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What makes a great company?

Vast hours have been dedicated to answering this question. The best academics and consultants have all tried to figure it out. With good reason – 80% of entrepreneurs fail within 18 months of business.

But nobody can agree on a single, definitive factor. Business can’t be reduced to a simple formula. Instead, there are many factors colluding to create the stopping power of the most successful businesses. Factors such as team, market and customer demands. There is one factor that brings them all together, however. There is a metaphorical ‘glue’ that gives meaning, direction and coordination to the various elements of successful business.

The ‘glue’ i’m referring to is vision.

By providing a destination and purpose for the organization, a powerful vision is capable of bringing people together to define an industry.

Destination and purpose

Vision acts as the destination and purpose of an organization’s existence.

Where do you want to end up?

In order to make progress towards something, you have to know what you are aiming for. You need a target – a goal.

Vision represents a combination of the two. It is having a moving target that you are continually trying to hit. And also, an idealistic endgame. Vision represents how your company moves on a day to day basis. It’s the driving force that energizes your people as they build products and interact with customers.

It also represents the big Why – the big change that you want to see in the world. If we actualize our vision, how will the world be different?

Understanding vision

The story of Steve Jobs has been told countless times. It’s been dissected and taught throughout business schools. It’s even been made into movie (more than one actually). But the reason why it’s effective is that the message is clear and easy to understand. Especially if we want to define and understand vision.

Steve Jobs and Steve Wozniak changed the world. They built one of the most successful companies of all time. They named it Apple, Inc. The name itself doesn’t seem fit for a computer company. Had they been working with business consultants at the time, they would have walked out in protest. But the name itself gives insight into where Jobs was coming from. He wanted to be different. He wanted to challenge the status quo. He was the square peg that society wanted to fit in the round hole. He rejected this idea.

He believed that personal computers should be in the hands of everyday people. Not just business executives. He wanted to empower the masses by giving them tools to advance the mind. He wanted these computers to have an intuitive user experience – designed for the everyday person. He wanted to beautify and democratize access to technology. That was his vision.

The Why, the How, and the What

In his best selling book, ‘Start With the Why’, Simon Sinek created a model that encapsulates what vision is. In what he calls the Golden Circle, there are three aspects: the Why, the How, and the What. Here is some further clarity:

• The Why – This circle represents the problem or need you are solving. It also represents the shift in the status quo that you are trying to bring about. You could be solving the problem of internet connectivity in Africa. But your broader Why is to bring the human family together.
• The How – Alone, the Why of your vision is just a dream. There needs to be a pragmatic road map that leads to the achievement of the Why. This is the building aspect where processes and systems are put in place to achieve the vision.
• The What – The final circle refers to the output of the two inner circles. What is the product or service that is being built in relation to the vision? What are the features that allows it to solve that particular problem?

Starting with Why

Having vision is about the Why of what you do. The best businesses are laser-focused on the problem they are solving. But they go further. They have a definitive mission which goes beyond that particular problem. And ideally, they define a new status quo.

Here are some examples of company visions and their Why:

• Facebook – To give people the power to share and make the world more connected.
• Apple – To make a contribution to the world by making tools for the mind that advance humankind. (This was quoted from Steve Jobs as his original vision).
• Google – To organize the world’s information and make it universally accessible and useful.
• Amazon – To be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.
• TED – To spread ideas.

None of these vision statements talk about what they do. Nor do they mention how they do it. But in the background, these are the factors that allowed them to achieve the Why. Hence, the Why, How and What are all interconnected and codependent.

Google doesn’t speak of the complexities that their search algorithms have. But it’s this robust technology that allowed them to organize the world’s information. This despite there being others on the same mission.

Apple’s original vision statement isn’t about how aesthetic their products are – although this was a core part of how they achieved their vision. Instead, there is a greater feeling of revolution and empowerment. Great user experience was just a means to achieve that.

In all, although the How and What of vision is important (critical to achieving it), the Why has to come first. Otherwise, there is no concrete destination to build towards.

Becoming a visionary leader

Creating a great business is hard. Bringing together a great team, identifying markets, solving customer problems and fending off competition. These are just a few things you have to deal with. And without a concrete vision about why your company exists and what you believe in, excelling in these areas is much harder.

Your ability to harmonize the various aspects of business through a strong vision is key.

To illustrate why, let’s take a look at a charismatic visionary: Elon Musk.

An example of a strong vision

Musk is one of the founders of PayPal. He went on to found SpaceX and Tesla Motors, which he both actively runs. He is also the founder of Open AI, the Boring Company and various smaller ventures. Some even describe him as ‘Iron Man’, in reference to the superhero who shares the same inventiveness and desire to take on the world.

But what is it that distinguishes Musk from other entrepreneurs? He’s smart, but there are thousands of smart entrepreneurs who aren’t as successful. What sets him apart is his otherworldly vision for the future. And I mean that literally – SpaceX’s vision is to make humanity a multi-planetary species. Likewise, Tesla Motors vision statement is to drive the transition to sustainable vehicles.

Through this strong sense of purpose, Musk is able to do what others aren’t. He is able to thrive despite the many setbacks he’s faced. Here’s how Musk’s vision impacts his business:

• Building a team – Musk’s compelling vision appeals to the talented and idealistic. The best people aren’t just looking for a job, they’re looking to change the world. Through working with Musk, they’re able to do so.
• Overcoming adversity  – Musk has overcome a huge amount of adversity. He struggled to get funding for his ideas. He faces negative PR, funded from incumbents in the car industry. He has to overcome difficult technical challenges. Yet at every stage he has managed to succeed – something only possible with a strong purpose.
• Penetrating the market – Tesla is making waves in the centuries old automobile industry. It’s an industry with high barriers to entry, powerful lobbies and red tape that keeps upstarts at bay. In Q2 2018, Tesla shipped 40,740 vehicles. Considering his cars range in price from $55,000 to $100,000, Tesla is doing very well.
• Spotting opportunities – How many entrepreneurs can go toe to toe with the American, Chinese and Russian governments? Musk’s SpaceX brought spaceflight into the private domain. Where other entrepreneurs shied away, he had the vision to seize the opportunity.

Creating a compelling vision

You should now have a greater understanding of the importance of having a vision. Now it’s time to turn inwards.

Start thinking about your current situation. Do you even have a vision? Or is it just a vague idea about what you do and how you do it? Worse, are you on autopilot with no clear sight of where your organization is going?

Making it concrete

You probably have some idea of where you are taking your business. But having a vague idea of your purpose isn’t going to give you the effect that you need.

A fuzzy vision won’t remind your people about why they come into work everyday. It isn’t going to give them the fuel they need to do their best work.

Likewise, if your customers don’t get a sense of what you represent then you are missing out on a key competitive edge. Do you want your customers to think about you based on what your product does? Or would you rather they align with your brand as an expression of their values?

A study by researchers at the University of Bangkok and Macquaire University found that there were 7 aspects of a powerful vision. They were:

• Conciseness
• Clarity
• Future orientation
• Stability
• Challenge
• Abstractness
• Ability to inspire

These factors play an important role in the message that you are trying to communicate. But it’s also important to look at the factors that inform your vision in the first place. In other words, how do you find your Why?

There are four steps that will help you construct your Why.

1. Identify problems

Think about what problems your company is solving. Think about the implications of these problems and the effects if left unsolved.

For instance, let’s say you are a manufacturing company that produces parts for wheelchairs. The problem you are solving is that you are helping people to be more mobile. If left unsolved, people’s life quality will suffer.

2. See past it

Next, it’s important to go beyond what you are currently solving. You need to be able to see the forest from the trees.

In other words, you can’t just be fixated on your specific problem. You have to be thinking about the future and adjacent problems that you aren’t solving. You have to visualize how your organization can tackle the whole industry, both now and in the future.

In the example of the wheelchair manufacturing company, you could have a broader vision to give people lifelong access to great mobility. This would extend their focus past just wheelchair parts and more into the domain of personal transport. The emphasis of ‘great mobility’ could mean developing ways of enhancing general mobility – even for people without disabilities. This could mean inventing a completely new method of personal transport – something akin to a Segway.

3. Define values

Then you have to start thinking about what your company represents. What are the ideas, beliefs, and values that guide you as you go about solving these problems?

Think beyond profit. Do you represent honesty? Fairness? Changing the status quo? These are the values that give work meaning beyond simply earning a living.

With the example above, the company could embody values of freedom, equality of access and respect regardless of physical ability.

4. Create a story with meaning

Finally, you want to bring it all together to create a story that has meaning. You now exist to represent a mission. Your organization is embarking on a new journey.

„We are Mobility Manufacturers Inc. We represent freedom, equality of access and respect for all. We exist because everyone should have the ability to easily and efficiently move around our shared planet. We started 5 years ago when we personally experienced the difficulties and lack of access that disabled people have to deal with.“

Next steps

One final aspect of developing a vision lies within yourself as a leader.

You may have a compelling vision, but you need to embody and represent it. The vision has to be communicated through you. And for it to resonate, it has to be congruent with who you are.

So, who are you? And how do you plan to change the world?

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3. New business models

The digital age has brought about new ways to conduct business. The internet and ubiquitous smartphones have opened up new customer channels. They have also opened up completely new ways of doing business, with some companies being internet only.

These new business models can be extremely lucrative thanks to the scaling power of the internet. But for companies who aren’t able to harness its potential, it can mean extinction. Let’s take a look at the most popular new business models: Sharing economies, x-as-a-service, data-centered businesses, ecosystems and decentralized organizations.

Sharing economies

The description of ‘sharing economy’ isn’t completely accurate, but generally refers to the use of products or services without any ownership on the customers part. For instance, AirBnB allows locals to rent out their houses to travellers which helps experience the culture better when travelling. RelayRides is another example that allows people to rent out their cars to others.

These platforms have been powered by the matchmaking potential of the internet, combined with the accessibility and distribution of smartphones.

If you are in the hotel or car businesses, these new models pose a threat to your margins. In order to be competitive, new strategies such as delivering tailored customer experiences and aspirational branding are necessary.

X-as-a-service

Similar to the sharing economy, B2B providers are becoming vendors of technology which they lease out for a monthly fee.

This means that companies no longer have to invest money into building out technologies from scratch. Instead, they can just pick and choose what they want and assemble it like Lego.

Data

Companies are always looking for ways to make better decisions. When it comes to important decisions like whether to launch a new product, guessing is never a good idea.

As it stands, 85% of companies are trying to be more data driven, but only 37% are succeeding. Being data-driven is one of the best ways to make better decisions. This is why data has become one of the most valuable commodities in the digital age.

Some companies like Facebook have built their business model around the data they collect. The fact that they know everything about us is valuable to marketing leaders who want to hyper-target their products. Other companies like Crunchbase act as aggregates of data which they package and sell.

Ecosystems

In certain industries, there are opportunities for key players to own the whole ecosystem. This isn’t achieved through pure financial and political power like in the previous century. Instead, it’s more about familiarity of service and ease of accessibility.

An example of this is Amazon and what they did to the book publishing industry. Leveraging their success as a book retailer, they branched out into e-readers and even starting their own publishing arm.

Having this monopolistic level of power has given them leverage over publishing incumbents who were slow to adapt to this change.

Decentralization

The changing ways in which we think also plays a part in the development of digital business models. Take the blockchain for instance. The technology and concept behind it is impressive. But it is the idea of decentralized ownership and cutting out the middleman which gives it strong commercial potential. With growing distrust in government and big business around the world, the demand for more transparent and fairer business models is being met by the blockchain.

And investors are lining up to back these new models. As of May, $1.3 billion was invested in blockchain companies by Venture Capitalists. This doesn’t include the billions poured in by crowdfunding.

4. Cultural Landscape

We have already talked about how digital platforms such as social media have given the average person a voice. Often, customers will use these platforms to voice their support or frustration with a brand. But it’s not just about customer service. It’s also about corporate social responsibility.

Social platforms such as Twitter and Facebook have given people the ability to start social movements and vote with their dollar. For instance, there have been movements to boycott brands that are run by people who may have controversial beliefs. An example would be the conflict between religious business people and the LGBT community. Similarly, businesses who are politically aligned with controversial issues such as gun ownership or immigration are often in the firing line from both sides.

The key takeaway? Businesses in the digital age are no longer faceless entities.

There is increasing pressure for businesses to ‘take a stand’ on certain issues. Particularly that which is seen as human rights, of political nature, and environmental sustainability.

A current example of a company taking a political position can be seen through Nike’s appointment of Colin Kaepernick as the brand face of their slogan, ‘Just Do It.’ For those not in the know, Colin Kaepernick is a NFL player who startet the U.S. national anthem protests by keeling for the national anthem during an American football game in 2016. This was done to protest what he viewed as systematic oppression of different groups in the country, fuelled by the then inflamed media coverage of excessive police force.

The protest continues to divide the country. But Nike’s recent appointment of Kaepernick as the ambassador for one of their campaigns has sparked outrage on social media. Since the release of the campaign last week, people across the US can be seen burning their Nike sportswear in protest against the company. In their eyes, Kaepernick’s refusal to kneel for the anthem was a sign of disrespect. And Nike endorsing him puts the company in the category of the ‘other’, politically speaking.

As a business leader, navigating this cultural landscape can be difficult. Where do you draw the line between strong personal beliefs, being socially responsible and maximizing the return for shareholders? That’s something every leader will have to figure out as culture and politics become more polarized.

5. Holistic Leadership

But your greatest challenge in the digital age is becoming a multi-faceted leader.

As competition increases and technology continues to disrupt, only the best leaders will thrive and continue to exceed value to shareholders and customers.

How do entrepreneurs achieve this?

For a start, the idea of a sales focused or technical focused CEO has had it’s time. We’re moving to an era where business leaders need to be able to wear multiple hats and see through different perspectives. This means your perspective needs to cover sales, marketing, people, product, technology and service.

If you as a leader aren’t curious and diving into all functions of your business then you will miss out on opportunities for growth.

This is why I advocate for executive coaching and business networks simply because the stakes are high. The challenges we discussed in this series are just the tip of the iceberg but can still prove to be fatal. In the digital age, what worked 10 years ago, or even 5 years ago, may not work today. And although you may be in a comfortable position now, that can all change in the next few years.

The best course of action is to be prepared and tackle the challenges before they affect you.

Der Beitrag The Great Challenges of Entrepreneurship 2/2 erschien zuerst auf Argo Ventures.

Most people would come up with a list that looked like this:

• Competing in Olympic sports
• Battling a life-threatening disease
• Forgiving somebody who has done you a great wrong

To the benefit of entrepreneurial ego’s everywhere, I’d like to add one more to that list. Starting, scaling and managing a business is one of the most challenging things a human can do.

In many ways, successful entrepreneurs are like the Olympic athletes of the business world. A path that only a few dare to walk on, and even less survive.

And that’s a lot about what entrepreneurship is – surviving. Throughout all era’s, there have been tremendous challenges that business leaders had to face. Some of them fatal – there are countless case studies of failed ventures both large and small.

The challenges that entrepreneurs of the industrial era face are quite different from those in the digital age. Competition and disruption were more limited. Now, the knowledge explosion and democratization of access means there are threats coming from every angle.

Are you prepared?

Being blindsided by one of these threats could cost you your position in your market. Let’s cover all the bases so that you can identify your potential weak spots.

1. Competitive Pressures

You saw this one coming, so let’s get it out of the way.

The threat of somebody eating your lunch is one of the main fears that business leaders contend with. Naturally, competition in business has always existed. But due to digitization, things are a lot different – particularly so over the past 10 years.

There are two competitive pressures that are unique to the digital era:

• The Ursupers: Scrappy, disruptive upstarts – I’m not referring to the Mark Zuckerberg types either. It’s the renegades in your industry with domain expertise and something to prove that are deadly.
• Human Poaching: Shortage of technical talent – In marketing, there’s a saying we are all now part of media companies. It’s also true that we are all now part of technology companies.

The Usurpers

The culture has changed. Talented students coming out of prestigious universities no longer want to work in Finance or the Big 4 consultancies. In fact, they don’t even want a paycheck and a retirement package. The generations coming up are seeking greater meaning in the work they do – and for many, this means starting a company that could change the world. This cultural shift towards being your own boss, in combination with the democratization of both knowledge and access, is leading to a new breed of competitors:

They are smart and hyper-ambitious.

If the large conglomerate in your space is what scares you, you should take a look at the companies coming up behind. They are the true threat, even though it’s not easy to see in the present.

All it takes is one well-executed idea by an all-star team. That’s enough to turn your whole market upside down – as has been the case with many industries.

According to Accenture’s Disruptability Index, its estimated that as much as 63 percent of companies are experiencing disruption.

Truly, no industry or business is safe. No matter how successful they have been in the past.

Human Poaching

Why would somebody with an in-demand skill choose your company over the others? The way some companies conduct themselves, you would think that they have never asked themselves this question. Have you?

The traditional way that business leaders and hiring managers approach hiring is outdated. We no longer live in an era where companies are the only ones who ask ‘why should I hire you?’.

The question is now flipped, ‘why should I join you?’.

When it comes to digital skill sets, you are competing with every other company who has a stake in the digital world. Programming, IT and Design run across all industries and verticals, not just tech-focused companies.

Put your company toe to toe with the likes of Google, Facebook and trendy companies such as AirBnB. That’s who you are competing with for talent. You are competing intensely for those who can make your digital strategy come to life.

2. Customer Demands

Study how attitudes towards the customer have evolved over the decades and centuries. In the era of radio and television, it was all about influencing and changing people’s perspectives – both for good and bad.

A business culture evolved from a harsh, war-driven period – utilizing the concept of propaganda to tap into the human psyche and increase profit. Examples of this can be seen in the amplification of ideas around femininity in order to sell more products. You need to purchase this product to feel like a real woman, or so they were told.

Most recently, we have witnessed an era of more overt sales tactics. High-pressure salesmen cold calling prospects, spam email campaigns, and clickbait news titles. All in an effort to capture your attention and sell you something.

Now, we are entering an era of transparency and exceptional experience.

• Transparency– The internet has changed everything. There are two powerful effects that the internet has produced: the democratization of information and giving everybody a platform to speak. Both of these effects present challenges for business leaders. The former means that customers are well aware of the positioning your product has in the market before they even talk to a sales rep. The latter means that if you aren’t authentic and provide great service, everybody will know about it. True for both B2B and B2C companies.
• Exceptional experience– Not to be confused with adding value. This also links back into the competitive environment. If we are honest with ourselves, the chances are that a competitor may be doing the exact same thing we are. They may even be doing it better. In this case, everybody is providing value to the customer. But how many companies provide exceptional customer experiences? I don’t mean offering warranties or having helpful support teams. Go beyond that, make customers feel like they are doing something important by becoming a part of your brand. Be their strategic partners in business and educate, guide and teach them as opposed to just selling them products.

Personalization

In light of the need to offer exceptional experiences, there has been a significant shift occurring in recent years. In this new competitive environment, some companies are reaching into the cookie jar and changing the way they think about their customers. The paradigm has changed. No longer are customers seen as a singular, uniform entity. Instead, customers are being treated as the individuals that they are.

We are leaving the era of mass marketing, and entering the era of personalization. This can be seen in a few ways:

• Personalization startups  Mass produce a luxury item or create an artisan version of a commodity. There has been a boom in startups that are focused on the latter. They are taking products and ideas that are generic and making it relevant to individual customers. Take the rise in personalized children’s books for instance. Or the various nutrition startups like Habit that manage your diet according to your needs.
• Content marketing– With increased competition, it’s hard for customers to distinguish the value among businesses. Now, it’s becoming necessary to provide value to first in the form of content. This can be through solving problems, changing their way of thinking or simply entertaining them. Content is becoming key as it’s usually expected that there will be multiple touch points with a customer before they become a buyer. There is an emphasis towards building relationships as opposed to transactions. This is true even for products like Redbull, who deploy one of the most robust content strategies.
• Cookies, tracking, and data– As customers engage with a brand, businesses are able to collect data that can help tailor their service to them. For instance, Netflix and Spotify use algorithms to suggest content that you would like, based on your browsing history. Over time, they will be able to create a profile of what content you like best. This personalization ensures that you stay a loyal and happy customer.

Hidden Demands

Entrepreneurship is about finding what customers truly want.

If you ask a customer about what it is they want or need, they won’t be able to give you a straight answer. Naturally, if the problem is so obvious they would have likely already solved it.

This is why a key part of innovation involves uncovering the practices, problems, and psychology of the customer. It’s about discovering knowledge. We spoke about this in our article about why business leaders need to think like scientists.

But uncovering problems the customer faces doesn’t mean that they will automatically buy from you. The customer may be in denial that there is a legitimate problem. They may be happy with the status quo. They may realize there is a problem but aren’t convinced of the solution.

This is why educating your potential customers and becoming trusted partners is important. It links into the need for personalization and understanding the customer journey. They may not be ready now, but over time you have the ability to change how they think.

Confronting the challenges

Competitive pressures and customer demands are likely two challenges you already know about. Effectively navigating them is the real task. This is why we have set up coaching for entrepreneurs and business leaders so that you have the support to face these threats head-on.

But there are also many more besides what we discussed here. In the next part, we will cover the challenges of becoming new business models, cultural pressures and becoming a multi-faceted leader.

Der Beitrag The Great Challenges of Entrepreneurship 1/2 erschien zuerst auf Argo Ventures.