking that type of career opportunity on, I will reconsider the issues of business-wide consistency, as well as storefront-level flexibility, and both in prototyping new possibilities and in addressing local-to-store opportunities and challenges.”

• Who would seek to build a franchise system, and from scratch and as a starting business model objective?

One obvious approach to answering that would be to look to people who have had very positive experience working in this type of system. And look in particular for people with an entrepreneurial mind set and approach to life, who have become franchise holder participants themselves, and who have achieved real success at that. Look for people who have shown outlier levels of success developing and running single franchise outlets who dream bigger than that. And look to franchisees who have not stopped with simply managing some single franchise outlet, however successful, in such a system. Look for people who have managed, or who would wish to manage and effectively own, an at least small empire of outlets and franchise storefronts in such a system, and who have reached a point where the “effectively own” of that can no longer suffice.

I in fact raise a very important point there, that as a more general point of discussion reflects on what type of person would seek to found specific types of new businesses in general. And it is a point, as more generally stated, that connects both to my own career path and work life, and certainly as I have pursued entrepreneurial goals, and to the experience of others who I have worked with and learned from.

People who seek to build new businesses or who otherwise enter into what is fundamentally new for them professionally, almost always set out to build from a foundation of their own roots and experience, and in directions that connect with their ongoing drives and interests. True, many people make genuine career changes at least once over the course of their overall work lives. And this can mean going fairly far afield from their familiar backgrounds when doing so and for many of the at least overtly visible details of what they would do. But dramatic across the board change, and certainly as carried out for the sake of change per se, is more the exception than the rule here. And those who actively pursue that type of career transition are more likely to take their more divergent next step forward paths, because they see their old and familiar as no longer being viable for them. And even then, they generally seek to capture and retain what they consider to be their stronger transferable skills and experience when moving from old into new there.

That meshes with my own experience too, and certainly as a matter of general principle. And let me explain that with a brief digression from consideration of franchise systems and who would set out to build them per se, to consider career path transitions per se where franchise-related change would represent more specific case in point examples of that.

Drawing a few, selectively sketched out details from my own work life, where I have faced and carried out transitions, I spent a number of years working as a research scientist, and as a manager in that arena. And I went through some fairly significant career path transitions while doing this, and most certainly when leaving this type of work.

I actively carried out basic biomedical research at a key point in my earlier work life, gaining personal income and funding support for my research from privately sourced and government research grants: one of the commonest approaches there is for those who carry out research in academic settings. Then at a time when I was facing the end of my then-current round of grant support, I found myself facing a fundamental career path decision. Research grants are generally time-limited and my funding was coming up for renewal and with new competitive grant applications required and all that that entails. Should I simply try continuing along that path or should I try something new? And then a colleague of mine approached me with what he referred to as “an offer you can’t refuse” and I found that I couldn’t: I made a transition from working in a research lab to carrying out and supervising clinical research in a hospital setting, and teaching others how to do that type of work too. This meant shifting to an entirely new type of research for me in detail, while still working in a biomedical research context. But this also meant my moving into a position where my salary and benefits would arrive for me in regular, in-house employee form and not be time-limited constrained by my having to land that next funding grant.

And I built out all of the clinical research programs on a clinical service by clinical service basis at the hospital center in New York City that I was now working for, and built an overarching clinical research department out of that for them. Then for financial reasons that I have to admit, I saw coming as they arose, my department was downsized and I was downsized – and I made a more disruptive next step change, founding my first real consulting business and with a business organization and technology focus. My first real clients where drawn from the healthcare field, and came to me for assistance because they were in need of organizational guidance in setting up small businesses of their own (e.g. a medical oversight business that private ambulance services could hire, in order to meet their accreditation requirements for being allowed to respond to 911 emergency service request calls.) And I quickly branched out from there and with an information technology focus and a more general business development one as well. I came to work in and with multiple industries and businesses in them, new and established.

Why do I cite this here? First, my own work life example is my own and I know it and its details. Second, I have made both minor transitional and disruptively significant transitional changes over the years, and I have seen what was ostensibly some single same career stage evolve and morph over time, and in ways and to degrees that have cumulatively added up to being disruptive in nature. My consulting business evolution to include participation in as wide a range of business types as I have worked with, from a much more limited beginning, highlights that. The principles that I cite here, and from my own experience might not be grounded in franchise systems experience – except insofar as I have business consulted with a couple of large corporations that have franchise systems within them. But these basic career step patterns apply to those who become involved in, or who end up building franchise systems too. They reach out to new while seeking to hold onto and build from transferable sources of value and strength from their own pasts. And evolutionary change with its cumulative impact enters into that for them too.

Most everyone who I have worked with, or know for their professional career paths, have built their next career steps from as much of a foundation of what they have experience in already, as would be realistically possible and beneficial for them: myself included. People who strike out with an intent to build franchise systems, and scalable enterprises that can be built around proof-of-principle prototype storefronts, build from what for them is their familiar too – and whether that means building a franchise system around a business type that they know and are comfortable with, or from comfort zone familiarity with being a franchisee per se or both. And the same applies, of course, for those to start out thinking “single location” and then build out from there to assemble what becomes a franchise system business too.

Now, who would seek to be a franchisee in such a growing business empire? I will turn to that question in my next installment to this series, and will continue on from there as noted above with discussion of… “the issues of business-wide consistency, as well as storefront-level flexibility, and both in prototyping new possibilities and in addressing local-to-store opportunities and challenges.” In anticipation of that line of discussion to come, I will approach these issues from the perspective of who would do this and why.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

Building a startup for what you want it to become 31: moving past the initial startup phase 17

Posted in startups by Timothy Platt on March 30, 2018

This is my 31st installment to a series on building a business that can become an effective and even a leading participant in its industry and its business sector, and for its targeted marketplaces (see Startups and Early Stage Businesses and its Page 2 continuation, postings 186 and loosely following for Parts 1-30.)

I focused in Part 28 and again in Part 29 of this series, on the increasingly pivotal role that data, and that big data in particular are coming to play in enabling business success in this emerging 21st century. Then I turned in Part 30 to at least begin addressing a second, follow-up point that arises from that:

• The issues of in-house generated, and outside-sourced business intelligence as marketable commodities, and for how they would be used in business planning and for how this type of resource might be selectively commoditized and sold.

I have already, as noted in Part 30, been discussing a number of crucial aspects to this complex set of issues, including the question of how fair, consistent, replicable valuation would be determined for business intelligence per se. And I ended that series installment by stating that I would continue from there by “at least briefly delving into the issues of how information would be selected and organized for use, and for sale as marketable commodities.”

I begin this with the data itself, and with customer-based and derived data as a source of working examples. Some and in fact much of this data would be developed by a business itself, on the basis of their own transactional activities with the individual customers who they do business with and learn about in the process. But depending on the nature and scale of those transactions entered into (e.g. purchase of a new car or other big ticket item or when customers are applying for a store credit card, where creditworthiness would be an important consideration), third party sourced personally identifiable information might also be needed, acquired and held too. In my parenthetically added examples there, this would mean data included in specific customers’ credit reports as purchased from credit reporting agencies such as Experian or Equifax. And citing outside sources such as credit agencies here, only scratches the surface of what might be available and what is increasingly being tapped into by businesses for consumer and marketplace data and insight. Just consider the potential inherent in scrapping data from social media there, and certainly for developing demographics level insight – but also when fleshing out an understanding of specific individual customers when drilling in for those details would be desired. And consider how automation and the application of artificial intelligence agents can enable the widespread development and use of that type and level of fine grained aggregated data too.

Setting aside the issues of confidentiality and the legally mandated requirement of safeguarding specific individual’s personally identifiable information in those increasingly detailed customer files, let’s at least briefly consider how and where this information would gain its value, looking here at least for now, just on the positive value potential side of the benefits and returns in this, as opposed to the risks and costs side of the ledger.

• Value comes here, from aggregating the right combinations of raw (here customer) data in ways that could be used to answer meaningful questions that would help the businesses asking them, to be more competitively effective.

Let me take that out of the abstract with a specific example. A single anonymized customer record, derived from the accumulated raw data concerning them as a specific individual is not going to offer any significant value to any given acquiring business, and certainly if it lacks sufficient context to identify precisely what types of demographics that individual would belong to, and in ways that would offer marketing or other value. Lone and disconnected data of this type would not even be useful in and of itself, and without recourse to correlated outside data, in distinguishing between more mainstream customers and real outliers who might not effectively fit into any simple demographic for their actual consumer behavior.

• Data only gains value when it can be organized into meaningful contexts, and when it arrives in meaningfully connectable bundles.

And with that offered, I step back and reconsider everything I just said about customer data from a second and very different perspective – that happens to be particularly crucially important in the context of product or service innovation, and particularly where that innovative change goes significantly beyond the simple cosmetic.

I begin here with a starting point that I have cited and pursued numerous times in the course of developing this blog up to here: the innovation acceptance curve as it maps out and helps to explain how New enters into a marketplace and how it comes to gain progressively wider acceptance there.

A really significantly new and novel innovation that hits the market, is going to primarily if not exclusively gain its initial foothold there, from the purchasing and usage decisions of a relatively small fraction of that overall market, that would qualify as its pioneer and early adaptors. These people are, by definition outliers when viewed from the perspective of the larger markets that they at least nominally belong to. And my just completed notes on data contexts, was organized and presented with more middle adaptors at least tacitly presumed, and even late adaptors for that matter. My comments offered before this switch in conceptual direction, were at the very least fully compatible with the goal of meeting marketing and sales needs that would connect them to as large and active a purchasing community as possible. But businesses that primarily seek to develop and offer cutting edge New, would be best served by gathering in and acquiring outlier data, and more specifically the right outlier data that would collectively define what for them, would be their best fit specialized niche market.

Focusing here, on this special case-in-point category of innovation-driven data requiring businesses, and the desired perhaps numerically small niche markets of otherwise-outliers that would fit into them, who they would most need to understand and connect to:

• The data that they would accumulate in-house, as supplemented by data acquired from outside sources, would hold an overall aggregate value for them that was at least roughly defined as the overall gross returns on investment from sales made on the basis of this data, net any and all costs accrued from gathering and acquiring it, and organizing it into operationally useful form (a general consideration that would apply to any business),
• As framed in a niche market-oriented business context by consideration of the overall scale and the overall possible sales reach and profit potential that might be obtained from effectively connecting to its particular best possible consumer base, from using this data. (Note that this bullet point at least tacitly presumes that data available, if properly developed and used can help a business identify its best possible target market consumer base to start with. At least initially, but also when moving forward in the face of marketplace and competitive context change, that might not reasonably be presumed, and certainly as anything like an automatic given.)

As noted in earlier postings to this blog, online businesses with their at least potentially global reach, face opportunity for reaching essentially anyone worldwide who would fit into even the most specialized niche market, only provided that the members of that demographic go online and that they would be willing to buy there too. So I offer this narrative as holding increasing importance in our all but ubiquitously online connected 21st century world.

I am going to continue this narrative in a next series installment with an at least brief discussion of businesses that aggregate and organize information for businesses, as their marketable products and in accordance with their business models, as that set of issues enters into this series’ narrative. In this, I will more fully explore the issues and questions of where business intelligence comes from, and how it would be error corrected and kept up to date, as well as free from what should be avoidable risk from holding and using it. And that will mean addressing the sometimes mirage of data anonymization, where the more comprehensive the range and scale of such data is collected and the more effectively it is organized for practical use, the more likely it becomes that it can be linked to individual sources that it ultimately came from.

Looking further ahead here, I will look at all of that from an in-house versus cloud storage, organization and analysis perspective, as initially promised in Part 28, and will proceed from there to consider these issues from a more business-development timeline perspective, bringing in the issues and challenges of cost-effectively developing a business for all of this and how and when, so as to bring in necessary change while controlling possible risk. That will, among other things, mean reconsidering outside funding and organic, strictly in-house sourced funding where capital development expenses would be faced.

Meanwhile, you can find this and related material at my Startups and Early Stage Businesses directory and at its Page 2 continuation.

Planning for and building the right business model 101 – 36: goals and benchmarks and effective development and communication of them 16

Posted in startups, strategy and planning by Timothy Platt on March 22, 2018

This is my 36th posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-35.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I began discussing three exit strategies in Part 33 of this, that all hinge on how a new business would enter into and pursue its first real growth phase after establishing itself as being consistently profitable:

1. A new venture that has at least preliminarily proven itself as viable and as a source of profitability can go public and with all of the organizational change and all of the transparency and reporting requirements that this entails as they begin offering stock shares.
2. A new venture can transition from pursuing an organic growth and development model (as in exit strategy 1, above) but to one in which they seek out and acquire larger individually sourced outside capital investment resources, and particularly from venture capitalists.
3. A new venture, and certainly one that is built around a growth-oriented business model, might build its first bricks and mortar site, in effect as a prototype effort that it would refine with a goal of replication through, for example a franchise system. And there, licensing fees and ongoing franchise-sourced income going back to the home company, would provide funds that could be used for further capital development, among other things, to keep a fiscal systems focus here on what I include in this list.

I have addressed the first two of these scenarios since Part 33 in this series, leading me to Scenario 3: the topic of this posting. As noted in Part 35, this is the business development option of these three that I have discussed and analyzed the least overall in this blog, at least up to here. My goal for what follows is to at least begin to address that gap in coverage, starting with due diligence considerations as to how this approach would be followed so as to improve its likelihood of success. And I will begin with the core business model itself, and then move on to consider the people involved, and in operationalizing and building a such business so as to limit unwanted change or divergence throughout its overall system, while supporting necessary business-wide flexibility that can address local needs and opportunities.

I begin by acknowledging that the founders of a single storefront business might start out planning on building to a single location and just that, and that their success there might prompt them to reconsider their single location assumptions and particularly if they see both significant success in what they are doing there, and a specific next step growth opportunity in a second location. And if they see this type of move as desirable and even necessary in some way, if they are to realize their full mission and vision goals of providing to their markets, but they come to realize that they personally would be stretched too thin if they tried running a second (or further) storefront on their own, they might in effect drift into realizing a franchise-type approach as a growth and expansion model.

But I will assume for the most part in what follows, that those business founders start out their venture with the possibility of franchise system expansion in mind, and that they in fact build their first location storefront with that, and with prototyping from it in mind. And that means developing and fleshing out their business plan with a very specific type of robustness in mind: building a business system that would in all likelihood be successfully transferable to new locations with different local markets that they do not currently personally know. And this business model would be built around an operational and management template that they could train new non-founder managers into. This would involve and in fact require development of a standardizable brand and layout, and a replicable corporate culture that new franchise owner managers could buy into and follow. And crucially importantly, the core business model involved here would have to be built around effective quality control due diligence systems, where consistency and storefront-to-storefront quality of appearance, service and product offerings, and back-office support would be explicitly defined and carefully maintained.

Most franchise systems give measures of entrepreneurial independence to their franchise license holders, but they do require and enforce adherence to a basic standardized form too. And this can and usually does include centralized control over what is offered through all of their franchise outlets. And most central offices of these systems manage overall marketing offered, and in fact take on that responsibility for their entire system, as well as offering a variety of other consistency-enabling resources. There are in fact franchise systems that even insist on centrally providing all cleaning supplies used by all of their franchisees to maintain consistency, and positive control there too. Their basic argument there, as with centralized control over what goes into franchise product inventories, is that one poorly run outlet, or outlet of poor appearance or reputation can harm the overall reputation of all other franchise operations in their system, and even the entire franchise system and its brand as a whole. Consistent, and consistently high quality control and for all publically visible metrics and for all back-office business effectiveness metrics too, are crucial to making these systems succeed. I presume here that a capacity for all of this is built into the basic founding business plan and business model and from its beginning, and at least in embryonic form for all of the crucial details.

I stated above that I would begin this discussion with the business model in place and then move on to consider the people who would become involved in this type of venture. I am going to continue this discussion in a next series installment, starting with that area of consideration. And I will begin there, with the business founders and would-be overall owners of this type of, at least potential business empire too. Then after offering at least a basic organizing discussion of who would most likely build a new venture with this possibility in mind, and successfully so, and after going on from there to consider franchisees and who would be good fits for taking that type of career opportunity on, I will reconsider the issues of business-wide consistency, as well as storefront-level flexibility, and both in prototyping new possibilities and in addressing local-to-store opportunities and challenges.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

Building a startup for what you want it to become 30: moving past the initial startup phase 16

Posted in startups by Timothy Platt on February 20, 2018

This is my 30th installment to a series on building a business that can become an effective and even a leading participant in its industry and its business sector, and for its targeted marketplaces (see Startups and Early Stage Businesses and its Page 2 continuation, postings 186 and loosely following for Parts 1-29.)

I focused in Part 28 and again in Part 29 of this, on the increasing importance of big data and of its effective use, and for what is rapidly coming to be essentially all businesses: large and small. And one of the core threads running through that narrative was an at least briefly stated rationale as to why this point of conclusion is increasingly valid already, in our still just emerging 21st century context.

That two part discussion, in fact addressed the first of a list of topics points that I offered in Part 28, as material to be delved into in subsequent series installments from there. The second of those points as initially offered for future consideration was:

• In-house generated, and outside-sourced business intelligence as marketable commodities, and for how they would be used in business planning and for how this type of resource might be selectively commoditized and sold.

And my goal for this posting is to at least begin to discuss and analyze that point. I note in anticipation of doing so that the range of issues that this briefly stated bullet point brings up is vast and complex. And many of the details of that are going to prove pivotally crucial to both individual businesses and to networked groups of them such as supply chain systems, and to the markets and the consumers that these businesses serve too.

I begin this posting and its core line of discussion with a single two word expression as drawn from that bullet pointed topics note: “marketable commodities.” And I begin addressing that by citing the obvious. As soon as I began writing of businesses acquiring outside sourced business intelligence, I at least implicitly began addressing the issues of information commoditization, and its marketability and sale.

The devil, as they say is in the details for that, and in ways that only begin with the challenges of information security in the face of confidentiality concerns, where the most valuable information in this can and often does carry security and confidentiality issues and challenges with it; information not so encumbered tends to be freely and even widely available anyway, and as such has at best just minimal marketable value as such.

And with that noted, I raise the first real issue that of necessity arises here, assuming only that a given body of raw data, processed knowledge developed from it, or some combination thereof, can be organized in such as way as to meet security concerns and requirements:

• What is this information worth, and how would that be determined?

I have in fact been addressing that challenge for quite a while now in this blog, so to keep from repeating earlier lines of discussion and analysis, I begin re-addressing this set of issues here, by offering links to my earlier discussions of this:

Business Intelligence as a Qualitative Distinction – a requirement for effective rules of monetization,
• My series: Business Intelligence as a Quantitative Distinction, as can be found at Macroeconomics and Business as postings 21 and following for its Parts 1-9, and
Depreciation of Value in Non-Rivalrous Goods and the Business Intelligence Life Cycle and its Part 2 continuation.

These postings all go back to 2010 for their writing, so the issues that I would address here have been on my mind for a while now. And the newsworthy events that prompted me to write them then, which still hold topical value now, involve blind spots in how businesses are reviewed and analyzed for their overall market values, as for example in merger and acquisition contexts.

It is easy to determine a replicable and reliable valuation for the rivalrous assets that a business holds, and according to largely consistently determined accounting-based amortization revaluations as those items age. This means everything from physical space and building structures owned, to the furniture and other physical assets held and used within them, and more. It is much more difficult to arrive at a consistent and reliable valuation of business intelligence held by a business, and certainly where that means trade secret or other proprietary data or processed knowledge. So in practice, its valuation often becomes one of seeking to establish a more fluid “what the market would bear” as to viable price offered, if it were to be put on the market for sale.

• But these less tangible assets clearly hold value, and particularly now and for essentially any type of business intelligence that might be held, in an increasingly big data-driven, competitive business context.
• So as we more and more fully enter into a true information-based economy, it becomes more and more important that we be able to set consistently based valuations as to what crucial business intelligence that is held, is actually worth.

Consider the scenario of buying and selling a business with its information assets included, as an example context that happens to bring these issues to a head and in ways that cannot be evaded or overlooked. But these issues are at least as important when a business would buy or sell specific, select information resources too, as part of its ongoing business activities.

I began reconsidering the issues of information valuation here, by mentioning information security in passing. But I have to acknowledge that business risk is in fact a crucially important source of business cost here, and one that can generally be at least probabilistically determined, where overall cost of a possible event or circumstance arising, that would have to be taken into account here at least nominally for its possible impact, can be determined as the product of its likely cost if it does arise in fact, and the likelihood of that happening and with that value expressed as a proportion. So for example, and to keep this simple, if an adverse event would either fully occur or not occur at all (with no partial or limited occurrences possible), and with a maximum penalty due from that or none at all, and its happening would cost $10,000 and it has a .01 likelihood of happening (1%), then its nominal cost that has to be calculated in, would be (0.01 X $10,000) = $100.

This type of nominal cost determination makes the most sense when a business has to arrive at overall ongoing costs accrued over longer periods of time, for a wide range of possible simultaneous risk factors and possible incidents. And when the array of them, each with its own probability of occurring and each with its own predictable costs if it does, becomes complex enough so as to collectively constitute a statistical universe, then overall cost determinations as arrived at over time from this can become on average, quite reliable and predictable. This model as described here is in fact part of the basic foundation of the core business model pursued by insurance companies. But the basic principles outlined here apply to any business that would buy or sell business intelligence and particularly where they seek out or sell information of significant marketable value, where such disclosure might carry risk as well as possible profitable value.

I am going to continue this discussion in a next series installment, where I will at least briefly delve into the issues of how information would be selected and organized for use, and for sale as marketable commodities. In anticipation of that, I note here that anonymizing data and aggregating individually sourced data into general demographic form are important here, but they only address part of this story. I will discuss that basic approach but go beyond it too. Yes, this is in part a matter of managing information security risk, but it is also a matter of establishing the types of information-based value that would be offered in a marketplace, and sold to other businesses, where that at least potentially includes competitors – and particularly if that data is sold to and then resold by a third party business that pursues an information aggregator and clearinghouse business model. After completing that phase of this overall discussion, I will continue on to address the remaining issues as listed at the end of Part 28 for inclusion here.

Meanwhile, you can find this and related material at my Startups and Early Stage Businesses directory and at its Page 2 continuation.

Planning for and building the right business model 101 – 35: goals and benchmarks and effective development and communication of them 15

Posted in startups, strategy and planning by Timothy Platt on February 12, 2018

This is my 35th posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-34.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I began discussing three exit strategies in Part 33, that all hinge on how a new business would enter into and pursue its first real growth phase after establishing itself as consistently profitable enough to perform at least better than break even in balancing its income and expenses, and on an ongoing basis. I have in fact been addressing this subject and these types of next-step development scenarios for a while now in this blog – and with some of that coming out quite recently. So my goal here in this posting is to take a fresh approach to one of those possibilities: one of those scenarios. And I begin doing so by briefly recapping what the three are, in order to put this discussion to come into perspective:

1. A new venture that has at least preliminarily proven itself as viable and as a source of profitability can go public and with all of the organizational change and all of the transparency and reporting requirements that this entails as they begin offering stock shares.
2. A new venture can transition from pursuing an organic growth and development model (as in exit strategy 1, above) but to one in which they seek out and acquire larger individually sourced outside capital investment resources, and particularly from venture capitalists.
3. A new venture, and certainly one that is built around a growth-oriented business model, might build its first bricks and mortar site, in effect as a prototype effort that it would refine with a goal of replication through, for example a franchise system.

I have basically finished my discussion of Scenario 1 here, at least for purposes of this series, in Part 34. And I turn from that, in this next series installment to consider Scenario 2 and venture capital funding in more detail. And I begin that by specifically acknowledging that this is the one scenario of these three that I have already delved into the most in this blog, and by far and certainly when compared to my option 3, franchise system development scenario.

What would I add here that would fundamentally add to what I have already offered on this topic? My goal here is to more fully consider how the founders of a new venture, and one or more venture capitalists might come together to discuss the possibilities of working together, and how those new business founders might best present themselves and their new business in this, in order to both secure venture funding and to do so under the most favorable terms, from their perspective. Ultimately, if a new venture’s founders cannot achieve that, Scenario 2 as listed above can at best only offer them a limited share of what could be its value creating potential.

I begin addressing this set of issues by explicitly noting that finding the right possible outside investors, or being found by them, and coming to a mutually beneficial agreement with them depends on who you know or can come to know, and how effectively you can organize and present your business development pitch. And online social media and the interactive online have made this coming together of at least potentially involved collaborating partners in this, a lot easier.

Let me at least start fleshing the how of that out, with the fundamentals, and by noting that most all of what will follow here, applies to securing angel investment funding too (which I will parenthetically make note of as appropriate):

• Venture capital investors tend to specialize in industries and business sectors that they have hands-on expertise in, as a due diligence measure that increases their chances of backing the right ventures that are more likely to succeed and bring them a return on their investments in them. (And angel investors tend to specialize too, though they are more likely to focus on business models and more specifically on the mission and vision statements and intentions that underlie them, than venture capitalists would.)
• So business founders need to both identify and successfully reach out to these investors, and to the right ones for what they seek to do, and in ways and with messages that would prompt them to want see and hear more from them.
• This means a new business’ founders doing their homework and for determining the levels and types of funding that they would need, and the levels and types of constraints that they would accept as trade-offs for that funding. And crucially importantly, this means their doing their homework to identify what possible funding sources might be interested at least generically in their type of business, categorically.
• Both more traditional broadcast published online resources such as web sites, and more interactive resources such as social media enter in there, with an initial focus for this step in this process, one of finding out before reaching out. See my earlier series: Using Social Media as Crucial Business Analysis Resources (as can be found at Social Networking and Business 2 as postings 217 and loosely following for its Parts 1-7.)
• Know who you seek to work with in this and who is most likely to be most interested in investing in the type of business venture that you are developing and building. Know something of where they have invested in the past, and their terms of agreement and their due diligence requirements as expressed there: the demands that they have made on other business founders for what they would do and how and when, as well as what they offer in return. Is it possible to identify other businesses and their executives and owners who have worked with the investors who you are considering here? Can you contact them and gain insight from them as to their own experience in this, that would help flesh out your own due diligence here?
• And then reach out to the possibilities that you see as holding the greatest promise to you and your business.
• At the same time, selectively develop and offer pitch-oriented information about yourself and about your new venture online too, and with multiple explicit audiences in mind:
• Potential markets and their consumer members, with a goal of developing a basis for viral marketing as well as purchasing-oriented interest, and
• Potential investors included. Post online and interact with others online in this, with a goal of increasing visibility and creating at least a measure of buzz.
• And as part of your basic background research and of your outreach, identify appropriate face to face forums where entrepreneurs meet and pitch to potential investors, and with a goal of gaining insight in how to refine your message as well as with a goal of actually securing funding. If you do seek out an audience of this type, and opportunities to present at this type of forum, practice at what might more likely be a second choice one first. And then take the lessons learned from that to your efforts to present and win over investors at more of a first choice venue of this type. And remember: participation in forums of this type only opens conversations. The real work of marketing and negotiating follows. (These forums often bring multiple types of investors under one roof, with at least some venture capital participation possible but with angel and other investors definitely also included. Know who participates on the other side of the table, and the levels and types of investments that they make, coming out of these events, when they decide to invest from that at all.)
• Note that larger and more established venture capital firms are a lot less likely to appear at these forums unless one or more of their principals have a direct, personal professional relationship with a forum organizer. If you really seek support from one of them, you might consider participation in these forums as valuable practice runs for refining your pitch for when you do reach out to them. But even if this is your up-front goal, keep an open mind to the possibility that a perhaps overall smaller investor might be both interested, and willing to offer you a better deal.
• And very importantly there, remember that a good deal in this does not just mean how much investment funding would be offered, or better terms of investment as far as what these funding sources would demand in return, or how soon. Know what they can and will offer in the way of mentoring and advice, and yes: through board participation in your new venture and through other more direct forms of participation too. Who would they bring with them to the table – to your business’ table, who could help increase your chances of success, too?

I am going to continue on in my next series installment to consider the third scenario from the list that I repeated here towards the top of this posting:

• A new venture, and certainly one that is built around a growth-oriented business model, might build its first bricks and mortar site, in effect as a prototype effort that it would refine with a goal of replication through, for example a franchise system.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

Building a startup for what you want it to become 29: moving past the initial startup phase 15

Posted in book recommendations, startups by Timothy Platt on January 9, 2018

This is my 29th installment to a series on building a business that can become an effective and even a leading participant in its industry and its business sector, and for its targeted marketplaces (see Startups and Early Stage Businesses and its Page 2 continuation, postings 186 and loosely following for Parts 1-28.)

I focused in Part 28 on how big data is becoming an essential driver of business success in the 21st century, and for small businesses as much as for large ones, and increasingly regardless of industry or business sector. And I at least somewhat took its line of discussion out of the abstract by selectively discussing the questions and issues of inventory management in a retail business context as would be found at a supermarket, or even at a minimarket. And I concluded that installment by raising two issues that I would at least begin to further discuss here:

• Much of this data (e.g. inventory and related sales and shrinkage data that such a retail operation would need and use) would of necessity come from within the business. But it is increasingly important to bring in outside sourced data too, and both on how other competing businesses are doing in your business sector, and for your inventory item sources where changes there can impact upon your business too. And outside sourced market data would also be necessary.
• My point there is that as much data as a business develops internally and from their own systems and processes, they are likely going to need at least as much from outside of themselves too. And this all has to be coordinately organized and analyzed if effective and timely use is to be made of it.

Rereading those two bullet points simply reinforces a perception that I found myself considering as I first wrote them; they are fundamentally valid, but they are also fundamentally incomplete and they are more suggestive than informative in important ways, and certainly where outside sourced data is concerned. I offered a somewhat lengthy to-address list at the end of Part 28, in text paragraph form, but as noted there I begin this narrative continuation with those here-repeated topics points and with a goal of fleshing them out.

And I at least begin to do so by stepping back from the specifics of retail stores and their inventory management needs or solutions, to consider businesses in general and both for the types and for scope of overall information collection and usage needs that they face.

• A well conceived and run business can be viewed as a strategically organized and structured system of standardized and routine operational processes, supplemented as needed with exception and one-off resolution handling capabilities. And it is the effective, coordinate management of the two that creates both business strength and certainly in the face of change and the unexpected, and business resiliency and agility.
• And all of this is information driven, and dependent on effective communications to make it work: ongoing information development and organization, and information sharing and use that balance access needs with information security and overall risk management needs.
• And the 21st century is marked by an explosion in the scale and diversity of information that can be available that could at least offer incremental value there, and by a corresponding explosion in the scale of what businesses: any businesses need in the way of information and in the way of its smoother and more efficient sharing, if they are to remain competitive – and not lose out from not picking up on all of those potential incremental sources of advantage.

The tighter the competition that a business faces, the more important any realistically, cost-effectively possible incremental advantage becomes for it, that it might be able to gain. And for businesses that conduct at least some share of their business activity online, competition is increasingly becoming global in reach. Note that when I write here of information sourcing and/or sharing with a business’ outside context, this means both sales and directly sales-related transactions, and supply chain process participation and more, and an increasingly wider and more complex array of outside facing and connecting interactions.

That brings me specifically and directly to the phrase I made explicit note of above in my first bullet point here, as needing clarification and amplification: “outside sourced market data.” I stated above that I was looking beyond the more restricted scope of inventory management here, so I update that clause and its intent for what is to follow, as “outside sourced data” in general.

If you have and run a small town hardware store or grocery store and have what amounts to a local monopoly there and for at least a large percentage of your steady customers, and if most of your business is with steady, repeat customers, you do not need much if any specific information on what other, same or similar-type businesses are doing elsewhere in order to effectively plan and execute to your own business model and your own business needs. You will need inventory information management capabilities and you do need to know your own marketplace and your own customer base, but that is about it and for both in-house and outside-facing raw data that would go into your calculations and decision making. And of course you would need to be familiar with predictable seasonal and other cyclical shifts in what your customers need and want and expect. And you would have to keep your eyes open to the unexpected, such as the sudden emergence of fads that might sweep up your customer base too. But this is the simplest, baseline information gathering and management context that I would consider here; think of this as the pre-internet marketing and sales paradigm too, and as a baseline model for that context too.

The wider and more diverse the marketplace that you would seek to address, and the wider and more diverse the competition that you would face as you seek to hold a viable fraction of this overall potential market space as your own, the more information you will need – and particularly from outside of your business and its own immediate operations.

• This means more diverse and detailed market demographics and market segmentation data: customer and potential customer knowledge and insight.
• This means wider and more detailed information on what is probably a much wider and more diverse array of competitors and of potential competitors so you can more effectively allocate your resources in meeting their challenges.
• And together this means larger amounts of progressively more diverse outside data that you can use in making finer and finer grained descriptive and predictive analyses for use in your own business planning and its execution.
• I return to those perhaps individually small but collectively significant information-based advantages here again, that I made note of above. Increasingly, and certainly for actionable data, what you can gather in and use, you must and certainly when competing with other businesses that do.

And as I repeated above, the value in all of this comes from coordinately gathering, organizing and analyzing all of this, at least initially raw data, and from converting what might in principle easily become a meaningless jumble of disconnected facts, into actionable knowledge.

I said at the end of Part 28 that I would offer some relevant references here regarding big data, and I begin with two sets of references from this blog:

• The series Big Data (as can be found at Ubiquitous Computing and Communications – everywhere all the time and its Page 2 continuation, postings 177 and loosely following, for its Parts 1-11.)
• The series: Big Data and the Assembly of Global Insight Out of Small Scale, Local and Micro-Local Data (as can be found at Reexamining the Fundamentals, as Section IV.)

And I add the following book references to this as well:

• Marz, Nathan and James Warren. (2015) Big Data: principles and best practices of scalable real-time data systems. Manning Publications.
• Marr, Bernard. (2017) Data Strategy: how to profit from a world of big data, analytics and the internet of things. Kogan Page Ltd.

And this brings me to the next entry in the to-address list that I appended to the end of Part 28, to follow discussion of the two bullet points I have addressed here:

• In-house generated, and outside-sourced business intelligence as marketable commodities, and for how they would be used in business planning and for how this type of resource might be selectively commoditized and sold.

I will address these issues in large part in terms of cloud-based systems for data storage and analysis and certainly as big data capabilities might be pursued by smaller businesses. And I will approach that from a more business-development timeline perspective, bringing in the issues and challenges of cost-effectively developing an enterprise for this type of data-intensive capability so as to bring in necessary change while controlling possible risk. That will, among other things mean reconsidering outside funding and organic, strictly in-house sourced funding where capital development expenses would be faced.

Meanwhile, you can find this and related material at my Startups and Early Stage Businesses directory and at its Page 2 continuation.

Planning for and building the right business model 101 – 34: goals and benchmarks and effective development and communication of them 14

Posted in startups, strategy and planning by Timothy Platt on January 3, 2018

This is my 34th posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-33.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I began Part 33 by listing three possible exit strategy transitions that the owners of a new business venture might pursue as it first begins to achieve a consistent positive cash flow and proven profitability, thus entering into its first real growth phase:

1. A new venture that has at least preliminarily proven itself as viable and as a source of profitability can go public and with all of the organizational change and all of the transparency and reporting requirements that this entails as they begin offering stock shares.
2. A new venture can transition from pursuing an organic growth and development model (as in exit strategy 1, above) but to one in which they seek out and acquire larger individually sourced outside capital investment resources, and particularly from venture capitalists as briefly touched upon in Part 28, Part 29 and Part 30 of this series.
3. A new venture, and certainly one that is built around a growth-oriented business model, might build its first bricks and mortar site, in effect as a prototype effort that it would refine with a goal of replication through, for example a franchise system.

And I chose these three for their diversity, and with no attempt at anything like comprehensive coverage of even the commoner possibilities there. So for example, I offered venture capital funding in Scenario 2, but not angel or crowd sourced funding: two other possibilities that would provide what might be considered variation scenarios to the one offered here. Initially, my plan was to delve into the details of the three exit strategies that I did list there, at least beginning in that posting. But further reflection prompted me to offer more foundational material regarding the type of scenario analysis that I would offer here first, that I would turn to when addressing them. So as a consequence, I begin more specifically considering the above Scenario 1 here in this posting. And I will do so, developing my line of discussion to follow here, in terms of the organizing model approach developed in Part 33.

My topic of focus here is on businesses that seek to go public through initial public offerings (IPOs) and stock releases. And I begin addressing this possibility and its issues and challenges by posing two more-general analytical requirements here, that are at least implicit in all that I wrote in Part 33:

• Know your own business and what positives and negatives it carries with it as it is now (e.g. positive assets, and debts and other at least potentially limiting restrictions on what it can do and when and how.)
• And know both the positives (for you and your business) and the negatives that in this case, going public would bring with it for your business.

Now the question is one of how those positives and negatives lists match up. Where would the positives from going through an IPO mesh with and reinforce the positives already there, at least potentially in this business? And where would those going-IPO positives help address that business’ current negatives: factors or conditions that could hinder its development and even threaten its success if not balanced off in some way by mitigating factors? Now, where would the restrictions and demands of going public in this way limit the business? That certainly becomes important if pursuing this approach would create a new negative for the business, or exacerbate a current one. Let me take that out of the abstract with a specific real-world example.

Let’s assume that a business has been founded by a small group of invested owners who all have equal equity shares in what they are collectively building. And on the surface, they do work well enough together in building their joint venture, to keep everything developing fairly smoothly and efficiently and certainly through its earliest stages. But below that surface, this group is roiled by what can at times seem fairly fundamental disagreement over where their business is, and should be going as it builds out and comes into its own. This might keep surfacing as expressed differences in the type of corporate culture that they should be building there, or differences of opinion as to the right type of community of employees and managers that it should develop and how it should best relate to and connect to its marketplace. And under that, this type of difference can extend into hiring and terms of employment differences and a great deal more. And now these people, each with their own sometimes aligning and sometimes divergent views on all of this, are considering going public – where that requires a type and level of transparency and of public reporting that might very well bring all of these points of difference and disagreement to a head.

That type of pressure towards what some might seen as forced compromise, can be stressful and it can at least start out looking like a business side negative colliding with an exit strategy negative to create a real pit that the business could fall into. But at the same time, this can be seen as a positive too, forcing these people to stop trying to perhaps superficially gloss over what might be significant differences, and early enough so they do not face a crisis from their remaining there.

Problems that are simply kicked down the road and set aside sometimes to just fade away – if they were more superficial and less important than initially considered. But real problems set aside for later and again and again, can just grow and fester below the surface too – until they erupt to the surface.

Going IPO requires meeting a lot more legally mandated and societally expected requirements than just public reporting, but I pick up on this one because it highlights how perceived negatives in this case, can overlap and mutually reinforce each other. But at the same time, this example also highlights how initial perception and understanding can be wrong, or at least misleading. It is usually better for the founders of a business, in this type of group business development initiative, to resolve their differences as early as possible, and for them to not wait until they are forced to, and at a time and under circumstances not of their choosing. And that holds whether the founding group can in fact find a modus vivendi and continue on together, or if some of them end up going their separate ways. Early there at least lessens the chance that a business-to-be, simply explodes from long-harbored disagreement and yes, from long-harbored resentment arising from that too.

I repeat my first of two general points as offered above, in light of this:

• Know your own business and what positives and negatives it carries with it as it is now.

And I repeat the second of them too, with a perhaps reconsideration of what the first actually means in mind:

• And know both the positives (for you and your business) and the negatives that in this case, going public would bring with it for your business.

Your answers to the questions that those two points raise as arrived at initially, might require rethinking. And that is definitely true where your starting assumptions might limit what you see, and how you would prioritize and weight the factors and considerations that you do list, for their impact and significance.

Let’s reconsider my underlying tensions and disagreements scenario of above, in light of that point of observation. If the disagreement issues that that team of business founders faced were on the table and readily amenable to inclusion in this type of analysis, and even in a first round assessment of the positives and negatives faced, their differences would probably have already been resolved, and either by arrival at some form of compromise consensus agreement, or through at least one founder walking away, taking the equivalent of their equity share with them (e.g. as an agreed to buyout arrangement.)

Do your research on how other business ventures that match yours for at least some crucial details, have fared when going IPO. And look in particular for lessons learnable from businesses that have run into trouble there, and certainly where their initial valuations as posted from what might have been day 1 hype, at least significantly drop if not collapse after that.

I am going to turn to reconsider Scenario 2 (venture capital backing) and then Scenario 3 (building with franchise model expansion in mind), beginning in my next series installment. Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

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